Why Do Traders Choose CFDs?

Understanding the Contract for Difference

A Contract for Difference offers market operators an innovative way to participate in price movements without the need to own the underlying asset. It is a financial derivative that operates with leverage and margin, allowing exposure to multiple markets with a reduced initial investment.

The main difference between a CFD and conventional buying is simple: you do not acquire the commodity or asset itself. Instead, you trade exclusively on the price. If you can correctly predict the direction of the price movement, you profit from that difference. That is precisely why the tool is called a Contract for Difference.

How Does It Work in Practice?

The mechanism is straightforward. When you open a CFD position, you set an entry price. When you close the contract, the difference between this initial price and the final price determines your gain or loss. The system works with two sides: the buyer and the seller settle this difference at the end of the operation.

Unlike traditional futures contracts, which have fixed expiration dates and prices, CFDs behave like common securities in the market. You operate with variable bid and ask prices, without being tied to specific deadlines. This offers flexibility—you can enter and exit whenever you want.

Variety of Markets in a Single Instrument

Leverage is the main attraction of CFDs. With an initial margin deposit, you amplify your exposure to price movements. This feature democratized access to markets that were previously restricted.

CFDs cover an impressive spectrum of assets: crude oil, gold, corn, and other commodities; forex; stock indices; and even cryptocurrencies. Speculating on price movements in any direction—up or down—has become feasible with reduced costs. You simply buy or sell units depending on your thesis: will you bet on an increase or a decrease?

This combination of low operational costs and flexibility in leverage multiples explains why CFDs have gained global popularity among traders seeking agile and responsive strategies.