What is Trading?
Contract for Difference is a contract between two parties, typically described as “buyer” and “seller”, stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at contract time (if the difference is negative, then the buyer pays instead to the seller). In effect, are financial derivatives that allow traders to take advantage of prices moving up (long positions) or prices moving down (short positions) on underlying financial instruments and are often used to speculate on those markets.
For example, when applied to equities, such a contract is an equity derivative that allows traders to speculate on asset price movements, without the need for ownership of the underlying asset.
If you believe that the price of the underlying asset is rising, you would open a “Long Position”, meaning that in order to make a profit out of this trade, the price when closing the position should be higher than the opening price.
In contrast, if you think that the price of the underlying asset will be dropping, open a “Short Position”, meaning that when closing the trade, the price should be lower than the opening price.