CFD trading, from the first pip

CFD stands for contract for difference. It is an agreement between you and the provider to settle the change in an instrument’s price between the moment you open a position and the moment you close it.

You never own the underlying asset. Buying a gold CFD does not put a bar in a vault, and buying a share CFD does not make you a shareholder. What you hold is exposure to the price: if it moves your way, the difference is added to your account; if it moves against you, the difference is taken from it.

That one idea is why a single account can trade currencies, indices, commodities, shares, crypto and metals side by side. Each one is simply a price, and a contract on where it goes next.

Because a CFD is a contract on the price rather than the asset itself, you can open a position in either direction. If you expect the price to rise, you buy (go long). If you expect it to fall, you sell (go short) without needing to own anything first.

Every quote has two prices. You buy at the higher one, the ask, and sell at the lower one, the bid. A long position opens at the ask and closes at the bid; a short position opens at the bid and closes at the ask.

To open a position you do not pay its full value. You set aside a fraction of it as collateral, called margin, and the platform holds that amount for as long as the position is open. Leverage is the ratio between the two: at 1:100, a 100,000 position needs 1,000 of margin.

Leverage does not change the size of the position or what each price move is worth. It changes how much of your own money sits behind it. The same move that would be a small ripple on an unleveraged holding is a large share of a thin margin, in both directions. On this platform leverage goes up to 1:400 on forex and is lower on other asset classes.

The number to watch is margin level: your equity as a percentage of the margin in use. If it falls to 100% you receive a margin call, a warning that there is no free margin left. If it falls to 20%, the stop-out rule starts closing positions automatically, largest loss first, until the level recovers.

Try the numbers in the margin calculator

The first cost is the spread, the gap between the bid and the ask. A new position starts slightly negative by exactly that gap, because it opened at one price and would close at the other. The tighter the spread, the less the market has to move before the trade breaks even.

The second is swap, an overnight financing adjustment applied to positions held past the daily rollover. It depends on the instrument and on whether you are long or short, and it can be a charge or a credit. A trade closed the same day has no swap at all.

The live spread is visible on every quote and swap rates are listed per instrument, so you can know the cost of a trade before you place it.

A goal like “make money” gives you nothing to act on. Useful trading goals are specific, within your control, and can be checked at the end of the week: how much you risk per trade, which markets and hours you trade, how many positions you hold at once, and when you stop for the day.

Realistic goals also protect you from yourself. Most large losses come not from one bad idea but from abandoning the plan after a few of them: doubling the size, moving the stop, trading to win it back.

CFDs are leveraged, and leverage magnifies losses exactly as much as gains. A position can lose value quickly, especially around scheduled news, at the market open, or in thinly traded hours when prices can jump from one level to another with nothing in between.

A stop loss limits the damage, but in a gap it can be filled at a worse price than the one you set. Positions held overnight carry swap. And any trading approach, however careful, will have losing periods.

Negative balance protection means you cannot lose more than the money in your account. It does not mean you cannot lose all of it. Only trade with money you can afford to lose, and practise on a demo account until the mechanics in this guide feel routine.