A CFD is a Contract for Difference. It’s a financial product that allows you to speculate on future changes in the market. A stock index measures the price performance of global stock markets. So, when you trade indices with CFDs, you’re agreeing to exchange the difference in the price of an index from one time period to another. This gives CFDs the advantage of providing a potentially large margin to traders.

With the major indexes, this margin typically stands at around 1 to 3% of the value of the index. With a margin of 1%, you would only need $1,000 in cash to leverage $100,000 on an index CFD. This is what makes CFDs so attractive to traders — you can make your capital go further without having to expose yourself to the risks of investing in a single company.