What is a CFD?
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The short answer
A CFD, or contract for difference, is a contract with your broker: you agree to settle the price difference of an asset between opening and closing the position, without ever owning that asset. There is nothing to deliver, nothing to withdraw, and your counterparty is the broker itself. Everything else follows from that: the price you see is theirs and not an exchange’s, every instrument has its own contract specification, a position held overnight is financed, and in Europe leverage is capped by regulation.
A contract, not an asset
Buying a CFD on a share makes you the owner of no share at all. You and your broker simply agree to settle the price difference between the moment you open the position and the moment you close it.
Three immediate consequences. There is nothing to deliver and nothing to withdraw: everything settles in cash on your account, as one line of profit or loss. You hold none of the rights attached to the asset, no real ownership and no voting right. And selling is exactly as simple as buying, since there is nothing to borrow in order to sell.
The most important point is also the least visible: your counterparty is your broker. That is not a matter of wording, it is what explains everything else on this page.
The price you see is your broker’s
There is no central exchange for CFDs. Each broker publishes its own quotes, built from its liquidity providers.
Hence small gaps between two brokers on the same asset at the same instant: a different spread, a daily high off by a few points, a wick present on one and absent on the other. The names themselves differ too, as our page on symbol suffixes and duplicates details.
That matters when you read a chart: a level marked at one broker does not land in exactly the same place at another, and it is at yours that your stop will be hit or not.
None of this means the price is made up. A serious broker stays very close to the reference market, under its regulator’s supervision. But it is their price that decides your fill and your result, not the one on a news site.
The contract specification decides your size
A lot means nothing on its own. On a currency pair one lot most often covers 100,000 units of the base currency; on gold, 100 ounces; on Bitcoin, often one unit, but not everywhere.
Three numbers are to be read in the contract specification, inside your platform: the contract size, the minimum volume and step, and the instrument’s settlement currency. They are what turns a distance into money, and therefore a risk into a size, as our page on position size per instrument details.
These values are not universal: they belong to your broker, and sometimes to the exact symbol variant you opened. Assuming them is how you end up ten times off on your size without noticing.
A CFD is financed for as long as you hold it
Opening costs the spread, and sometimes a commission. Holding costs on top of that, every night, a financing charge called swap. Those three lines are detailed on our page about the real cost of a trade.
Two mechanisms specific to CFDs come on top and often surprise. The first is the dividend adjustment on shares and cash indices: on the ex-dividend day the buyer is credited and the seller debited. It offsets the mechanical drop in the quote, it does not make you richer.
The second is the coexistence of two versions of the same asset at the same broker, common on indices and commodities. A cash version, with no expiry, financed every night. A version backed by a futures contract, which is not financed but expires on a fixed date and has to be rolled. A single suffix sometimes tells them apart, and picking the wrong one means the wrong hours, the wrong fees and the wrong end date.
What the European framework imposes
At a European entity, a retail client gets protections that are not optional.
Leverage is capped by asset class, from 30:1 on major currency pairs down to 2:1 on cryptocurrencies, which our page on margin and leverage details. Negative balance protection keeps your account from going into debt. And the broker must display the share of its retail clients who lose money, a figure most often between 70 and 80%.
Many groups also run an entity outside the European Union, where the advertised leverage is far higher. Those protections go away with it, and so does the recourse you would have in a dispute.
Professional client status, on request and under conditions, lifts those caps. It also removes the protections that come with them, which is rarely put forward.
What AlphaGPT does
AlphaGPT is not a broker. The tool never holds your funds, never takes the other side and executes nothing itself: orders go to your own account, at your own broker.
What it does with all of the above: the analysis runs on real prices read at your broker, and the size offered is computed from the contract size actually read there, never from an assumed value.
What the tool does not do: it does not choose your broker, does not compare their terms, and computes neither commission nor overnight financing. Those belong to your account conditions.
Trading carries a risk of capital loss.