CFDs (Contracts for Difference)

Contracts for Difference are derivative instruments that allow traders to speculate on the changing values of underlying assets without having to take ownership of them. In a contract for difference a buyer and a seller agree that the seller will pay the buyer the difference between the value of the asset at the time of the contract agreement and the contract termination. If the difference is negative then the buyer must pay the difference to the seller. When trading CFDs traders buy (or go long) when they are expecting a rise in price and sell (or go short) when expecting a drop in value.