So what is Contract for Difference, and what do we need to know when trading CFDs in the post GFC period?
CFDs have certainly had increased public awareness of trading instruments, and the thousands of seminars and educational systems teaching people how to trade the market whether it is with forex, share trading, options, commodity trading or index trading, and others.
And what most of these trading instruments have in common is Contract for Difference.
As there are CFDs on stocks, indices, commodities and other trading instruments.
So what are CFDs and what do we have to be aware of now?
See this page on the latest update on what is Contract for Difference and CFDs and trends in trading CFDs.
What CFDs are is that they are similar to trading shares or commodities except that you do not formally buy the stock and instead are dealing with a market maker.
Market makers are CFD providers and offer a CFD product that has commissions, spread, interest, rules of entry or exit including to do with liquidity.
But now there are new types of CFDs around, such as DMA or direct market access in addition to market maker CFDs.
They are different in terms of:
1. Prices mirroring underlying market
2. Order actually placed in underlying market
5. Liquidity implications when entering or exiting
Then there are exchange traded CFDs which are offered by the ASX which finesse the rules of entry even more and makes the trader a market taker or a maker.
See this page for more on these types of stock and share CFDs including DMA CFDs and exchange traded CFDs.