Contract for Difference (CFD)

A leveraged contract with a provider that pays or charges the change in an asset's price, without owning the asset.

Example

A CFD on EUR/USD gains when the pair rises and loses when it falls, with only margin deposited.

The provider is usually your counterparty, and regulators in several regions require providers to disclose how many retail accounts lose money.

Leverage — Investing with borrowed money so that you control more of an asset than your own capital would buy. Gains and losses are both multiplied by the same factor.
Counterparty risk — The risk that the party on the other side of an arrangement fails to pay what it owes you.
Margin call — A demand from a lender for more cash or collateral because the value of a leveraged position has fallen far enough that the equity in it is below the required level.

Every currency trade is a bet on two countries at once — A forex position is always one currency against another. Retail traders usually hold it through leveraged broker products, while every international investor already holds currency risk without trading at all. (9 min)
Leverage, gaps, the broker itself, and a tax treatment that depends on the product — The biggest forex risks are leverage and sudden gaps. Costs include spreads and overnight financing, and tax treatment varies widely by product and country. (11 min)