What is a CFD?

CFD stands for contracts for difference. It is an instrument for traders to take long or short position in a share counter without having the share itself. The price of the CFD mirrors the performance of the stock itself and the profit or loss is determined by the difference between the buy and sell price.

The benefits of CFDs are:
Can be used to sell high and buy low without the penalties of short-selling stock
Unlike options and warrants, it does not expire and therefore does not have time decay
Easy to price because they mirror the exchange traded price of the underlying instrument
Can be a good hedge to a long stock portfolio if the CFDs of the same stocks are short i.e. to achieve market-neutral exposure.
Therefore CFDs can be used in the following manner:
Make money in any market condition. So instead of standing on the sidelines in a falling market, bears can sell high buy low to make money.
Protect the downside for long term investors who hold a long stock portfolio for income or growth reasons.