Before we get to how best to use CFD trading for hedging, it is important to understand the meaning of all the terms involved. A CFD is short for ‘contracts for difference’ which is a contract between the `buyer’ and `seller’ that requires the seller to pay the difference between asset value at the current time minus that at contract time. Of course, depending on whether the value comes to negative or positive, it could be the buyer paying the seller, or vice versa.