A contract for differences (CFD) is a financial instrument traders use to speculate on prices without owning the underlying asset. When entering into a CFD, an investor and broker agree to exchange ...

Example of a CFD An investor wants to buy a CFD on the SPDR S&P 500 (SPY), an exchange-traded fund that tracks the S&P 500 Index. The broker requires 5% down for the trade.

To take an example, when you think the price of gold will increase, you can put a buy position. In case of a rise in the price of gold, you receive the difference of the opening and the closing price.

So, for example, if you're looking at a Gold CFD at a bid of $1,900 and an ask of $1,902, you're looking at a spread of $2. That's how much you have to get the price moving in your direction just ...

Market volatility can significantly affect how contracts for difference (CFDs) perform. Let’s look at how volatile markets ...