CFDs are tradeable instruments that track the price of underlying securities or assets. A CFD trade occurs when a trader enters into a contract with their broker to buy or sell a particular underlying asset or security at a specific price. In doing so, the trader aims to speculate on price fluctuations that may occur in the window of time between when the contract is agreed upon and entered into force, and when it expires (or when the trade is closed). request_quoteOwnership of underlying assets When you purchase an asset like company stock, you become the owner of those actual shares. When purchasing a CFD, however, you never own the underlying asset. As the price of the underlying asset fluctuates, the CFD trader will experience either an unrealized profit or an unrealized loss (or neither, if the price remains flat). Profits are only realized if the trade is closed while the position is still profitable (losses work under the same principle – if the trade is unprofitable when closed, the loss becomes realized). For example, if a trader buys a CFD on the EUR/USD pair and the contract price moves higher than the initial purchase price, the unrealized profit will be the difference between those two prices (minus any applicable trading costs). A quick note about losses: It’s important to remember that realized losses can worsen in the event of a margin call, or a gap in a stop-loss order. This added risk exists because CFDs are traded from within a margin account, which has the potential to incur a negative balance due to the use of leverage.