What is a Contract for Difference, CFD.
The most important thing in Forex is the exchange rate between two currencies in a currency pair, which is also called a quotation or a price. The price can vary very quickly, sometimes several times per second, so in Forex you can make many trade deals 24 hours a day and 5 days a week. In general, currency quotes reflect the economic situation of a country. If the Eurozone economy is stronger than the US economy, the euro, respectively, will grow compared to the US dollar (EUR/USD) and vice versa.
As a rule, the validity period of such a CFD contract is not specified by the parties involved in the transaction and may be terminated at the request of one of the parties that has such a right (one of the counterparties). On that basis, the contracts for difference in price (CFD) relate to derivative financial instruments on the underlying asset, what allows to make profit both at increase and decrease in the price of the underlying asset, whether it be a commodity or a security. With regard to securities, like shares and bonds, CFD is a derivative instrument from a contract for the purchase of shares or bonds, which allows speculating simply on the price changes of these securities, without need of registration of the ownership on them. CFDs were created to meet the demands of small exchange speculators, who do not possess the necessary capital for security trading, because to make transactions by contracts for difference in price, it is necessary to deposit only a small part of own funds as compared to the actual value of the asset. As a result, CFD trading has significantly expanded the scope of activity of private traders on the exchange market.