| Updated: December 1, 2025If you have explored the website of any broker, you have likely encountered the option to trade contracts for difference (CFDs). This derivative instrument is particularly popular among experienced traders who utilise margin and leverage due to the many advantages it offers.
This comprehensive guide provides essential information about CFD trading, covering how CFDs work, the regulatory considerations, the markets in which CFDs are available, and the most common mistakes to avoid. Additionally, the guide discusses the advantages and disadvantages of trading CFDs, helping you make more informed decisions.
Below you can find the best platforms for CFD trading
| Broker | Trading Platforms | Licences | |
|---|---|---|---|
1 | cTrader, MetaTrader 4, MetaTrader 5 | FSCM (Mauritius, # GB25204316) | |
FPM Trading FX Spreads vs Industry AverageChart loading There might be additional fees corresponding with this account type. ** Last update - 2025-11-05 09:31:14 UTC | |||
2 | cTrader, DupliTrade, Fusion+ Copy Trading, MetaFX, MetaTrader 4, MetaTrader 5, TradingView | FSAS (Seychelles, # SD096), VFSC (Vanuatu, # 40256), ASIC (Australia, # 385620) | |
Fusion Markets FX Spreads vs Industry AverageChart loading There might be additional fees corresponding with this account type. ** Last update - 2025-12-01 09:16:48 UTC | |||
3 | cTrader, MetaTrader 4, MetaTrader 5, TradingView, ZuluTrade, BlackBull CopyTrader, BlackBull Invest, BlackBull Shares, BlackBull Trade | FMA (New Zealand, # FSP403326), FSAS (Seychelles, # SD045) | |
BlackBull Markets FX Spreads vs Industry AverageChart loading There might be additional fees corresponding with this account type. ** Last update - 2025-05-20 14:08:12 UTC | |||
4 | MetaTrader 4 | VFSC (Vanuatu, # 40256), ASIC (Australia, # 385620) | |
Global Prime FX Spreads vs Industry AverageChart loading There might be additional fees corresponding with this account type. ** Last update - 2025-12-01 18:00:21 UTC | |||
5  Capital.com | MetaTrader 4, Proprietary Mobile, Proprietary Web, TradingView | CySEC (Cyprus, # 319/17), FCA (United Kingdom, # 793714), SCB (Bahamas, # SIA-F245), ASIC (Australia, # 513393), ESCA (United Arab Emirates, # 20200000176) | |
Capital.com FX Spreads vs Industry AverageChart loading There might be additional fees corresponding with this account type. ** Last update - 2025-12-01 18:27:19 UTC | |||
6 | MetaTrader 4, MetaTrader 5, Proprietary Mobile, Proprietary Web | CySEC (Cyprus, # 388/20), DFSA (United Arab Emirates, # F004356), FCA (United Kingdom, # 684312), FSAS (Seychelles, # SD108), SCB (Bahamas, # SIA-F217), ASIC (Australia, # 414530), BaFin (Germany, # 151148), CMA (Kenya, # 128) | |
Pepperstone FX Spreads vs Industry AverageChart loading There might be additional fees corresponding with this account type. ** Last update - 2025-12-02 10:36:55 UTC | |||
7 | MetaTrader 4, MetaTrader 5 | SVGFSA (Saint Vincent and the Grenadines, # 149) | |
Switch Markets FX Spreads vs Industry AverageChart loading There might be additional fees corresponding with this account type. ** Last update - 2025-05-21 11:41:03 UTC | |||
8 | MetaTrader 4, Axi Copy Trading, Axi Mobile | CySEC (Cyprus, # 433/23), DFSA (United Arab Emirates, # F003742), FCA (United Kingdom, # 466201), FMA (New Zealand, # 518226), SVGFSA (Saint Vincent and the Grenadines, # 25417), ASIC (Australia, # 318232) | |
Axi FX Spreads vs Industry AverageChart loading There might be additional fees corresponding with this account type. ** Last update - 2025-05-21 11:43:59 UTC | |||
9 | Proprietary Mobile, Proprietary Web | CFTC (United States, # 0001398), CySEC (Cyprus, # 250/14), DFSA (United Arab Emirates, # F005651), EFSA (Estonia, # 4.1-1/18), FCA (United Kingdom, # 509909), FFAJ (Japan, # 2010001092422), FMA (New Zealand, # 486026), FSA (Japan, # 2010001092422), FSAS (Seychelles, # SD039), FSCA (South Africa, # 47546), MAS (Singapore, # CMS100648), SCB (Bahamas, # SIA-F250), ASIC (Australia, # 417727) | |
Plus500 FX Spreads vs Industry AverageChart loading There might be additional fees corresponding with this account type. ** Last update - 2025-05-20 07:49:34 UTC | |||
