At present, the contract for difference is a trading tool that domestic residents hear the most. The Reuters Financial Dictionary defines the contract for differences as follows: it refers to a trading method that only uses the difference between the settlement price and the contract price for cash settlement without involving the exchange of physical objects or securities. In fact, in order to control the risk of contracts for differences and curb excessive speculation, financial management institutions in various countries stipulate that brokers or banks engaged in contracts for differences must have a deposit of 100%, that is to say, no matter how customers pay the deposit, brokers or banks must have a deposit of 100% for their transactions with customers. For example, the financing ratio provided by brokers to customers is 5%. This means that customers can trade at 10000 yuan only by paying 500 yuan, but for banks or brokers, it must have 10000 yuan to trade.

1, function conversion

Contracts for differences appeared in 1970s, and became a relatively mainstream trading variety in 2000.

American crude oil contract price difference every other month.

CFD appeared in the form of swap transactions, and in the 1980s it mainly focused on transactions between banks and large institutions. 1999 was officially traded in overseas retail markets, and in 2000, the British stock contract for difference was launched in the UK.

At first, the contract for differences was only an effective tool for large institutions to avoid securities risks. Now, it has become a common investment tool for global retail investors.

More and more retail customers use CFD as a part of trading portfolio, and get substitutes for physical trading of stocks. Investors who use CFD trading contracts to obtain the price difference include short-term traders who trade in the day and long-term investors who look for more flexible trading tools to replace financing stock trading.

2. Investment tools

Contracts for differences are an effective way to buy and sell stocks, indexes, futures and other commodities. CFD deals with the price of commodities, and does not involve the transaction of commodity entities, so contracts for differences (CFD) have no restrictions on settlement and delivery in futures trading, and some people call it current futures. Theoretically, CFD commodities can be all things with fluctuating prices, including national indexes, foreign exchange, futures, stocks, precious metals and other commodities. Some formal foreign exchange platforms can now trade contracts for differences by buying and selling these commodities, such as easy-forex Easy Trust and FXCM.