cTrader Contract for Difference (CFD)

What is a CFD?

CFD trading stands for Contract for Difference trading which is a type of financial trading that allows you to speculate on the price movements of various assets, such as stocks, indices, commodities, or currencies, without actually owning the underlying asset. It can also be risky and requires a good understanding of the market and the specific assets you’re trading.

Contract for Difference trading is actually offered by the broker, and the cTrader platform supports such trading. There are many brokers that offer CFD trading, view our recommended brokers.

How Does It Work?

A CFD is a contract between a trader and a broker, where you agree to exchange the difference in the price of an asset from the time the contract is opened to when it's closed. The key feature of CFD trading is that you don’t actually own the asset, instead, you are trading based on price movements.

There is no ownership, so when you trade a CFD, you're not buying the actual asset (like a stock or commodity), but rather speculating on whether the asset’s price will rise or fall.

Concepts of a CFD

• If you believe the price of the symbol will rise, you "go long" and (buy).
• If you believe the price of the symbol will fall, you "go short" and (sell).
• If the market moves in your favor you will make a profit.
• If the market moves against you, it will incur a loss.

CFDs are often traded with leverage, so you only need to deposit a small percentage of the full trade value (this is called the margin), but you still gain (or lose) exposure to the entire market value. Leverage can also magnify both profits and losses.

Advantages of CFD Trading

When you trade a CFD (Contract for Difference) using the cTrader platform, it offers several advantages that make it attractive to many traders. CFDs generally require less capital than traditional trading, because you only need to deposit a margin, not the full value of the asset and this makes it easier for smaller investors to enter markets that might otherwise be too expensive.

CFDs allow you to trade with leverage, where you can open larger positions with a smaller amount of capital, example, with a 10:1 leverage, you only need £1,000 to control a £10,000 position. This will increase the potential return on investment, though it also increases the overall risk.