CFD means Contract For Difference. A CFD mirrors the performance of a share or index and offers the benefits of trading shares without having to physically own them. Just like physical shares your profit or loss is determined by the difference between your buy price and your sell price.
Trading CFDs is very similar to trading shares, but with some important advantages.
Leverage
CFDs are traded on margin, which means for a small outlay you can open up much larger position in the market.
Going short
It is just as easy to sell a CFD as it it to buy because with CFDs there is no physical transaction. Going short means opening a position by selling with the aim of profiting from falling share prices.
Global market access
Trading CFDs allows you to access the Australian and global markets from a single trading account. CFDs can be traded over global Shares, Sectors, Indices, Treasuries and Foreign Exchange.
Originally used by large institutions to cost effectively cover their equity exposures, the CFD product is now a commonplace trading tool used by retail investors around the world.
