What is a CFD and how is it different from owning the asset?
My broker says I can trade stocks as CFDs. Do I own the shares then?
For education only. This is not financial advice. Trading carries a high risk of loss.
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1 Answer
Best answer
A CFD (contract for difference) is an agreement with a broker to exchange the difference in price of an asset between the time you open and close the trade. You never own the asset.
You can go long or short and use leverage, but you pay spreads and overnight financing, and leverage can cause losses larger than you expect. With stocks, owning the share gives you things like voting rights and dividends directly, while a CFD only tracks the price.
CFDs are restricted for retail clients in some countries, so check the rules where you live.
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