CFDs
A CFD (contract for difference) is a private agreement with your broker to exchange the price difference of an asset between opening and closing. You never own the asset. It lets you trade almost any market with little capital and go short in one click — and it is, by a wide margin, the product where retail loses the most money.
By the TradingCalculator.Pro team · Updated on · About us
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Frequently asked questions
What is a CFD and how does it work?
A contract for difference is an agreement with your broker to exchange the difference between an asset's opening and closing price. Buy a share CFD and the share rises 5%, you make that 5% on the notional without ever buying the share. You never own the underlying: you receive no dividends as such (they are adjusted), you have no voting rights and you cannot withdraw the asset.
Why do most CFD traders lose money?
Brokers are required by ESMA to publish it: between 74% and 89% of retail accounts lose money. The causes are structural: high leverage that amplifies sizing errors, spread and financing that erode results, and a product that invites overtrading. It is not bad luck; it is the product's mathematics meeting human behaviour.
What leverage does the law allow on CFDs?
In the European Union, ESMA caps retail leverage at 30:1 on major currency pairs, 20:1 on major indices and gold, 10:1 on other commodities and non-major indices, 5:1 on individual shares and 2:1 on cryptocurrencies. Professional clients can request more by waiving protections.
What is the difference between a CFD and buying the share?
Buying the share makes you an owner: you receive dividends, you vote, you pay no financing and you can hold indefinitely. With a CFD you get price exposure with less capital and can short easily, but you pay spread and daily financing, you depend on your broker's solvency, and you own nothing. For the long term, the share or the ETF; for short-term leveraged trades, the CFD.
Can you lose more than you deposit with a CFD?
In the European Union, no: negative balance protection has been mandatory for retail clients since 2018 and your maximum loss is your account balance. With non-EU brokers, or under professional client classification, that protection may not apply and you can end up owing money.