Glossary entry
A contract for difference is a derivative agreement that settles the change in an underlying reference price between opening and closing a position. The holder generally does not own the underlying asset. CFDs commonly involve leverage, so a relatively small margin supports a larger exposure, with financing charges and counterparty terms affecting results.
Illustrative example
A hypothetical long CFD with exposure of 1,000 gains or loses 10 when its reference price moves 1%, before spreads, financing, and other charges.
What to consider
Leverage amplifies losses as well as gains. Product availability, loss protections, margin rules, and legal treatment depend on the jurisdiction and provider.
General information, not a personal recommendation. Product availability, rights, and obligations are determined by the relevant provider, jurisdiction, and approved agreements.