A Contract For Difference (CFD) is a derivative financial instrument that allows traders to speculate on price movements of an underlying asset without owning it. The trader and broker exchange the difference in the asset's price between when the contract is opened and closed, with leverage amplifying both potential profits and losses.
Example
“He opened a CFD position on Tesla shares with 5:1 leverage, gaining exposure to $10,000 worth of stock with only a $2,000 margin deposit.”