Contract for difference is what allows the investors to take a short or long position easily or a sell or buy instrument might be shorted at any given time. Since the CFD market typically doesn’t have a short-selling rule. An instrument might be shorted at any given time. Because when it comes to CFD there is no ownership in the underlying asset, there is no shorting or borrowing cost. Also no fees or few fees are charged for trading a CFD.
The brokers normally make money from the trade through paying the spread. With that, it means that the trader will be able to pay the ask price when buying, while taking the bid price during the shorting or selling. The brokers take a spread or piece on each of the bid price when shorting or selling. The brokers take a spread or piece on each of the bid as well as the price that they quote.
Even with the above, you need to know the disadvantages of CFD which include:
In case the underlying asset experience a serious volatility or there is a price fluctuations, the spreads which are on the bid and the ask prices might be great. To pay a large spread on exits and entries prevents having to make profit from small CFD moves, decreasing the number of winnings for the trades while it increases the losses.
