Contract for Difference (CFD)

A Contract for Difference (CFD) is a financial derivative that allows traders to speculate on the price movements of cryptocurrencies (and other assets) without actually owning the underlying asset. When trading CFDs, the buyer and the seller agree to exchange the difference between the asset's opening and closing prices. If the price moves in favor of the trader, they make a profit; if it moves against them, they incur a loss. CFDs allow traders to take advantage of price movements in both directions (up or down) and can be leveraged, meaning traders can control a larger position with a smaller initial investment. However, leveraged trading can increase both potential profits and potential losses. CFD trading is popular in crypto markets due to the high volatility and the ability to trade without owning the actual cryptocurrencies.