What can you trade with CFDs? A beginner's guide

What can you trade with CFDs? A beginner's guide

Reading time: 9 minutes

Until a few decades ago, you needed separate brokerage accounts to trade different markets, one for forex, another for stocks and yet another for commodities. This also meant maintaining adequate balances in multiple accounts. Contracts for Difference (CFDs) have made life simpler for traders.

CFDs are derivative instruments where you enter into an agreement to exchange the difference in an asset’s price from the date you open the position to the date you close it. This means you can speculate on price moves without needing to own the underlying asset. CFD trading can lower entry barriers for beginners because you only need to invest a fraction of the position’s total value to open a trade. You only need to deposit a fraction of the trade's total value (known as margin), while leverage gives you exposure to the full position.

Since you don’t need to own the underlying asset, the need to take physical delivery of barrels of oil or gold bars is eliminated. Moreover, leverage allows you to open much larger positions than you would be able to with only the capital in your trading account. Such advantages have boosted the popularity of CFDs, with the global CFD market estimated at $9.8 billion in 2025 and projected to reach $19.6 billion by 2034.

Before exploring the markets suited for CFD trading for beginners, here’s an introduction to how CFDs work.

Beginner’s guide to how CFDs work

One of the most key advantages offered by CFDs is the ability to speculate on both rising and falling prices, using leverage to increase market exposure. However, remember that increasing market exposure can also increase potential losses

Going long

If your analysis indicates that an asset’s price is likely to increase, you open a long position. Here, you buy a specific number of CFD contracts at the current ask price. If the market moves inline with your expectations, you can close the position by selling the contracts at the higher bid price, capturing the cash difference as profit. However, if the price falls below your entry point, your account could incur a loss.

Going short

If your research signals that an asset’s price is overvalued or heading into a decline, CFDs allow you to benefit from a falling market by initiating a sell trade at the current bid price. You close the position later by buying the asset’s CFD back at a lower price. The price difference between your sell and buy prices would be your profit. However, if the price moves up instead, you could lose capital, especially if you haven’t used any techniques for managing risk.

Leverage and margin

CFDs are typically traded on leverage. This means you only deposit a small percentage of the total trade value to open a position. This initial deposit is your margin. For example, a 10:1 leverage ratio allows you to control a US$10,000 position with just US$1,000 of margin capital. This initial margin acts as collateral for the trade. To keep the position open, your account must maintain sufficient equity to meet your broker's margin requirements.

As mentioned earlier, using leverage can entail high risk. This makes risk management crucial in CFD trading for beginners and seasoned traders alike.

Costs

When trading CFDs, your costs typically include the spread, commissions and swap fees.The spread is the difference between the bid (sell) price and the ask (buy) price.The ask price is typically higher than the bid price. Some brokers charge a commission when you open and close a trade, particularly on raw spread accounts. Finally, take into consideration the interest charged for holding a leveraged position open overnight. This is known as the swap rate and varies from broker to broker.

Which markets can you trade with CFDs?

With CFDs, you can trade multiple markets and asset classes via a single account. As a beginner trading CFDs, learn all you can about each asset class to make informed choices.

Stock market

Stock CFDs account for about 30% of the global CFD volume. This popularity is driven to a large extent by CFDs allowing you to speculate on the price of even the most expensive stocks by depositing only a fraction of the total position value as margin. With share CFDs, you can speculate on the largest US tech giants, such as Apple, Nvidia, or Microsoft, or European blue chips listed on the London or Frankfurt Stock Exchange.

When trading share CFDs, you do not receive physical stock certificates or corporate voting rights. However, you can go short if you expect the stock’s price to fall and go long if you anticipate a price rise.

Stock indices

Representing 18.5% of the CFD market, stock indices track entire baskets of stocks representing a specific country or economic sector. Examples include the S&P 500 (US), FTSE 100 (UK), DAX 40 (Germany) and Nikkei 225 (Japan).

Indices tend to be popular among beginners because they allow you to diversify your portfolio with a single trade. Instead of spending hours analysing individual corporate balance sheets, you can speculate on the health of an entire sector or a nation’s economy.

Forex market

Forex CFDs accounted for approximately 55% of global CFD volumes in 2024, making it the largest segment of the CFD trading ecosystem. The forex market operates 24 hours a day, five days a week, allowing you to open and close positions at a time convenient to you. The market is known for its deep liquidity, especially for major forex pairs, such as the EUR/USD, which usually translates into tighter spreads and lower slippage during normal market conditions.

Commodities market

Commodity CFDs make up 16.3% of the global CFD market. They allow you to trade physical commodities without worrying about the logistics, storage costs, or transport requirements of the actual physical goods. The most commonly traded commodities are precious metals like gold (XAU/USD) and silver (XAG/USD), crude oil (Brent and WTI), and soft commodities like coffee, corn, or sugar.

Cryptocurrency market

Representing 14.2% of the retail CFD market, digital asset CFDs are the fastest-growing sector. They allow you to speculate on the high price volatility of major cryptocurrencies like Bitcoin (BTC), Ether (ETH) and Solana (SOL).

Trading digital assets via CFDs can eliminate many of the technical friction points of the crypto market. You don’t need to register on separate crypto exchanges, set up vulnerable digital storage wallets, or manage private security keys. You speculate on the asset’s price directly through your standard, regulated brokerage account.

Tips on CFD trading for beginners

Once you’ve learned how CFDs work, here are a few things to keep in mind to build your strategy and ensure you are managing risks adequately.

Spend time on education

Experienced traders recommend not trying to trade dozens of different stocks, currencies and metals all at once. Pick one or two liquid assets, learn their trading hours and understand what data points drive their daily price action. Practice trading them via CFDs on your demo account to fine-tune your strategy to different market conditions.

Keep a trading journal

Log every trade you make. Note the entry price, reasons for opening the trade, stop-loss level, and your emotional state during the trade. Regularly reviewing this log can help you identify patterns and work on minimising your emotions’ impact on decision-making.

Use stop-loss orders

Since leverage can magnify both potential gains and losses, experienced traders suggest using stop-loss orders with every position. A stop-loss order is an instruction to close a position if the market reaches a specified price. This way, if the market moves against your analysis, your losses can be capped.

1% risk limit

Many experienced traders follow the rule of not risking more than 1% of their total trading account balance on any individual position. With this, a single unfavourable market move will only impact 1% of your total funds.

Trade CFDs with a regulated broker

Learning how to navigate multi-asset CFDs requires consistency, clear analysis and proper risk management parameters. However, your technical execution environment is just as important. In the volatile global markets, you need an institutional-grade partner committed to offering low-latency execution and minimum slippage.

At FP Markets, we offer CFD trading for beginners and advanced traders across global shares, currencies, indices, commodities and cryptocurrencies, all from a single account. Take advantage of deep liquidity and competitive raw spreads to keep your trading costs low. Take control of your trading journey and open your account with FP Markets.