Similarities between CFDs and forex trading
While there are some key differences between forex CFDs and forex trading, there are also lots of similarities. Whichever option you choose, you’ll probably pay to open your position via the spread, instead of commission. And you’ll always speculate on the price movements of forex pairs instead of on currencies in isolation.
All retail forex trades will take advantage of leverage. Leverage allows retail forex traders to get exposure to large amounts of currency without having to pay the full value of their trade upfront. Instead, you only put down a deposit known as margin.
Your profit or loss will still be calculated based on the full size of your position, though. So your profits and losses can be far greater than the amount you put down to open the trade, and your losses can sometimes even exceed your initial deposit.
Find out more about how a forex trade works.