A CFD lets you speculate on whether a market rises or falls — without owning the underlying asset. This guide explains how contracts work, what costs to expect, how hedging fits in, and how CFDs differ from shares and futures.
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If gold rises from $2,000 to $2,050 and you are long a gold CFD, your broker credits the difference (minus costs). If gold falls, you lose the difference. You never store bullion in a vault — you trade the price movement under the terms of your CFD contract.
A Contract for Difference (CFD) is an agreement between you and your broker to exchange the difference in price of an underlying market from the moment you open the position to when you close it. You never take delivery of the physical asset — you gain or lose based on price movement.
You choose size (lots or units), direction (buy/sell), and optional protective orders. Margin is reserved from your account equity. When you close, realised P&L is credited or debited after spread, commission, and any swap adjustments.
CFDs let you control a larger notional exposure with a smaller deposit. Leverage amplifies both gains and losses relative to the margin posted. If equity cannot support open risk, margin calls or stop-outs may occur per your account rules.
Investors sometimes use CFDs to offset short-term risk in a physical portfolio. A short index or share CFD might hedge equity exposure during a volatile week without selling the underlying holdings — subject to tax and regulatory advice in your jurisdiction.
CFD
Speculate on price; no ownership, no stamp duty on UK share CFDs in many cases
Alternative
Own the stock; dividends, voting, and custody apply
CFD
No fixed expiry on typical retail CFDs; roll via swap
Alternative
Exchange-traded; contract expiry and roll dates
CFD
Derivative on rate movement; cash-settled with broker
Alternative
Often for conversion/settlement, not leveraged speculation
Modelling all-in cost prevents surprises after a month of active trading. Spreads and swaps often matter more than commission for swing traders; scalpers focus on spread plus per-side fees.
How FP Markets prices RAW ECNThe bid is where you can sell; the ask is where you can buy. The gap is the spread — a core trading cost. Spreads widen in illiquid periods and compress during peak session liquidity.
Yes. Commission on some account types, overnight swaps on held positions, and occasional platform or data fees. All-in modelling matters when you compare brokers.
Yes. Test order types, margin, and platform workflow with virtual funds before funding a live account.
Leverage settings depend on account and region. Lower leverage reduces notional exposure per dollar of margin but does not remove market risk.
Futures are standardised exchange contracts with expiry dates. Retail CFDs are typically OTC with no set expiry — P&L is the price difference from open to close, plus costs.
No. CFDs are leveraged products with significant risk of loss. Read the PDS, terms, and risk warnings for your entity before trading.
Open virtual funds, place small test trades across two asset classes, and review swap and margin reports before live sizing.