10 | MetaTrader 4, MetaTrader 5, TradingView | CySEC (Cyprus, # 246/14), FCA (United Kingdom, # 921296), SCB (Bahamas, # SIA-F220), ASIC (Australia, # 391441) | |
Eightcap FX Spreads vs Industry AverageChart loading There might be additional fees corresponding with this account type. ** Last update - 2025-05-12 11:16:44 UTC | |||
11 | L2 Dealer, MetaTrader 4, Proprietary Web, ProRealTime, TradingView | CFTC (United States, # 0509630), DFSA (United Arab Emirates, # F001780), FCA (United Kingdom, # 944492), FFAJ (Japan), FINMA (Switzerland, # IG Bank S.A.), FMA (New Zealand, # 684191), FSCA (South Africa, # 41393), JFSA (Japan, # 9010401051715), MAS (Singapore, # 1489), ASIC (Australia, # 515106), BaFin (Germany, # 148759), BMA (Bermuda, # 54814) | |
IG FX Spreads vs Industry AverageChart loading There might be additional fees corresponding with this account type. ** Last update - 2025-05-20 07:52:37 UTC | |||
12 | MetaTrader 4, MetaTrader 4 MultiTerminal, MetaTrader 5, Proprietary Mobile, Proprietary Web | CFTC (United States, # 0516820), CySEC (Cyprus, # 120/10), DFSA (United Arab Emirates, # F003484), FSCA (South Africa, # 49976), IFSC (Belize, # 000261/27), FSCM (Mauritius, # GB23202700) | |
XM Group FX Spreads vs Industry AverageChart loading There might be additional fees corresponding with this account type. ** Last update - 2025-11-19 12:29:42 UTC | |||
FPM Trading
4.9
Fusion Markets
BlackBull Markets
Global Prime
4.7
Pepperstone
Switch Markets
Axi
4.2
Plus500
Eightcap
IG
XM GroupWhat is CFD trading?
The contract for difference (CFD) is a derivative financial instrument that enables traders to speculate on the price fluctuations of fast-moving markets such as the foreign exchange, indices, soft and hard commodities, bonds, and shares.
Traders can speculate on rising or falling market prices without owning any underlying assets such as fiat currencies, cryptocurrencies, precious metals, physical company shares, natural gas, sugar, or crude oil. This speculation is possible in either direction, with traders having the option to open short or long positions.
The losses or profits they realise depend on the extent to which their price-movement predictions are correct. With contracts for difference, the actual value of the underlying assets is not taken into account. Instead, only the change between the entry and exit prices is considered. In essence, this is a contract between a broker and their customer, hence the name of this instrument.
With CFDs, the trader opens a long or short position for a given number of units in their preferred market, depending on whether they think the price of the market will appreciate or depreciate.
When the trader believes the value of their selected market will rise, they choose to open a buy position, or, in other words, to go long. In this case, their earnings will rise proportionately to the increase in the market price, i.e. they will earn multiples of the number of units by which the price has risen.
Unfortunately, the opposite is also true. If the price of the market drops, the trader will register losses for each point by which the price moves against them. Here is a concrete example of how trading with cash CFDs works.
Suppose a trader believes the value of Brent oil will go up, so they decide to open a buy position and purchase one contract for USD/BBL at a current market price of 72.85. The Brent oil market rises by eleven points to 72.96 and the trader decides to close their position. Every price movement of $0.01 for USD/BBL is worth $0.10. The Brent oil price has changed by 11 cents in this case, resulting in a net profit of $1.10 ($0.10 × 11 cents) for the trader.
As we said earlier, there is also the possibility of the market moving in the opposite direction, i.e. against the trader. If this happens and the price of Brent oil drops by twenty points to 72.65, for example, the trader will suffer losses of (72.85 − 72.65) × 0.10 = 20 × 0.10 = $2.00 instead. Thankfully, our hypothetical trader was watching the market closely and exited their position in time to prevent further losses from mounting.
