CFD, which stands for Contract for Difference, is an investment instrument. While the history of CFD markets is not as rooted as currency pairs, these markets have been developing since the 1990s. In investments made through CFDs, physical ownership of the underlying asset is not obtained.
CFD is a financial investment type where the current difference between the opening and closing prices of the underlying asset is calculated based on the direction of the opened position and reflected as a positive or negative amount on the platform. In CFD investments, physical ownership of the underlying asset is not obtained. The most commonly used CFD products include stock indices, commodities, and Forex contracts.
What are the General Features of CFDs?
1. Overnight Interest
In CFD contracts written on stocks or indices, if positions carried over to the next day, overnight interest is charged or paid to the investor based on the direction of the position (long or short).
2. Underlying Asset
All CFD contracts are written on an underlying asset. The price in CFD contracts is correlated with the price of the underlying asset. While CFD contracts can be traded in correlation with the maturity date of the underlying asset, they can also be traded based on spot market prices. In CFD contracts written on stocks, there is no specific maturity date. Therefore, in CFD contracts where the underlying asset is a stock, the spot market price is directly reflected to the investor.
How are CFD Transactions Conducted in the Forex Market?
CFDs gained momentum in the 1990s, especially in financial markets, due to the leverage effect. In the forex market, CFDs are traded under the same market conditions and rules as commodities, stocks, or currency pairs, with no difference in trading on the platform.
The inclusion of the leverage feature in CFD products provides a low-cost advantage to investors. By using the leverage feature available in the forex market, investors can invest in the shares of the world’s largest companies with small capital.
What Does Rollover Mean in CFD Contracts?
In addition to CFD products with start and end dates, Rollover refers to the continuation of open positions under the same conditions with the same transaction size.
Start trading with 100,000 USD on your demo account without risking real money. Gain experience with your dedicated investment advisor. When you are ready, take your first step into the world’s largest market!