Trade global markets without owning the underlying asset. Learn how contracts for difference work and how to trade them responsibly.
A Contract for Difference (CFD) is a financial derivative that allows you to speculate on the price movement of an asset without owning it. Instead, you enter into a contract with a broker to exchange the difference in price between when the position is opened and when it is closed.
If you believe an asset's price will rise, you open a long (buy) position. If you think it will fall, you open a short (sell) position. Your profit or loss is determined by the difference between your entry and exit prices, multiplied by the number of contracts.
CFDs are available on thousands of markets including shares, indices, commodities, currencies, and even cryptocurrencies, making them one of the most versatile trading instruments available to retail traders.
One account, thousands of markets worldwide.
Trade price movements of individual company stocks from the FTSE 100, S&P 500, NASDAQ, and other global exchanges without owning the shares. Access blue-chip and growth stocks with fractional sizing.
Speculate on the performance of entire stock market indices like the FTSE 100, DAX 40, S&P 500, and Nikkei 225. Index CFDs offer broad market exposure in a single trade.
Trade gold, silver, crude oil, natural gas, and agricultural products. Commodity CFDs let you participate in these markets without dealing with physical delivery or futures contracts.
Access the global currency market with CFDs on major, minor, and exotic currency pairs. Benefit from tight spreads and deep liquidity across over 80 FX pairs.
Speculate on the price of Bitcoin, Ethereum, and other cryptocurrencies without needing a digital wallet. Trade crypto volatility through a regulated broker.
Trade government bonds and interest rate instruments. These CFDs are popular among traders who follow central bank policy and macroeconomic trends.
You believe shares of Company X, currently priced at £50, will rise. You buy 100 share CFDs.
Your profit or loss is based on the full £5,000 exposure, not just the £1,000 margin. This is why risk management is critical.
You believe the FTSE 100 index, currently at 7,500, will decline. You sell 2 index CFDs at £10 per point.
Short selling via CFDs allows you to profit from falling markets, something not easily done with traditional share ownership.
| Cost Type | Description | When It Applies |
|---|---|---|
| Spread | The difference between the buy and sell price of an instrument. | Every trade, on entry and exit |
| Overnight Financing | A daily charge (or credit) for holding leveraged positions overnight, based on interbank rates. | Positions held past market close |
| Commission | A per-trade fee, common on share CFDs. Some brokers offer commission-free trading on other instruments. | Varies by broker and instrument |
| Guaranteed Stop Premium | An additional cost for guaranteed stop-loss orders that protect against slippage and gaps. | Optional, when using guaranteed stops |
| Currency Conversion | A fee applied when trading instruments denominated in a different currency to your account. | Cross-currency trades |
CFD trading in the UK is regulated by the Financial Conduct Authority (FCA). Key protections for retail traders include:
| Feature | CFDs | Shares |
|---|---|---|
| Ownership | No ownership of asset | Own the asset |
| Short Selling | Easy and built-in | Complex, requires borrowing |
| Leverage | Yes, amplifies gains/losses | No (unless margin account) |
| Stamp Duty (UK) | None | 0.5% on purchases |
| Dividends | Adjustment credited/debited | Receive actual dividends |
| Overnight Costs | Yes, financing charges | None |
| Voting Rights | None | Yes |