A CFD is a contract for difference used to speculate on movements in various markets based on underlying assets. They are commonly available for trading of forex, commodities, cryptocurrencies and shares. Typically, these products are traded as leveraged derivatives between a client and a CFD provider. When trading with CFDs, you are agreeing to pay the difference between the price of the underlying asset from the open to the close of the contract.
- If you buy a CFD (also known as a long trade) you are expecting the price to increase.
- If you sell a CFD (also known as a short trade) you are expecting the price to decrease.
When executing the open and close of a CFD trade, these will be done as opposite sides. For example, if you open the trade as a Buy, then when you close the trade, it will be executed as a Sell. This is why Buy trades are executed on the Ask price, and Sell trades are executed on the Bid price.