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CFD stands for Contract for Difference, CFDs are a financial agreement made between a buyer and seller to make good the profit or loss incurred between when the CFD was purchased to when it was sold. CFDs are common in both Australia as well as the UK, they are mostly offered over indices, stocks and currencies.

CFD stands for Contract for Difference, CFDs are a financial agreement made between a buyer and seller to make good the profit or loss incurred between when the CFD was purchased to when it was sold. CFDs are common in both Australia as well as the UK, they are mostly offered over indices, stocks and currencies.

In the early days in London where CFDs began they were known as SWAP contracts. It was not until around 2001 that CFDs became accepted by retail investors. It was CMC Markets and IG Markets, two large spread betting businesses based in the UK that bought CFDs to the forefront in the retail trader's arsenal. CFDs suddenly grew to become widespread in the United kingdom as they did not attract any stamp duty.

In 2002 both CMC Markets and IG Markets opened offices in Australia and began to actively promote CFDs to Australian traders, the popularity of CFDs peaked in 2007. As a result of their popularity amongst Australian traders and investors many international CFD providers saw the potential in Australia and opened up offices. At present are over 13 CFD providers operating in Australia and an estimated 35,000 retail CFD traders.

In recent times CFDs have received much negative publicity as a result of traders incurring losses due to overexposing themselves to the market during times of volatility. This combined with the recent collapse of CFD provider Sonray Capital Markets has led to increased scrutiny from the Australian financial Services Regulator ASIC relating to how CFD providers handle client money.

CFDs are the most popular financial product in Australia. It is estimated that CFD volumes account for approximately 35% of the turnover on the ASX, however this is difficult to confirm as CFDs are an over-the-counter (OTC) product.

CFDs in Australia are largely traded live on the internet through a selection of proprietary CFD trading platforms offered by the major providers. Many of these platforms were originally developed for forex CFD trading however due to the similarities between share CFDs and forex CFDs the platforms have been tailored to suit share CFD traders.

Australia has the highest portion of share ownership in the word per capita as a result it is not surprising that many CFD traders also trade shares. The phenomenal growth in the share market in Australia has led to CFD trading becoming popular in the share trading community.

Before you run out and join the 35,000 CFD traders in Australia you must ensure that you're completely aware of the risks involved in CFD trading. Like any leveraged financial product CFDs offer major benefits however these do not come without risk. You should make sure that prior to jumping into CFD trading you read the Product Disclosure Statement (PDS) available from your CFD provider that outlines the risks and benefits of buying and selling CFDs.