A Contract for Difference (CFD) is a derivative that allows you to speculate on the rise and fall in the price of an underlying market such as shares, FX, commodities, or indices, without taking ownership of the actual asset.

Your profit or loss is based on the difference between the price you open and the price you close your CFD position. If the market moves in your favour, you shall profit; if it moves against you, you lose. Any additional costs, such as financing charges, swap rates, or currency conversion effects, are also subtracted from your overall profit or loss on the position.

No, you do not own the underlying asset when trading a CFD.

CFDs expose you to market risk, leverage risk, counterparty risk, volatility and gapping, margin call risk, and liquidity risk. Because CFDs are leveraged products, losses can exceed your initial deposit.

A pip is the tradable point in CFD trading. This means your position size correlates to the pip value you change, e.g., one standard lot of FTSE equals £10 per pip movement. If the market moves 5 pips, this is a profit or loss of £50.

The spread is the difference between the buy and sell price. It’s a built-in cost you pay when opening a CFD trade.

This is dependent on the classification of your account. Retail traders in accordance with regulation cannot have margin offsets.

The underlying asset refers to the product you are trading, such as Brent crude oil or physical gold.