6 key concepts of CFD trading
CFDs are leveraged derivatives with high volatility. Inexperienced traders can deplete balances quickly. You realise profit or loss only when you close a buy or sell position. The instrument suits traders who understand markets, pricing and risk.
Short and long positions in CFD trading
You can trade both directions. Going long aims to profit if price rises; going short aims to profit if price falls. Example: short FTSE 100 at 2,450; it drops to 2,400; the 50-point move delivers $50 on a 1-contract position. Profits or losses crystallise on closing.
CFDs and margins
Margin is the minimum equity to open and maintain a leveraged position. Initial margin is required to enter a trade; maintenance margin keeps it open. Falling below maintenance triggers a margin call. If unmet, the broker can close positions to limit further losses.
Spreads and commissions for CFD trading
Brokers quote bid (sell) and ask (buy); the difference is the spread. Many brokers embed fees in the spread; ECN-style accounts offer raw spreads plus fixed commissions. Example: GBP/USD 1.2764/1.2766 = 2 pips; on a 10,000-unit mini lot that’s about $2 in spread cost. Stock CFDs often carry separate commissions.
CFD contract sizes
CFD contract size mirrors the underlying. Silver commonly trades in 5,000-troy-ounce lots (1 troy ounce ≈ 31.1035 g). Share CFDs are typically 1 CFD per share, so 100 Amazon shares = 100 CFDs. Forex uses lots: standard 100,000 units; mini 10,000; micro 1,000; cent 100.
CFDs and leverage
The contract for difference is a leveraged product, which enables traders to invest smaller amounts of money to deal with a much larger trading volume. This is known as leverage. Say a trader is interested in opening a position equal to 1,000 shares in Facebook.
In the absence of leverage, this would mean they must cover the entire cost of the Facebook shares upfront. To proceed with the example, the price per share is $1, or 100 × $0.01. In a conventional situation where the person executes a traditional trade with a broker, they will have to pay 1,000 × $1 upfront.
This would cause them to expose a total of $1,000 to risk, provided that we ignore any additional charges or commissions. If Facebook shares jump by $0.30, the price per share will increase to $1.30.
Hedging
If you are acquainted with professional traders, you might have heard them mention hedging. This approach is implemented by many experienced investors who trade with CFDs. They use it to manage their risk and protect their existing portfolio.
Let’s assume a hypothetical trader has bought 10 shares in Netflix at a price of $910 per share, investing $9,100 in total. If the company reports a disappointing quarter and share prices drop to $860, our trader could lose $500 from their original $9,100 investment.
The trader can mitigate their risk without disposing of their shares by hedging with contracts for difference. They can profit from long positions if the market prices increase. Gaining from falling markets is also possible when a trader opens a short position and the prices start declining. Our hypothetical trader thinks the value of Netflix shares is about to depreciate and goes short with a CFD on 10 shares at the current market price of $910.
Netflix prices indeed drop from $910 to $860, causing the trader to lose $500 as their investment is now worth only $8,600. However, the trader’s short CFD position offsets this loss because they opened it at a starting price of $910 per share, and the price has now dropped by $50 to $860. The trader generates profits of $500 (a $50 price difference × 10 shares) from this CFD.
6 common markets for CFD trading
One great thing about CFDs is that the instrument is available for all asset classes, including currency pairs, indices, stocks, soft and hard commodities, and even bonds. The sections below cover six of the most common options for CFD traders.
Forex CFD trading
Many experienced investors prefer to trade currency pairs like EUR/USD via contracts for difference because this increases their exposure to the forex market. The latter is the largest and most liquid market in the world, exceeding even the stock market in terms of trading volume.
According to data compiled by the Bank for International Settlements (BIS), the forex market recorded an impressive trading volume of over $7.5 trillion per day in 2022.
Instead of buying and selling currencies in the conventional way on the spot market, you can trade units of currencies with CFDs depending on whether you think their underlying value will appreciate or depreciate. It works quite similarly to traditional forex trading. Trading CFDs for this instrument comes with several benefits. For example, there is no need for you to deposit the full value of your trades.
Commodity CFDs
Another option for CFD traders is to trade commodities. There are two types of commodity, starting with hard commodities like natural gas, crude oil, and precious metals that are mined.
