CFD is a financial tool similar to a share or index which lets you trade an underlying share, index or commodity contract without having to hold the underlying asset itself.
CFDs (Contracts for Difference) – an arrangement made in a futures contract whereby differences in settlement are made through cash payments, rather than the delivery of physical goods or securities.
CFDs are considered as one of the easiest methods of settlement as losses and gains are paid by cash. CFDs allow you to trade on one platform on-line.
CFD Share perform is buying and selling the performance of a share or Index through a CFD is almost identical to a physical equity trade financed by a loan.
A client could borrow $50,000 from a bank to buy Shares. The client would receive the returns from the Shares, but would pay interest on the loan to the bank. CFD encapsulate this process in a single transaction. If a client buys a CFD on a Share, he will receive the daily performance of the Share, and be charged interest (financing) overnight.
This blog is written for Orient Financial Brokers, a leading online forex broker in UAE and Middle East.