A contract for difference (or CFD) is an agreement between two parties to exchange the difference between the opening price and closing price of a contract.
With CFD trading, you can speculate on rising or falling prices on thousands of global markets.
Develop fresh trading ideas with the help of our experts' market insights.
Take a position on over 10,000 markets - including indices, forex, shares and more - with leveraged access using a CFD.
Unlike conventional forms of trading like physical shares trading, CFDs enable you to potentially profit irrespective of whether market prices are moving up or down.
This means you can potentially profit even during falling markets. For example, if you think the S&P 500 Index will fall in the coming days because a number of major US firms are expected to report weak earnings, you can go short or ‘sell’.
If the index moves in the way you predicted, you can profit from every point the S&P 500 falls.
And, as a leveraged product, you can place a trade by depositing just a fraction of the full value of your position.
Remember, however, that leveraged trading allows you to gain significant market exposure, which means your returns will be magnified. As a result, you could incur losses that exceed your deposit if the trade moves against your prediction.
You can also use CFDs as a hedging tool to help offset any losses incurred in your physical portfolio of shares.
At City Index, we offer low commissions, tight spreads and margins from 1% on over 10,000 financial markets, including indices, shares, currencies, commodities and more.
Our range of trading platforms and Apps for iPhone™, Android, BlackBerry and Windows Phones enable you to instantly react to market prices at any time of the day – even when you’re on the move.
CFDs can be tax efficient, depending on your circumstances. You can use any losses you incur to offset against your Capital Gains Tax (CGT) liabilities*. For more information, we recommend you seek independent investment advice.
When you open a CFD trading account with City Index, you can benefit from: