CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Basics

What is a CFD?

4 min read

A contract for difference (CFD) is an agreement between you and your broker to exchange the difference in the price of a market between the moment you open a trade and the moment you close it. You never own the underlying asset — no shares, no coins, no barrels of oil. You only take a position on where the price is going.

Long or short

Because you do not own anything, you can trade in either direction:

  • Buy (go long) if you think the price will rise. You profit if it goes up, and lose if it goes down.
  • Sell (go short) if you think the price will fall. You profit if it goes down, and lose if it goes up.

Bid, ask and the spread

Every market has two prices. The ask is the price you buy at; the bid is the price you sell at. The gap between them is the spread, and it is the first cost of every trade: a position opened and closed straight away, at unchanged prices, loses the spread.

On WebTrader a long position is valued at the bid (the price you could sell at) and a short at the ask (the price you would buy back at), so your profit and loss always reflects what you could actually close for.

A simple example

Say Gold shows 4,316.30 / 4,316.80 (bid / ask). You buy 1 unit at the ask, 4,316.80. Later the price is 4,340.10 / 4,340.60. Closing means selling at the bid, 4,340.10:

  • Profit = (4,340.10 − 4,316.80) × 1 = +23.30

Had the price fallen to 4,290.00 bid, closing would have cost you 26.80. Your result depends only on the price difference and your position size.

What you pay

  • The spread on every trade.
  • Overnight financing (swap) may apply to positions held past the daily rollover.

The exact charges are set out in our Terms of Service.

Before you start

CFDs are traded with leverage, which magnifies both profits and losses — read our guide to leverage and margin before placing a trade, and use the risk tools the platform gives you.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Only trade with money you can afford to lose.