There are also soft commodities like sugar, orange juice, coffee, cocoa, wheat, corn, livestock, and soybeans that are grown. We should also mention that many CFDs for soft commodities borrow their prices from the underlying values of the futures market.
Share CFDs
Most CFD brokers usually give their clients the option to enter into contracts for difference on the shares of some of the world’s largest companies. Both long and short positions are available for this market. One contract is normally equal to one share in a company, meaning that trading 500 shares in Netflix, for example, requires purchasing 500 contracts for difference. Some brokers facilitate trading with fractional shares, allowing clients to gain exposure to the stock market by trading less than one whole share. The trading hours coincide with those for the underlying exchange. In most cases, a commission is charged on share CFDs.
Index CFDs
Another alternative for CFD traders is to speculate on the performance of different stock markets, including some of the biggest indices in the world, such as the Dow Jones Industrial Average, the FTSE 100 Index, Nikkei 225, the German DAX 30, Nasdaq, the Hang Seng Index, and the NYSE.
As a matter of fact, trading index CFDs is a less volatile alternative to trading individual stocks. It enables the trader to spread their risk across an entire market instead of restricting themselves to a single company.
Cryptocurrency CFDs
Cryptocurrency CFDs allow traders to speculate on the price movements of digital currencies like Bitcoin, Ethereum, Solana, and Ripple without owning the actual coins. Traders can go long or short, profiting from rising or falling prices, often using leverage to increase exposure with less capital. Unlike spot crypto trading, CFDs do not require a wallet or exchange account. However, the volatile nature of cryptocurrencies makes crypto CFDs high-risk, requiring careful market analysis and risk management.
ETF CFDs
ETF CFDs enable speculation on exchange-traded funds (ETFs), which are baskets of assets like stocks, bonds, or commodities traded on stock exchanges. Trading ETF CFDs gives you exposure to diversified portfolios without requiring you to purchase the underlying securities separately. This allows you to profit from the market movements of entire sectors or themes, such as technology or energy. Leverage and the ability to go long or short enhance trading flexibility, whilst avoiding the complexities of direct ETF ownership.
Advantages and disadvantages of CFD trading
Contracts for difference are an advanced trading instrument that can be highly beneficial for seasoned traders but, at the same time, very detrimental to those lacking experience and a proper understanding of how they work. Let’s start with a rundown of some of the main advantages this instrument has to offer.
- The ability to trade with leverage enables you to gain greater market exposure and generate significant profits with a relatively small initial investment.
- You earn profits from the price movements of markets without having to own any underlying assets yourself.
- CFDs allow you to open both long and short positions, giving you the flexibility to profit from rising and falling markets alike and hedge existing portfolios.
- Costs are generally lower because most CFD markets, except shares, often do not incur additional commissions as brokers primarily earn through the bid-ask spread.
- CFD traders face a huge variety of trading opportunities. Many brokers who offer such contracts provide a choice from currency, commodity, index, stocks, bonds, and treasury CFDs. This ensures speculators have a broad range of financial vehicles to operate with.
As we stressed on several occasions, this is a complex instrument that often drains the entire balance of many retail traders. You should carefully examine the pitfalls below before you start your CFD trading experience.
- Remember when we said you can generate large profits with a small initial investment thanks to leverage? The bad news is that the opposite is also true. Leverage boosts your potential for profits but it also increases your losses. You can reduce your risk by setting stop-loss orders to protect your balance if the prices move against you.
- CFDs inherently carry counterparty risk since you enter contracts with brokers or financial institutions rather than trading on regulated exchanges. This means the broker’s financial stability is crucial. In the event of insolvency or failure to execute orders properly, traders might incur losses beyond their initial capital, especially in the absence of negative balance protection or investor compensation.
- CFD positions can incur overnight financing fees if positions are held open for extended periods. These costs can accumulate and substantially reduce profitability for long-term traders, sometimes making direct ownership of the underlying assets more cost-effective.
- Market gaps and slippage can occur during volatile market conditions or outside regular trading hours. This means your orders might be executed at prices significantly different from those expected, potentially leading to larger losses or missed profit opportunities. Unlike traditional exchanges, CFD markets can be less liquid at times, increasing this risk.
Platforms that support CFD trading
Many brokerages develop proprietary software, which may be considered a setback by prospective customers who are not accustomed to working with such platforms.
