CFD (Contract for Difference)
A CFD is a derivative that tracks an asset's price without owning it - the standard wrapper for retail forex trading.
A CFD is a derivative that settles the price difference without owning the asset, and most retail forex is traded this way. It is leveraged, which is why regulated brokers must warn that most retail CFD accounts lose money.
A Contract for Difference (CFD) is a derivative agreement between a trader and a broker to exchange the difference in an asset's price between opening and closing. You never own the underlying asset; you trade its price movement, usually with leverage. Most retail forex trading happens through CFDs, alongside CFDs on indices, commodities, shares and crypto. CFDs are leveraged products, which is why regulated brokers must warn that a majority of retail accounts lose money on them.
How It Works
- Trade the price movement, not the asset
- Leverage multiplies both profit and loss
- Regulated brokers must publish retail loss disclosures
Trading Tips
A CFD position is a contract with your broker, so broker risk and regulation matter
Read the broker's retail loss disclosure before depositing
CFD costs include spread, commission and swap - compare total cost
Related Terms
Put Your Knowledge Into Practice
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