A Contract for Difference (CFD) is a contract between two parties (the investor and the CFD provider) to exchange, at the close of the contract, the difference between the opening price and the closing price of an underlying share, index or commodity (investment) multiplied by the number of CFDs specified within the contract.

CFDs are an alternative to traditional share dealing. They also work in a similar way to financial spread betting. Although CFDs replicate the price movement of the underlying investment, when you open a CFD you are not buying the underlying investment. CFDs work as a flexible and cost effective way to trade on the upward or downward movement of the underlying investment.