CFD (Contract for Difference) trading allows you to speculate on price movements of financial markets without owning the underlying asset, using leverage to amplify your trading capacity.
Last updated: January 2025
When you trade CFDs, you're entering a contract with a broker to exchange the difference in price of an asset between the opening and closing of your position. You're essentially betting on whether the price will go up or down.
The beauty of CFDs is their flexibility - you can profit from falling markets by going short (selling) just as easily as you can profit from rising markets by going long (buying).
CFDs are leveraged products, meaning you only need to deposit a percentage of the full trade value to open a position. This deposit is called margin. For example, with 10:1 leverage, you can control a $10,000 position with just $1,000.
Warning: While leverage can magnify profits, it equally magnifies losses. You can lose more than your initial deposit.
You believe gold prices will rise due to economic uncertainty. Gold is currently at $2,000 per ounce.
Going long on gold
Price per ounce
5 × $2,000
$10,000 ÷ 10
$50 increase per ounce
5 ounces × $50 price increase = $250 profit (before costs)
You expect oil prices to fall due to oversupply. WTI Crude is at $80 per barrel.
Going short on oil
Price per barrel
10 × $80
$5 decrease per barrel
10 barrels × $5 price decrease = $50 profit (before costs)
CFDs are agreements between you and a broker to exchange the difference in an asset's price from when you open the position to when you close it. If you buy (go long) and the price rises, you profit. If you sell (go short) and the price falls, you profit. You never own the actual asset.
Practice with a risk-free demo account or compare our CFD trading account types.
