Futures or CFDs: the difference explained simply
The problem. Many beginners start with CFDs, not least because of the providers' huge advertising, for example as sponsors of Formula 1 cars. What many don't know: with CFDs, the broker is your direct trading counterparty. The provider sets the prices itself and determines the terms. The price is not formed on a central exchange. On the other side of your trade stands the broker or a liquidity provider. Your loss is therefore often the counterparty's gain.
The reality. Futures are traded on central, regulated exchanges (like the CME or Eurex). Here, many buyers and sellers meet at a central place. The price is formed there and is not set by the broker. It applies to all participants.
Desk Notes. Trading on central reference exchanges reduces conflicts of interest: when your trading counterparty is not your own broker, there is more equal treatment and market transparency.
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