What Are CFDs?
A contract for difference (CFD) lets you speculate on price without owning the underlying asset. This free lesson covers how CFDs work and how they differ from spot ownership.
A CFD is an agreement with your broker to exchange the difference in price of an instrument from open to close of your trade. You can go long or short indices (e.g. NAS100), metals (XAUUSD), energy, and sometimes stocks — depending on your broker’s offering on platforms like TradeLocker.
You do not own the index or the gold bar. You are trading a price stream with leverage, financing (swap), and the broker’s spread or commission. That is powerful and dangerous: small deposits can control large notional size.
CFDs suit active traders who want short-term directional exposure and shorting flexibility. They are a poor substitute for long-term investment if your goal is ownership, dividends, or zero overnight financing.
Risk is asymmetric if you oversize. A 1% adverse move on high leverage can liquidate accounts. Prop firm challenges amplify this: daily loss limits are hit fast on NAS100 or gold when size is wrong.
This free lesson is the definition layer. Premium unlocks CFD product types, margin mechanics, TradeLocker index workflows, and how to pair CFDs with a prop playbook.
Key Points
- → CFDs track price difference — no ownership of the underlying.
- → Long and short are both available on most CFD menus.
- → Leverage multiplies gains and losses.
- → Costs include spread/commission and often overnight financing.
- → Oversizing is the #1 account killer on indices and gold.
Manual Trading Tips
- • Read your broker’s CFD product specs: contract size, margin %, trading hours.
- • Start with one index CFD (e.g. NAS100) before adding metals and energy.
- • Write “I do not own the asset” on your desk card if you came from stocks.
- • Demo a full week of CFD size before live challenge capital.
Frequently Asked Questions
What is What Are CFDs? in manual trading?
A contract for difference (CFD) lets you speculate on price without owning the underlying asset. This free lesson covers how CFDs work and how they differ from spot ownership.
How do I apply What Are CFDs? on my charting platform?
Read your broker’s CFD product specs: contract size, margin %, trading hours.
Is What Are CFDs? suitable for beginners?
This lesson is rated beginner level and is designed for manual traders on any broker or platform.
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