Key Takeaways
- A CFD is an agreement to exchange the difference in an asset's price between the moment you open a trade and the moment you close it. You never own the underlying asset.
- You can go long if you expect the price to rise, or short if you expect it to fall. Your result is the price difference multiplied by your position size.
- CFDs let one account trade forex, metals, indices, energies, shares, and crypto. StoicMarkets lists 300+ instruments across nine asset classes.
- CFDs are leveraged products. They carry significant risk, and a losing position can move against you faster than an unleveraged one. Trade only with capital you can afford to lose.
What a CFD Actually Is
CFD stands for contract for difference. It is a contract between you and the broker that tracks the price of a market, so you can trade that price without buying the asset itself.
A Contract, Not an Asset
When you trade a gold CFD, you do not buy gold. You open a contract that mirrors the gold price. You and the broker agree to settle the difference between the opening price and the closing price in cash. That settlement is your profit or your loss.
No Ownership, No Delivery
Because you never take delivery, you skip the friction of owning the real thing. There is no storage for a barrel of oil, no share certificate, no crypto wallet to secure. You hold a position on the price and nothing else.
The Price Mirrors the Market
A CFD quote follows the underlying market tick for tick, so a one-point move in the index is a one-point move in your CFD. This is why the same platform can price hundreds of different markets in one place.
Trade in Both Directions
A CFD can be opened long or short with the same ease. You are not limited to markets that are rising. If your analysis says a market will fall, you can position for that fall directly.
How a CFD Trade Works
Every CFD trade has the same shape. You open a position, the price moves, and you close it. The difference between the two prices is your result.
1. Open the Position
You choose an instrument and a position size, measured in lots. Opening the trade sets your entry price. The platform reserves a portion of your balance as margin to hold the position.
2. Pick a Direction
Buy (go long) if you expect the price to rise. Sell (go short) if you expect it to fall. A short CFD is a genuine sell order on the contract, not a workaround, so falling markets are tradable the same way rising ones are.
3. The Position Runs
While the trade is open, its value moves with the market. Your unrealised profit or loss updates in real time. You manage the position with a stop loss and a take profit, the same discipline you would apply to any trade.
4. Close and Settle
Closing the trade locks in the price difference. If a long position closes higher than it opened, the difference is your profit. If it closes lower, the difference is your loss. Multiply the price move by your position size to get the cash result.
A worked example: you buy one lot of the US500 index CFD at 6,500.00. One lot controls 10 units of the index, so every 1.0-point move is worth $10. The index rises to 6,510.00 and you close. That is a 10-point gain, worth $100 before spread and swap. If the index falls to 6,490.00 instead, the same arithmetic gives a $100 loss. The numbers work the same way in both directions.
What You Can Trade as CFDs
The reach of the CFD model is the point. One StoicMarkets account trades 300+ instruments across nine asset classes on MetaTrader 5, so you are not tied to a single market.
Forex
Major, minor, and exotic currency pairs, from EUR/USD to less-traded crosses. Forex is the deepest and most liquid market a CFD account can reach.
Metals
Gold (XAU/USD) and silver (XAG/USD) as CFDs. Metals are a common way to trade safe-haven demand without holding physical bullion.
Indices
Index CFDs such as US100, EU50, and HK30 let you trade a whole basket of shares in one position rather than picking a single company.
Energies
Crude oil (USOil, UKOil) and natural gas as CFDs. Energy prices move on supply, demand, and geopolitics, and a CFD lets you trade those moves either way.
Shares
Share CFDs track individual company stocks. You trade the price of the stock without owning it, which is what makes going short on a single name straightforward.
Crypto
174 crypto CFDs, from BTC/USD and ETH/USD to a wide range of altcoins. You trade the price around the clock without holding coins in a wallet.
What CFD Trading Costs
Trading is not free, and knowing your costs is part of trading with discipline. Three costs matter on a CFD position.
The Spread
The spread is the gap between the buy price and the sell price. You pay it the moment you open a trade, because you enter at one side of the quote and exit at the other. Tighter spreads mean a lower cost to trade.
Commission
Some account types charge a small commission per lot in exchange for raw, tighter spreads. Others fold the cost into a slightly wider spread with no separate commission. Which suits you depends on how you trade.
Swap
Hold a CFD overnight and a swap charge or credit is applied. It reflects the interest cost of the leverage behind the position. Swap adds up on trades held for days or weeks, so it matters for longer-term positions.
Leverage and Margin on CFDs
CFDs are leveraged products. Leverage is what lets a modest deposit control a larger position, and it is also what makes CFDs riskier than trading with your full capital.
How Leverage Works
Leverage lets you open a position worth more than the cash you put up. StoicMarkets applies per-instrument caps, up to 1:500 on forex, with lower caps on other asset classes. Higher leverage magnifies both gains and losses on the same price move.
What Margin Is
Margin is the slice of your balance the platform sets aside to hold a leveraged position. It is not a fee. It is collateral. If the market moves far enough against you, you may face a margin call or an automatic close-out to protect the account.
The Risk You Take On
Leverage cuts both ways. A move that would be minor on an unleveraged position can be significant on a leveraged one, and losses can build faster than beginners expect. Most retail traders lose money trading CFDs. Size positions to survive being wrong.
CFDs vs Owning the Asset
Trading a CFD and buying the asset outright are different tools. The right one depends on what you are trying to do.
Trading a CFD
You trade the price with leverage, go long or short with equal ease, and access many markets from one account. You never own the asset, and you pay swap to hold a position overnight. It suits active trading over shorter horizons.
Owning the Asset
You buy and hold the real thing, a share or a coin, and it is yours. There is no swap to pay and no leverage working against you, but your capital is fully committed, you cannot easily profit from a fall, and you carry the cost of custody. It suits long-term investing.
CFDs vs Futures
CFDs and futures both let you trade a price with leverage, but they are not the same instrument. Futures are standardised, exchange-traded contracts with fixed expiry dates and set contract sizes. CFDs are traded over the counter with your broker, come in flexible position sizes, and most have no fixed expiry. Futures suit traders who want exchange settlement and standard contracts. CFDs suit traders who want flexible sizing and a single account across many markets.
Who CFD Trading Suits
CFDs reward preparation, not prediction. They suit traders who want to trade many markets in both directions from one account and who treat leverage as a tool to respect, not a shortcut to chase. A CFD does not care how you feel about a position. The discipline is yours to bring. Define your risk before you open the trade, size the position so a loss is survivable, and judge yourself on whether you followed your plan, not on a single result. That is the Stoic way to approach a leveraged market.
Frequently Asked Questions
Is CFD trading legal and regulated?
Yes. CFD trading is legal in most countries and offered by regulated brokers, though rules vary by jurisdiction. StoicMarkets is regulated by the FSCA under License #53079, holds client funds in segregated accounts, and provides negative balance protection. You can read more in our guide to how StoicMarkets is regulated.
Can you lose more than you deposit?
With negative balance protection, which StoicMarkets provides, your losses are generally limited to your account balance under normal market conditions. In extreme volatility or gap events, slippage can cause a temporary negative balance that must be settled. Because CFDs are leveraged, an unmanaged position can deplete your account quickly, so stop losses and sensible position sizing matter.
What is the difference between CFD trading and forex trading?
Forex trading is one type of CFD trading. When you trade a currency pair through a broker like StoicMarkets, you are trading a forex CFD. The term CFD is the wider category. It also covers metals, indices, energies, shares, and crypto. So all retail forex trading is CFD trading, but CFDs reach far beyond currencies.
Do CFDs expire?
Most CFDs have no fixed expiry date, so you can hold a position for as long as you keep enough margin and are willing to pay the overnight swap. A few instruments modelled on dated contracts, such as certain futures-linked CFDs, do roll or expire. The instrument's specification tells you which applies.
Can you hold CFDs long-term?
You can, but the swap charged on positions held overnight adds up over weeks and months, which makes long-term holding more expensive than short-term trading. If you want to hold positions longer without daily swap costs, a swap-free account removes them. Owning the asset outright is still the more natural fit for genuine long-term investing.
Is CFD trading good for beginners?
Beginners can trade CFDs, but leverage makes mistakes expensive, and most retail traders lose money. Start on a demo account with live prices. Then trade small, with a stop loss on every position, sized so that being wrong is survivable. The habits matter more than the market you pick.
How do I start trading CFDs with StoicMarkets?
Open an account, choose the account type that fits how you trade, and fund it. You trade every instrument on MetaTrader 5 across desktop, web, and mobile. A demo account lets you practise on live prices before you risk real capital, which is the disciplined place to start.
Trade 300+ CFDs With a Regulated Broker
StoicMarkets gives you forex, metals, indices, energies, shares, and crypto CFDs on MetaTrader 5, with segregated client funds and FSCA regulation behind every trade.