CFDs Explained: Working of Contracts for Differences - By: Andy Richarsdon

Contracts for Difference (CFD or CFDs) are undoubtedly one of the most exciting new products to be made available to the individual investor in recent years.
There are significant advantages of trading CFDs over conventional forms of trading and spread betting:

- Trade Long or Short
- Up to 1% margin rates
- Immediate execution
- No expiry period
- No extra spread
- Phone or Online CFD Trading

Most CFD providers offer a wide range of trading products available on the most active markets on the globe including:

- Equity CFDs
- Index CFDs
- Foreign Exchange (FOREX/FX) Trading
- Commodity (Commodities) CFDs

With these innovative contracts you can reap all the economic benefits of share dealing, without actually physically owning the shares. CFDs now represent an efficient and flexible alternative for experienced investors.

Through a CFD broker you can trade all the major Global Exchanges as well as gain exposure to all the major financial instruments. You can trade contracts for difference on the individual Equities (e.g. Vodafone, Microsoft); on Indices (e.g. FTSE 100, S&P); Forex (e.g. Euro/Dollar, Dollar/Yen) as well as Commodities (e.g. Gold, Oil).

Trading CFDs is inherently more risky, and potentially more rewarding than ordinary share dealing. Please make sure you understand the risks involved, for more information see our sections on Leverage and Risk.

History of CFDs

CFDs emerged in London in the early 1990's. Initially, there were primarily used by hedge funds to short sell the stock markets using leverage. The instrument also allowed these hedge funds to avoid paying stamp duty, in a similar way to members of the London Stock Exchange.

By the late 1990's, CFDs were introduced to the retail sphere. The dot-com technology boom led to the growth and development of online trading platforms which made it easier for investors to check price and trade in real-time. Over the last decade, CFDs have grown rapidly in the UK and have now been introduced into Europe, Japan, Canada, Australia and South Africa.

About the Author

Compare CFD Brokers and browse through our trading guide complete with trading strategies, tips and tactics.

Article Directory Source: http://www.articlerich.com/profile/Andy-Richarsdon/78245

Additional Articles From - Home | Investing | Stock market trading