Best CFD Brokers. CFD Brokers What is CFD Trading? CFD stands for 'Contract for Difference' It is a type of financial derivative that allows CFD traders to invest on the up or down price direction of various financial instruments, such as stocks, currencies, commodities, and indices, using leverage with no ownership of the underlying financial asset. A person trading a CFD enters a contract with their specific CFD broker to trade the difference in the price of the underlying asset from when the CFD contract is opened to when it is closed, using the agreed CFD terms.
CFD trading allows traders to go long (speculating on the price of an asset to increase) or short (speculating on the price of an asset to decrease). Because CFDs offer the ability to use leverage, traders can control large positions with relatively little capital. However, this also means that CFD traders can experience significant losses if the market moves against their position. Steps to Start CFD Trading Why Use a Broker for CFD Trading.