Guide
What is a CFD?
A CFD, or contract for difference, is an agreement with a broker to exchange the difference in an asset's price between the moment you open a position and the moment you close it. You never own the asset itself, such as a share, an index or a currency pair. You can trade a price going up (buy, or go long) or going down (sell, or go short).
CFDs are leveraged: you put down only part of the position's value as margin. That makes gains and losses larger compared with the money you put in.
How a CFD trade works
Pick a market
A currency pair, an index, a share or a commodity.
Choose a direction
Buy if you think the price will rise, sell if you think it will fall.
Set the size
The number of contracts sets how much each price move is worth.
Put up the margin
Only part of the position's value is needed to open it. The rest is leverage.
Close the position
The difference between the opening and closing price, times the size, is the profit or loss, minus the costs.
Leverage and margin: an example
Example, not a forecast. You open a position worth 10,000 EUR on EUR/USD with leverage of 1:30, so the margin is about 333 EUR. If the price moves 1% in your favour, the position gains 100 EUR, which is 30% of your margin. If it moves 1% against you, it loses 100 EUR, also 30% of your margin. A move of about 3.3% against you would use up the whole margin.
Leverage limits for private clients depend on the market and where you live. In the EU the limit for major currency pairs is 1:30, and it is lower for indices, shares, commodities and crypto.
What do CFDs cost?
Spread
The gap between the buy and the sell price. You pay it when you open and close a position.
Overnight financing
A position held past the daily cut-off is charged or credited a small amount for each night it stays open.
Other fees
Any commission or account fee is set out in the broker's terms. At Orbis Official, see our terms and conditions.
CFD, share or ETF?
Three ways to trade the same market, with very different risks.
CFD
You trade the price, not the asset. Leveraged, long or short, with a cost for each night you hold it. Losses can be fast.
Share
You own part of a company and can receive dividends. No leverage when you buy it outright. You can lose what you invested.
ETF
A fund that tracks an index or a basket and trades like a share. You own fund units, usually for the long term, with yearly fund costs.
What are the risks of CFDs?
Leverage works both ways, so losses can be fast and large compared with the money you put in. Prices can jump over a weekend or on news, so a stop loss is not always filled at its level. CFDs are complex instruments, and most of the risk comes from leverage and from positions left open without a plan.
Read the risk disclosure and only trade with money you can afford to lose.
FAQ
Questions about CFDs
How does a CFD work?
You agree with a broker to exchange the difference between the opening and the closing price of an asset, times the size of your position. You never own the asset.
What are the risks of CFDs?
The main risk is leverage: a small price move against you takes a large share of your margin. Prices can also jump past your stop loss on news or over a weekend.
What is the difference between a CFD and a share?
With a share you own part of a company. With a CFD you only trade its price, usually with leverage, and you can sell short as easily as you buy.
What is the difference between a CFD and an ETF?
An ETF is a fund you own, usually bought without leverage for the long term. A CFD on an index or an ETF is a leveraged contract on its price.
Can I lose more than I deposit?
Yes. Under our risk disclosure a negative balance can arise, for example when prices gap, and it stays on your account unless the law that applies to you says otherwise. Section 8 of the risk disclosure explains how.
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Our 300+ analysts trade every account with AI assistance, and you watch each trade live in the app. CFDs carry a high risk of losing money.