A photograph of a house is not the house. You can trade the photograph — bet on whether it will be worth more or less — without ever owning bricks, a roof, or a deed.
A Contract for Difference, or CFD, is that photograph. You never own the underlying stock, index, or commodity — you're purely trading the difference between the entry and exit price, with a broker on the other side of every trade.
How CFDs create leverage
A CFD broker requires only a margin deposit — often a small single-digit percentage of the position's notional value — to open a position many multiples larger. The mechanics resemble forex leverage: a ratio, a lot or unit size, and a margin requirement that's a fraction of true exposure.
The regulatory reality for Indian residents
CFDs on global stocks, indices, and commodities are not traded on Indian exchanges and are not products SEBI regulates or permits domestic brokers to offer to retail Indian residents. Trading them means going through an offshore broker, which brings the same FEMA and RBI remittance considerations flagged in the forex chapter, plus a separate concern: your recourse if that offshore broker has a platform failure, a dispute over execution, or simply becomes unreachable is governed by whatever jurisdiction they're regulated in — if any — not by SEBI's investor protection framework.
Why this matters for a leverage-focused school
The leverage mechanics of a CFD aren't exotic — they're the same margin-ratio idea running through this entire school. What's different is everything around the leverage: who's holding your money, what protects you if the broker fails, and whether you have a real regulatory body to complain to if something goes wrong. High leverage combined with thin regulatory protection is a materially different risk than high leverage on a SEBI-regulated exchange, even when the percentage numbers on screen look similar.
Key Takeaway
A CFD lets you trade price difference on a global stock, index, or commodity without ever owning the underlying asset. CFDs are not SEBI-regulated products available through Indian brokers to retail residents — accessing them means going offshore. The leverage math is familiar; what changes is investor protection, dispute recourse, and remittance considerations, which deserve at least as much scrutiny as the leverage ratio itself.