Lesson 2 · 6 min
What are CFDs?
Most retail forex is traded as a CFD: a contract on the price, not the thing itself.
A contract with your broker
A contract for difference pays you, or charges you, the change in price between opening and closing. You never own the currency, share or gold. Your counterparty is usually the broker.
Why that matters
Because the broker is on the other side, its licence and how it holds client money matter a lot. Top-tier regulators require client money to be kept separate and limit leverage for retail clients.
Costs you pay
The spread (gap between buy and sell price), sometimes a commission, and overnight financing (swap) if you hold past the daily cut-off.
The warning is real
Regulated CFD brokers in the UK, EU and Australia must publish what share of their retail accounts lose money. It is usually most of them.