A CFD, or "Contract for Difference," is a financial tool that allows traders to speculate on the price changes of an asset without owning it directly. With CFDs, you can take either long or short positions, enabling you to benefit from both rising and falling markets. Rather than purchasing the actual asset, you engage in a contract to mirror the market's performance and settle the difference when the trade is closed.
This approach offers flexibility and the potential to profit from market movements without needing to hold the underlying asset. When the position is closed, the profit or loss is determined by the difference between the entry and exit prices.