Contracts for difference, or CFDs, are derivative products that allow exposure to price movements in an underlying market without owning the underlying asset directly.
A CFD is an agreement based on the price difference between when a position is opened and when it is closed. The result depends on the movement of the underlying market, such as an index, share, FX pair or commodity.
CFDs are commonly used by active traders who want market exposure without taking direct ownership of the underlying asset.
CFDs can reference a range of underlying markets, including indices, equities, FX, commodities and other financial instruments, depending on the provider and account access.
CFD prices move with the underlying market. Traders may take long or short exposure, subject to platform rules, margin requirements and product terms.
CFDs are leveraged products and losses can occur quickly. Clients should understand margin, volatility and product terms before trading. This page is general information only and does not provide financial advice.
For general background on contracts for difference, leverage and retail investor risks, see ASIC MoneySmart guidance.
MoneySmart: Contracts for difference