CFD

Definition

Contract for Difference (CFD). A derivative that allows traders to trade on the movement of an underlying financial instrument (e.g. a stock, index, or commodity) instead of buying the underlying asset itself. If the underlying asset pays/receives dividend, the CFD trader will as well. CFD trades are closed by making a reverse trade. Often in contrast to their underlying asset, CFDs can be traded using leverage, can be short-sold, day-traded and traded without fees (because the cost is built into the spread).