Forex vs CFD, and CFDs vs futures, options, shares and ETFs

Forex, CFDs, futures, options and shares side by side

Four ways to take a position on a price, compared on what you own, how much you put down and what it costs to hold; retail forex counts as a CFD, and ETF shares trade like other shares. Rules quoted are for retail clients of UK and EU firms.

Sources: FCA PS19/18 and ESMA for CFDs, the CME Group futures KID, FINRA for options, the London Stock Exchange for ETFs. Options sold, rather than bought, can lose far more than the premium.

Forex vs CFD: is forex trading a CFD?

Usually, yes. The FCA Glossary defines a rolling spot forex contract as either an off-exchange future on currency or a contract for differences “by reference to fluctuations in foreign exchange”, entered into for speculation. That is the contract a retail forex account holds: no currency is delivered, and positions are rolled from day to day with a funding charge or credit.

What changes between a currency CFD and a CFD on something else is the leverage cap, set by how volatile the asset is, and the unit the price moves in.

CFD or futures: what is the difference?

A futures contract is set by the exchange. CME Group’s key information document for its cash-settled FX futures, dated 1 January 2026, describes a fixed unit of trading, monthly expiry dates, a margin deposit called a performance bond, and a daily settlement price at which gains and losses are paid to or collected by the clearing house. It also says that “it is possible to lose more than the amount of money deposited”.

A CFD has none of that structure: the broker sets the contract size, there is no expiry, and you pay overnight funding instead. For a UK or EU retail client the CFD comes with the leverage caps, close-out at 50% of margin and negative balance protection; a future traded through an exchange does not carry those CFD rules. The EU definition of a CFD excludes futures by name.

• Holding for weeks: a future has no nightly funding charge, but CME lists its FX futures in monthly contract months, so you roll to the next one before expiry.
• Size: an exchange contract comes in a fixed unit of trading; the size of a CFD is set by your broker.
• Counterparty: the clearing house stands between futures traders; with a CFD it is your broker.

CFD vs stocks: buying shares or a share CFD

Take the same £4,000 of a UK company at £4.00 a share. Bought outright, it costs £4,000 plus Stamp Duty Reserve Tax, usually 0.5% on electronic purchases according to GOV.UK, so £20; the shares are yours and there is no nightly charge. As a CFD, it ties up £800 of margin at 1:5, carries no stamp duty, according to HMRC’s Stamp Taxes on Shares Manual, and costs funding: £0.66 a night at an assumed 6% a year.

On those numbers the funding passes the stamp duty after 31 nights. Shorter trades favour the CFD on cost; longer holdings favour the shares. A 10% fall costs £400 either way, but on the CFD that is half your margin and triggers close-out if the account held only the margin. This is general information, not tax advice; your position depends on your circumstances, so check HMRC guidance or a tax adviser.

Options vs CFD trading

An option gives the buyer “the right, but not the obligation” to buy or sell an asset at a fixed price by a set date, as FINRA puts it, in return for a premium. For the buyer, the premium paid is the maximum loss; the seller of an uncovered call can lose without limit. A CFD has no strike price and no expiry: your profit or loss follows the price one for one, scaled by the position size.

Some brokers sell options that behave like CFDs. The FCA applied its CFD rules to these “CFD-like options” for retail clients from 1 September 2019, a month after the CFD rules themselves.

CFD vs ETF

An ETF is a fund whose shares are listed on an exchange. The London Stock Exchange says the most common legal form is an open-ended investment company and that ETFs are treated as ordinary equity in its rulebook, so you buy and hold ETF shares the way you hold any other share: paid in full, owned, with no margin call.

An index CFD gives exposure to an index with margin, £500 on £10,000 for a major index at 1:20, and funding for each night. The ETF suits holding an index for years; the CFD suits short trades, including short selling, at the price of higher risk.