Explainer
What is a CFD?
A contract for difference in plain terms – what you own, what you do not, and where the costs sit.
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The short version
A contract for difference (CFD) is an agreement with a broker to exchange the difference between an asset’s price when you open the contract and when you close it. You never own the underlying share, index or currency; you only hold the price exposure.
What to watch
CFDs are usually traded with leverage, so both gains and losses are calculated on the full position, not on the margin you put up. Overnight financing, spreads and commissions are the costs to check before you compare a CFD with buying the asset outright.