CFD Foundations · CFDs Trading Guide
A CFD turns a price change into a contractual cash result. Understanding what you own, and who owes that result, comes before choosing a market.
The agreement behind the screen
A contract for difference links your account to a specified reference price. You and the provider settle the change between your opening and closing prices, adjusted for contract size and applicable charges. The asset itself need not change hands. The trading ticket is therefore only the front of a legal agreement with rules about pricing, funding and closure.
Exposure is not ownership
A share CFD does not make you a shareholder. A gold CFD does not give you a bar you can collect. Voting rights, custody arrangements and physical delivery belong to different instruments. A cash adjustment connected with a dividend is a contractual entry, not evidence that you own the company. Identify the precise rights before comparing products.
Follow a simple cash result
Suppose a long contract represents 40 shares, opens at $25 and closes at $26.50. The price result is 40 × $1.50 = $60 before charges. Closing instead at $23.50 produces a $60 loss. The same exposure drives both calculations regardless of whether the initial margin was $200 or $500. A small deposit does not shrink the contract.
Separate three decisions
First decide whether the underlying exposure belongs in your plan. Next assess whether a CFD is a suitable way to obtain it. Finally evaluate the provider and contract. A correct market forecast can still produce an unsatisfactory outcome after costs or execution problems. Keeping these decisions separate makes weaknesses easier to identify before money is committed.
Try it yourself
A contract represents 80 units and rises from $12 to $12.75. What is the long position price result, and does the buyer own 80 units of the asset?
Show the worked answer
The price result is 80 × $0.75 = $60 before costs. The CFD provides contractual price exposure, not ownership of the 80 underlying units.
Further reading
Educational material, not a recommendation to trade. Numerical examples are hypothetical. CFDs involve leverage and substantial risk of loss. Availability, costs and protections depend on the contract, legal entity, jurisdiction and client classification.
