What Is a CFD?
A Contract for Difference (CFD) is a financial derivative that allows you to speculate on the price movement of an asset β stocks, indices, commodities, currencies, or more β without owning the underlying asset.
When you buy a CFD on gold, you do not own physical gold. You hold a contract with your broker that pays the difference between the opening and closing price of that contract.
How CFDs Work
You choose an asset (e.g. Gold) and decide on a direction:
Going Long (Buy): If you believe gold will rise, you open a buy CFD. If gold rises from $1,900 to $1,950, you profit from the $50 move (multiplied by your position size).
Going Short (Sell): If you believe gold will fall, you open a sell CFD. If gold falls from $1,900 to $1,860, you profit from the $40 decline.
CFDs allow you to profit (or lose) in both rising and falling markets β a key advantage over buying assets outright.
Costs of CFD Trading
Spread: The difference between the buy and sell price. This is how brokers earn on each trade.
Overnight financing (swap): If you hold a CFD position overnight, you pay (or receive) a small interest charge based on the notional value of the position. Long positions typically pay; short positions may receive.
Commission: Some account types charge per-trade commission instead of (or in addition to) the spread.
CFD Markets at eplanet Brokers
eplanet Brokers offers CFDs across:
- Forex: 60+ currency pairs
- Indices: 25+ global indices (S&P 500, FTSE 100, DAX 40, etc.)
- Commodities: Gold, silver, oil, natural gas, agricultural products
- Stocks: 110+ global equities (Apple, Tesla, Amazon, etc.)
- Energy: WTI Crude Oil, Brent Crude, Natural Gas
Key Risks to Understand
CFDs are leveraged products β losses can exceed your deposit if you do not use stop-losses. Overnight financing costs can erode profits on positions held for extended periods. CFDs are not suitable for all investors.
Always understand the full cost structure before trading any instrument.