What is a CFD?

CFDs – Contract For Differences –

Contract For Difference (CFD)

A CFD is an agreement made between two parties to exchange, at the closing of the contract, the difference between the openiing and closing prices of the underlying, multiplied by the number of underlyings referenced in the contract.

Typically an equity (a share) is the underlying, so it’s a way to get exposure to the price movements in equities, (possibly with leverage), without actually owning the shares.

Also, in the UK there can be tax advantages of buying CFDs (Trading CFDs) as opposed to Trading the Shares themselves