How a CFD works
A CFD, or contract for difference, is an agreement to exchange the change in an asset’s price between opening and closing, without ever owning the asset. You pick a direction, and you settle the difference in cash. Because you post only margin rather than the full value, a CFD is leveraged, and because you never take delivery, you can go short as easily as long.
Worked example
You open a CFD on a stock at $100 for 100 units, controlling $10,000 of exposure with a fraction of that as margin. The stock rises to $108 and you close: you collect the $8 per unit difference, $800, minus spread and overnight financing. Had you gone short and the stock fallen to $92, you would collect the same $800 on the decline. Ownership never changes hands; only the difference settles.
CFDs on Volity
Volity offers CFDs across forex, crypto, stocks, commodities, and indices through UBK Markets (licence 186/12), with leverage of up to 1:500 on forex, commodities and indices, up to 1:50 on crypto and up to 1:20 on single stocks. Leverage magnifies gains and losses alike, so size each position so a single loss stays small and keep a stop-loss. Negative balance protection limits the absolute worst case to your deposit. Use real shares when you want ownership and dividends; use CFDs for leverage, shorting, and fast direction.
Why it matters
CFDs are flexible and capital-efficient, but leverage cuts both ways and overnight financing makes them costly to hold for months. They suit active, directional trading, not long-term buy-and-hold. Size with position sizing, not the maximum leverage allows. Related: overnight financing and contract size.
Learn more in our CFD trading guide.
