Contracts for Difference (CFDs) are financial derivatives that allow traders to speculate on the price movements of various assets without owning the underlying asset itself. In a CFD, two parties, the buyer and the seller, agree to exchange the difference in the value of an asset from the time the contract is opened to when it is closed.

CFDs offer traders the opportunity to profit from both rising and falling markets, as they can take long (buy) or short (sell) positions on assets such as stocks, commodities, currencies, and indices. Since CFDs are leveraged products, traders can gain exposure to a larger position size with a smaller initial investment, amplifying both potential profits and losses.

One of the key features of CFDs is the ability to trade on margin, which means traders only need to deposit a percentage of the total trade value, known as the margin requirement, to open a position. This leverage magnifies potential returns but also increases the risk of significant losses, as losses can exceed the initial investment.

CFDs are traded over-the-counter (OTC) through brokerage firms and are subject to regulations in various jurisdictions. They provide flexibility, liquidity, and the ability to trade a wide range of assets, making them popular among both retail and institutional traders seeking to capitalize on short-term price movements in financial markets. However, traders need to understand the risks involved and use appropriate risk management strategies when trading CFDs.