A CFD — contract for difference — is an agreement between you and a broker to exchange the difference in an asset's price between when you open a position and when you close it. You're betting on the price; you never own the underlying share, currency, commodity or coin.
Most retail forex, indices, gold and crypto "trading" you see advertised is actually CFD trading.
What makes a CFD different from buying the real thing
- You don't own anything. Buy a share and you own a piece of a company. Open a CFD on that share and you own a contract that tracks its price — no shareholder rights, no asset in custody.
- It's leveraged by default. A small deposit (margin) controls a much larger position. That cuts both ways — see how leverage works.
- You can lose more than you put in unless your broker offers negative-balance protection. Gaps and fast moves can blow past your stop.
- You pay to hold overnight. A daily swap/financing charge applies to leveraged positions held past the daily cut-off. Hold for weeks and this adds up.
Why brokers love them
CFDs are flexible: you can go long or short, trade markets that are otherwise hard to access, and start with a small balance. That flexibility is real — but it's also why CFDs are the product regulators warn about most.
Between 62% and 78% of retail investor accounts lose money trading CFDs. That figure comes from the brokers' own regulatory disclosures.
The honest summary
CFDs are a legitimate, widely regulated product — and a high-risk one. They suit traders who understand leverage, financing costs and stops, and who only risk money they can afford to lose. If "you can lose more than you deposit" makes you uneasy, that's the right instinct, not a reason to ignore it.
Want to see how a leveraged CFD position behaves? Practise with fake money in our Trading Simulator Lite — educational only, and it doesn't predict real performance.
This is educational content, not financial advice. Read the full risk disclosure before trading.