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Contract for Difference

Entering the forex markets as a beginner trader can be quite overwhelming. Aside from the risks and charts that tend to intimidate budding investors, there’s also a whole bunch of FX “lingo” that can be difficult to get the hang of.

Perhaps the first of these “forex-isms” you’ll come across is the term “CFDs”.

But don’t be discouraged by the fancy abbreviation! This acronym is effectively just a 3-letter depiction of the concept of the forex markets. And we’ve simplified it all for you today.

Does your trading knowledge measure up? Check out our Learn Forex Basics!

Breaking Down CFDs

A contract for difference, or CFD, is an agreement between a forex broker and trader that allows you to speculate on the price movement of a financial instrument.

In the forex markets, the financial instruments you can speculate on are currencies, commodities, indices, energies, and equities.

As an FX trader, you choose a financial instrument and speculate on whether its value will increase or decrease. In...

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