CFDs or Contract for Difference are derivative instruments that allow traders to speculate on asset price movements without owning the underlying asset. A CFD is a contract between a trader and a broker to pay the difference between the initial and final price of an asset. Traders only need to deposit an initial margin, not purchase the asset in full.

A trader's profit or loss is determined by the difference between the buy price (open position) and the sell price (close position). CFDs offer the flexibility to buy (go long) or sell (go short) different types of assets such as stocks, indices, commodities and cryptocurrencies. CFDs are suitable for short-term speculative trading strategies as positions can be opened and closed at any time. However, the main risk is the potential for unlimited losses if the asset price moves against the trader's position.