Contracts for Difference, or CFDs, are financial agreements between two parties, typically a buyer and a seller. These contracts allow traders to speculate on the price movement of an asset, such as stocks or commodities, without actually owning the asset itself. Instead, the profit or loss is determined by the difference between the opening and closing prices of the contract. When a trader enters a CFD, they can either go long (buy) if they believe the price will rise or go short (sell) if they expect it to fall. This trading method offers leverage, meaning traders can control larger positions with a smaller amount of capital, but it also carries higher risks.