A CFD (Contract for Difference) is a derivative that lets you speculate on an asset's price movement without physically owning it. On close, you receive (or pay) the difference between opening and closing prices, multiplied by position size.
Pros:
- Access to many markets from one account: Forex, indices, stocks, commodities, crypto
- Easy short selling without borrowing the underlying
- Built-in leverage (30:1 max in EU on major Forex pairs)
- No physical storage costs (gold, oil)
Cons / risks:
- No ownership → no voting rights on stocks, no physical dividend (but compensatory adjustment)
- Overnight financing fees (swap) on positions held more than a day — can erode long-term profits
- High loss risk with leverage: 74-89% of retail accounts lose money (regulatory stats AMF/ESMA)
- Not eligible to French PEA tax-advantaged account; gains taxed at 30% flat tax in France
CFDs are regulated in Europe by ESMA since 2018 (leverage caps, negative balance protection, cost transparency). They remain banned in the US (deemed too risky for retail).