8 lines
1.3 KiB
Plaintext
8 lines
1.3 KiB
Plaintext
CFD
|
|
T
|
|
his is a key point
|
|
that actually explains why there is much less bureaucracy for forex trading than for buying and selling bank shares. CFDs (Contract for Difference) are contracts for differences that follow the performance of a given underlying (share, currency, index, etc.) and that can be exchanged, that is, bought or sold. CFDs differ from shares because they are not co-owned by a company and therefore do not give voting rights to those holding them. However, CFDs offer the same economic benefits as equities, such as profits, dividends, and splits.
|
|
In even more technical terms, the CFD exchanges the difference in value between the opening price of the certain underlying security (e.g., share) and its closing price. Following this mechanism, the trader who negotiates CFDs:
|
|
Gets a positive result if it buys before the underlying goes up
|
|
Gets a negative result if it sells before the underlying goes down
|
|
The mechanism is very simple, and we are sure that it is already clear. We need to buy if we think that a stock is close to the upside, we need to sell it if we think that a stock is close to the downside. CFDs follow the values of the underlying assets so you can get positive results just like shareholders, but playing at home from the comfort of your home. |