What is CFD trading?
The definition of a CFD (or Contract For Difference) is an agreement to exchange the difference in value of a particular market between the time at which the contract is opened and the time at which it is closed.
- CFDs are one of many forms of investing and trading the global financial markets. From one trading account you have access to Australian, US, UK and Asian stocks, indices, currencies, commodities and bonds. Via your account you have the ability to back your judgment as to whether any of our markets will rise or fall in value, similar to buying a share via a traditional stock broker in the hope that it will rise in value, so that you can sell it for a profit at a later date.
- With CFD trading, you can choose to decide that the market will rise, or alternatively, you might decide that it will fall. If you are correct and the market moves in your favour, you will make a profit of your CFD size multiplied by each point that the market moves in your favour. If you are wrong you will make a loss of your CFD size multiplied by each point that the market moves against you.
With CFDs you do not actually own the underlying asset that you are trading because it is a derived instrument. The prices that we provide you are derived from the underlying asset and these prices move in conjunction with that underlying asset.
So, for example, if you opened a CFD on BHP's share price you would not actually own the shares, but you would be buying or selling our price for BHP in the expectation of its share price rising or falling. As BHP's underlying share price moves, so does the Capital CFDs quote meaning our derived price moves up and down just like the real share.