📖 Financial Lexicon Term
What is CFD?
Contract for Difference. A derivative product allowing you to speculate on price movements without owning the underlying asset. Profits and losses are determined by the difference between entry and exit prices.
Detailed Explanation
A Contract for Difference (CFD) is a financial agreement between a retail trader and a broker. Instead of buying physical shares of Apple or barrels of oil, you contract to exchange the difference in the asset's price between the trade's open and close. This allows for easy short-selling and leveraged trading.
💡 Practical Trading Example
Buying a CFD on Gold (XAU/USD) at $2,000 and closing it at $2,050 yields a profit of $50 per ounce traded, without ever holding physical gold bars.