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, with retail leverage capped by asset class under CySEC rules through UBK Markets (licence 186/12): 30:1 on forex majors down to 2:1 on crypto and 5:1 on single stocks. 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.
