Spot Forex and Forex CFDs

Spot forex

In the professional market a spot trade settles two business days after it is agreed, when the currencies actually change hands. Retail brokers do not want you to take delivery of 100,000 euros, so at the end of each day they close the trade and reopen it for the next day, a process called rollover. The interest-rate difference between the two currencies is charged or credited when they do, which is the swap you see on your statement.

Forex CFDs

A CFD removes the currency entirely. You and the broker agree that if you buy EUR/USD at 1.1000 and close at 1.1100, the broker pays you the difference on the size you chose, and if the price goes the other way you pay the broker. Nothing is delivered and nothing settles. Most brokers outside the United States offer forex to retail clients as a CFD, and the same contract structure lets them offer indices, commodities, shares and crypto on the same platform.

Why it looks the same on screen

Both are quoted with a bid and ask, both are traded in lots, both use leverage and margin, and both charge or pay a swap overnight. The differences are legal rather than practical: a CFD is a derivative, which affects how it is regulated and taxed in some countries, and it is why US residents cannot trade CFDs at all. For learning the market, treat them as the same thing and check the legal form once you choose a broker.

What this means for you

• You will never own currency; you are trading price changes.
• Holding a position overnight costs or earns swap, so multi-day trades have a carrying cost.
• Because the product is a contract with your broker, the broker's regulation and financial strength matter.

Key takeaways

• Spot forex settles in two days but is rolled over nightly by retail brokers.
• A forex CFD is a contract to exchange the price difference, with no currency delivered.
• On a retail platform the two behave the same; the differences are legal and regulatory.
• Overnight positions carry a swap charge or credit.