What is a CFD? How contracts for difference work, and the risks
By SendPay Business · · 2 min read
- 1Type in your own numbers
- 2The tool works it out
- 3See the answer clearly
A CFD, or contract for difference, is a deal with a broker to exchange the difference in an asset's price between when you open and close the position. You never own the currency, share or coin; you only gain or lose on its price moving.
How a CFD trade works
- You pick an asset, such as the EUR/USD currency pair, and bet on it rising (going long) or falling (going short).
- You put down a deposit, called margin, which is only a fraction of the position's full size.
- When you close the position, the broker pays you the price difference if you were right, or you pay it if you were wrong.
- Holding a position overnight usually costs a daily financing charge.
Leverage cuts both ways
Because margin is only a fraction of the position, small price moves become big gains or losses compared with the money put in. In the UK, the FCA caps leverage for retail clients, at 30 to 1 for major currency pairs and lower for more volatile assets, and requires brokers to show the percentage of their retail accounts that lose money. Those figures are usually well over half.
Try it
Name your platform and watch it come to life
Type a name, tap a colour and pick what it does. The phone changes as you go.
Colour
What it does
Design and preview your whole platform free, then launch when you are ready.
CFDs and the law
CFD brokers serving UK customers must be authorised by the FCA. CFDs are banned for retail customers in the US.
Where SendPay fits
SendPay does not offer CFDs, leverage or forex trading. SendPay platforms offer currency exchange between GBP, EUR and USD accounts, and crypto buy, sell and hold, at fees the owner sets.
How it works
Your own money app- 1Name it and pick your colours
- 2Choose what it does
- 3Launch when you are ready
Why sign up
Create your free SendPay account
It's all about creating your own financial platform with ease. Start with a free account today.
- 🪪A free business accountOpen it in about a minute with your business name, email, password and mobile. No card and no documents to start.
- 💳Get paid from day oneTake card payments, and share your own payment link and invoices so customers pay in a click.
- 🌐A free business websiteFree to build, free to publish and free to keep, with unlimited visits.
- 🚀Your own financial platformDesign and preview your whole platform free, then launch when you are ready.
SendPay Business is a technology company, not a bank. Accounts, cards and payments are powered by licensed partners.
Questions people ask
Read next
Spotted a mistake or something out of date? and we'll fix it. How our guides are made
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.