What do the words Forex and CFD mean

Forex

Forex is a contraction standing for FOReign EXchange market. It is an international over-the-counter currency market with no centralized trading venue: trading takes place 24 hours per day across the globe.

The Forex market developed in the early 1970s, when flexible exchange rate regimes were adopted in many countries. Participants of the Forex market are central and commercial banks, investment companies, insurance companies, pension funds, and individuals for whom trading in the Forex market is an additional, and in some cases lucrative source of income. Nowadays, trades deals are mainly executed through trade terminals that operate via the Internet.

CFD

CFD is an acronym of Contract For Difference. These contracts are leveraged derivative securities based on Futures. There are CFDs for shares, stock indices and raw materials. The main difference between CFDs and futures contracts is that there is no centralized trading floor or stock exchange for the former. Like Forex, CFD is an over-the-counter market. The key objective is to derive profit from changes in the value of an underlying asset without the need to actually possess the asset in question.

The CFD market originally developed in the 1980s in the UK as an alternative to trading in the stock exchange or Forex market. It is an ideal alternative for those who want to deal with underlying markets but for some reason are excluded from it.