The Contract for Difference, or CFD, market is not a market in itself.
A CFD is a mechanism by which a product can be purchased OTC without owning the underlying asset. It is therefore a derivative product and is similar in its characteristics as a futures contract (you can even get CFDs on futures). They are popular trading mechanisms offered by the majority the brokers out here that diversify their trading product range away from only offering Forex. The price of the CFDs mimics the price of the underlying asset. Therefore, if the price of a barrel of oil was $75.66 a barrel, a CFD on Oil would be priced at or very close to that rate.
If you believed that the price of oil was going to rise, you would buy an Oil CFD from a CFD Broker, which would be the equivalent to a certain amount of barrels of oil. Normally 1 CFD would equate to 100 barrels of oil. If the price rose, and you then exited the trade by selling the CFD, you would earn the difference between the buy and sell price, just as if you bought the underlying asset. If the market moved against you the opposite would of course happen.
CFDs are available via brokers on a wide range of asset classes, including commodities, metals, indices, equities, treasuries, ETFs and even Forex!
CFD brokers pay out pip rebates inn the normal way, again, a spread is made between the buy and sell price, they pay PipthePip a pip rebate on that trade, and we pass a share of that rebate onto you. Due to the wide range of products on offer under the banner “CFDs”, each product will offer a different pip rebate and so check first for specific information. If you have any questions drop us a line. We are here to help!
