Open a trading app and Apple, Tesla or the S&P 500 may appear twice: once as a share, once as a CFD. They move with the same price, but they are completely different products.
What a CFD is
A contract for difference is a bet between you and the broker on whether a price goes up or down. You never own the underlying share. CFDs are usually traded with leverage: you put down a small deposit (the margin) and control a much larger position.
| Real shares / ETF units | CFDs | |
|---|---|---|
| You own the asset | Yes | No — it’s a contract with the broker |
| Leverage | No (unless you use a margin account) | Usually yes |
| Can you lose more than you put in? | No | Your losses can exceed a single position’s deposit; EU and UK rules protect retail clients from a negative balance on the account |
| Overnight costs | None | Daily financing fees for holding positions |
| Voting rights, dividends | Yes / yes | No / cash adjustments only |
| Suited to | Long-term investing | Short-term trading by experienced traders |
Why most retail CFD accounts lose money
Leverage magnifies both gains and losses. A 5% move against a 1:5 leveraged position wipes out 25% of the money behind it, and positions can be closed automatically when losses hit a limit. Add daily financing costs, and holding CFDs for the long term becomes expensive. That’s why regulators in the EU, the UK and elsewhere require brokers to show the percentage of retail CFD accounts that lose money — and that percentage is high.
How to make sure you’re buying real shares
- Look for words like “Invest”, “Real stock” or “No leverage”, and avoid anything labelled “CFD”, “Trade” with a leverage selector, or showing margin and overnight fees.
- Some brokers run separate accounts for shares and CFDs. Open the investing account, not the trading one.
- Check your holdings: real shares show as positions you own; CFDs show as open trades with a margin.
The short version
For building wealth over years, buy the real shares or ETF units. CFDs are a tool for short-term speculation, and most people who use them lose money.
This guide is general education, not personal financial advice. Your situation, country and tax rules matter. Disclaimer.