One viable course of action in this case would be to open a demo account with the respective broker and practise with a virtual balance until you get a proper feel of how everything works.
MetaTrader platform suite
The majority of brokers still prefer to use these third-party platforms, developed by MetaQuotes Software. Two versions are usually offered for free download on Mac- and Windows-based computers.
The more popular but older option is the MetaTrader 4 (MT4), which many brokerage clients still prefer to use. This one was created specifically for forex traders.
If you are looking to trade CFDs, we suggest you use the newer MetaTrader 5 (MT5) because it was built specifically for trading instruments like CFDs, futures, and stocks. Both versions are mobile-compatible, with free native apps available at Google Play and the Apple App Store.
There are tonnes of great features on either platform. Both boast a user-friendly interface and offer different functionalities, including many timeframes, one-click trading, multiple languages, technical indicators, graphical objects, and automated trading. There is also a browser-based version, called WebTrader, which does not require additional software downloads.
TradingView
In addition to the MetaTrader platform suite, TradingView has become an increasingly popular choice among CFD traders. TradingView offers advanced multi-asset charting with over 100 built-in and 100,000 community-created indicators, more than 20 chart types, and 110 smart drawing tools. Its unique Bar Replay lets traders back-test strategies visually.
Integrated brokerage connections enable seamless trade execution directly from charts. The powerful price-alert systems notify users via app, email, or text message. The platform supports custom scripting with Pine Script and is home to a large social community for sharing strategies. TradingView works on desktop, web, and mobile devices with real-time global market data.
cTrader
Another noteworthy platform is cTrader, which comes with an intuitive interface tailored for forex and CFD trading, advanced order types, depth-of-market (DOM) insights, and Level II pricing. It supports automated trading with cAlgo and custom indicators, plus one-click trading and detailed charting tools.
Designed for speed and precision, cTrader offers web, desktop, and mobile access alongside comprehensive risk-management and trade-management features. The platform emphasises transparency with clear trade-execution reports and fast order processing.
Regulations rundown – who can trade CFDs?
One important thing to keep in mind if you are interested in CFD trading is the fact that this instrument is not legal in all jurisdictions because of its high volatility. Most regulated brokers offering this service must prominently display disclaimers on their websites, warning their clients about the financial pitfalls associated with this derivative.
Other ongoing regulatory efforts include imposing strict retail marketing restrictions to prevent misleading promotions and comprehensive disclosures of all trading costs, including spreads, commissions, and overnight fees. Additionally, many jurisdictions require CFD brokers to segregate client deposits from their operating funds to ensure clients’ capital security even in adverse scenarios. Retail traders commonly benefit from negative balance protection, safeguarding them against massive losses and debt.
The regulatory requirements are country-specific. For example, under the rules enforced by the Financial Conduct Authority (FCA) in the UK, brokers are expected to carefully assess the suitability for CFD trading of each customer. Those who are not experienced or knowledgeable enough will be denied the service.
CFD trading is legal in Australia as well. However, the local financial watchdog, ASIC, labels this instrument as ‘detrimental’ to retail customers. In August 2019, the Australian regulator went as far as to propose severe restrictions on leverage as well as on what markets locals can trade CFDs on.
On a previous occasion, ASIC drew parallels between casino gambling and contracts for difference, suggesting the former is less risky. This echoes the sentiments of American investor, philanthropist, and businessman Warren Buffett, who once described derivatives like the CFD as “a financial weapon for mass destruction”.
Trading CFDs in Europe is regulated under the Markets in Financial Instruments Directive (MiFID). This piece of legislation enables brokers regulated in member states of the EU to offer speculative products to customers residing in all other countries of the Union and the European Economic Area (EEA) without acquiring separate licences.
Other territories where this derivative is legal include most of Canada, Japan, Singapore, the United Arab Emirates, South Africa, and New Zealand. In some places, like Belgium, the provision of specific CFDs is prohibited.
Maximum leverage requirements vary depending on local regulations. Hong Kong and the United States are some of the jurisdictions where CFD trading is completely outlawed. In the US, in particular, regulators like the SEC and CFTC consider these derivatives overly complex and way too risky for the average investor, largely because of the high leverage they offer. Additionally, CFDs are typically over-the-counter (OTC) products and, as such, are not traded on regulated exchanges, which raises concerns about their lack of transparency and investor recourse in case of a dispute or broker failure.