A Chainlink CFD is a contract for difference on the cryptocurrency Chainlink (LINK). The latter is a cryptocurrency for Oracle services on the Ethereum platform. LINK is one of the best performing cryptocurrencies of this year and currently has a market capitalization of $ 15,231,471,000.
CFD stands for “Contract for Difference”, which means contract for difference in German. These are a type of derivative financial instruments. More precisely, they are swaps in which two parties exchange a value and in the end benefit from the price development of the value.
In the case of a contract for difference, you borrow the value (in this case Chainlink) for an indefinite period of time by depositing a security. If you repay the value again at the same price, then you keep the difference from the performance as a return.
You choose Chainlink as the underlying asset and then decide whether you want to go long or short. With a long position, you expect the price to rise in the future. In the case of a short position, you assume falling prices.
You can close the trade at any time. In the end, you keep the return from the price development, if you are right. With contracts for difference, it is therefore possible to bet on falling prices.
As a rule, a leverage is used in a contract for difference. A lever multiplies the possible profits. With a leverage of 1:10, for example, you can take ten times as much.
However, this also increases the possible losses. In the worst case, you will lose the entire margin (security). Therefore, caution should be exercised when trading contracts for difference.