What is a contract for difference (CFD)?
A contract for difference (CFD) is a type of derivative product, meaning that it derives its price from an underlying asset. When you open a CFD with Capital.com, you agree with us to exchange the difference in the asset’s price between when you enter and exit the trade.
You can trade CFDs on 4,500+ markets on our platform, including:
Since CFDs are derivatives, you never take ownership of the actual asset. Instead, you’re simply speculating on whether the price will go up or down.
How does CFD trading work?
When you trade CFDs, you choose to go long (buy) if you think the market will rise, or go short (sell) if you think the market will fall.
Every trade shows two prices: the buy price and the sell price.
- If you want to go long (buy), you enter the trade at the buy price.
- If you want to go short (sell), you enter at the sell price.
You close a long position at the sell price, and close a short position at the buy price. The difference between the buy and sell prices is called the spread, which is the main cost your trade will incur.
Your profit or loss moves in line with the market price. If the market moves in your favour, you’ll profit – but if it moves against you, you’ll make a loss.
CFD positions are commonly opened and closed within short timeframes – often within one day – but you can hold them longer. However, holding overnight incurs additional fees.
What is a CFD account?
A CFD account can be opened with a broker to start trading CFDs. It gives you access to a trading platform where you can monitor the markets, place trades, view charts, and manage your account.
Some brokers may provide a demo account, which lets you practise trading with virtual funds before risking any real money. This is a good way to get familiar with the platform and understand how CFD trading works.
In many regions, you’ll need to pass an appropriateness check before opening a live account. This may involve answering a few questions to show you understand the risks of leveraged trading. It’s important to know how margin works and be aware of how quickly losses can occur.