CFD Trading FAQs
- What are CFDs?
- What types of CFD markets does FOREX.com offer?
- What is the cost of CFD trading?
- What is the CFD nightly finance charge and how is it calculated?
- When do CFD orders expire?
- CFD trading process - how it works?
- Is there any difference between CFDs and investing?
What are CFDs?
A CFD, or contract for difference, is an agreement to exchange the difference between the opening and closing price of the position under contract, rather than buying and selling the underlying security outright.
What types of CFD markets does FOREX.com offer?
With FOREX.com, you can trade a range of global stocks including commodities and indices as CFDs. Click here to view our range of markets.
What is the cost of CFD trading?
FOREX.com is compensated by the spread, which is the difference between the bid and ask prices. View our live spreads.
In addition, you may be charged a nightly finance charge if you hold a position overnight, after 5pm ET.
To learn more about CFD costs and commissions, visit our CFD trading costs academy page.
What is the CFD nightly finance charge and how is it calculated?
With most CFDs, financing is debited for long positions or credited for short positions daily if you are in a position at 5pm ET.
These charges are typically calculated as follows:
F=(S x P x R)/D
F - Daily Financing Charge
S - Number of CFDs (2500)
P - Closing Price
R - Relevant interest rate benchmark, +250 basis points for long positions or -250 basis points for short positions, e.g. (4.50% + 3.00%) = 7.50%
D - Number of days, i.e. 365 for UK stocks and 360 for all others
When do CFD orders expire?
FOREX.com offers two types of CFDs: futures CFDs, which are dated for a specific contract month and expire, and cash CFDs, which are non-expiring and roll into the next contract month, with a basis adjustment (credit or debit in the difference between contract months). You can check standard expiry definitions here. This can also be found under the Market 360 tab for each market on the FOREX.com Web Trading platform, or under the Company tab in the Terminal window of MetaTrader 4.
When a CFD futures market expires, we close all open positions based on our most recent prices and all open orders are cancelled. To retain your open positions in a market, you must manually open a new position in the next contract month.
CFD trading process - how it works?
CFD trading is the buying and selling of contracts for difference, financial derivatives in which you agree to exchange the difference between the opening and closing price of a specific financial asset – such as a share, index or forex pair.
Unlike traditional investing, you don't take delivery of the asset. You never own the stock or currency you're trading.
For example, if you want to go long on oil, you could buy an oil CFD that makes or loses you $1 for every point oil moves. You won't take ownership of any oil, but you'll still earn a profit or a loss from its price movement.
If oil rises 100 points, you earn $100 as profit. If it falls 100 points, you lose $100.
This is a simple example, but there's a lot more you should understand about CFDs – including leverage, shorting and more. We'll cover these below, or for a complete explanation, take a look at our full guide to how CFDs work.
Is there any difference between CFDs and investing?
Contracts for difference and investing both enable you to take positions on financial markets, but they work in different ways. When you invest, you are typically buying and holding a market in the hope that it rises in value so you can sell it for profit. With CFD investments, you never own the asset – you're just speculating on its price movements.
CFDs bring several benefits over traditional investing. You can trade on margin, short markets and more. However, it also brings significant additional risk.