Contracts for difference (CFDs) are a way of speculating on the change in value of a foreign exchange rate. CFDs can also speculate on a change in share price or a market index. You’re not buying the underlying asset, just speculating on the price movement.
CFD leverage is like trading with borrowed money. The deposit (or ‘margin’) you give to the provider is a small part of what you borrow to invest.
A CFD contract is legally binding. If the market goes against you, the CFD provider:
- will ask you to pay extra money at short notice to keep your CFD position open (a ‘margin call’). This may lead to further losses
- may close out your CFD, for whatever it’s worth at the time. You may lose all the money you invested