What is CFD trading and how does it work?
Discover everything you need to know about CFDs and find out how to trade a variety of asset classes using this derivative product.
What is CFD trading?
CFD trading is the method of speculating on the underlying price of an asset – like shares, indices, commodities, cryptos, forex and more – on a trading platform like ours. A CFD – short for ‘contract for difference’ – is the type of derivative that enables you to trade the price movements of these financial markets with us.
With this form of trading, you don’t own the underlying asset – you’re only getting exposure to its price movements.
We offer over 18,000* markets for you to speculate on with CFDs, including shares, indices, forex, cryptos, commodities and more.
Some of the key characteristics of CFDs and CFD trading are explained in more detail below.
3 CFD trading essentials
You can go long or short with CFDs
When trading CFDs, you’re predicting whether an asset’s price will rise or fall. If you think the asset’s price will go up, you’ll ‘buy’ (go long) and if you think the price will fall, you’ll ‘sell’ (go short). The outcome of your prediction will determine whether you make a profit or incur a loss.
It’s important to note that both ‘buying’ and ‘selling’ can result in a loss, and you should make sure that you understand how CFDs work before opening a position. You should also take steps to manage your risk.
To open a long CFD position in our platform, you’d choose ‘buy’ on the deal ticket and to open a short position, you’d choose ‘sell’.
CFD trading is leveraged
Leverage in CFD trading enables you to get full market exposure for a small initial deposit, known as margin. In other words, you only have to put up a percentage of the cost of the position as a margin, to gain exposure to the full value of the trade.