Definition
What is CFD (contract for difference)?
A CFD (contract for difference) is a leveraged contract that pays or charges the difference in an asset’s price between opening and closing the trade, without owning the asset itself.
With a CFD you never buy the underlying gold, index or coin. You agree to exchange the price difference, so you can go long or short with the same ease.
CFDs are traded on margin, with flexible lot sizes, and carry costs such as the spread, commission and overnight swap. Because they are leveraged, small price moves create large changes in equity.
Most prop firm forex, metals, index and crypto accounts use CFD-style instruments, while futures accounts use exchange-style contracts with a fixed value per point.
Example
Example: you buy 1 lot of a US index CFD with 1 unit per lot at 20,000.0 and close at 20,050.0. The 50-point move earns $50 before costs; 2 lots would earn $100.
At a prop firm
On Axora Funded CFD accounts you trade forex, gold, US indices and 11 crypto pairs in a simulated environment, with leverage capped per instrument (forex up to 1:100, crypto up to 1:5).
Frequently asked questions
Do I own the asset when I trade a CFD?
No. You only exchange the difference in price between open and close.
Can I short with a CFD?
Yes. Selling first is as simple as buying first.