Contracts for difference let you trade price movements without owning the asset. Here's how they work and what to watch for.
A contract for difference (CFD) is an agreement to exchange the difference in an asset's price between when you open and close a position. You never own the underlying share, index or commodity — you trade its price.
Long and short
CFDs make it as easy to sell short as to buy long, so you can look for opportunities in falling markets as well as rising ones.
Margin and overnight costs
CFDs are traded on margin, so a small deposit controls a larger position. Positions held overnight typically incur a swap charge or credit, which is published before you trade.
The risks
Because CFDs are leveraged, losses can exceed your initial deposit. Always use a stop-loss and size positions to your risk tolerance.
This article is general education, not investment advice.
