How to read a CFD key information document (KID): risk indicator, scenarios and costs

A key information document (KID) is a short, standardised summary that firms in the European Union must give retail clients before they buy a packaged investment product, including a contract for difference (CFD). It tells you what the product is, how risky it is on a scale of 1 to 7, what could happen to an example position under different market scenarios, and what it costs. For CFDs the most useful parts are the costs section and the plain statements about leverage and losses; the performance scenarios are illustrations, not forecasts.

Most traders never open the KID. It usually sits in the legal documents section of a broker's website, one for each product type, and the sign-up process asks you to confirm you have read it. This guide goes through it section by section, shows how to turn the example cost figures into the cost of your own trade, and explains what the document cannot tell you.

Where the KID comes from

The KID is required by the EU's PRIIPs Regulation (Regulation (EU) No 1286/2014), which covers packaged retail and insurance-based investment products. CFDs fall within its scope because their return depends on the price of something else. The requirement has applied since 1 January 2018.

The rules set out what the document must contain, in what order and under which headings, and limit it to a maximum of three sides of A4 paper when printed. The idea is that you can put two KIDs side by side, from two firms or for two products, and compare them on the same terms. The firm that creates the product, which for CFDs is the broker itself, writes the KID and must keep it up to date. It must be provided free of charge before you trade.

In the UK the PRIIPs rules were carried over after Brexit and are now being replaced by a new framework for consumer composite investments, with a transition period that began in April 2026 and runs to June 2027. Documents from UK-regulated firms may therefore look different from the EU format over time. The principles in this guide (read the risk statements, rescale the costs, treat scenarios as illustrations) apply to both.

The structure of a KID

Every PRIIPs KID uses the same headings in the same order:

1. Purpose. A standard statement that this is not marketing material and that the information is required by law to help you understand the product.
2. Product. The name of the product, the firm that makes it, its contact details, its regulator and the date of the document.
3. Comprehension alert. For products considered complex, a warning that you are about to purchase a product that is not simple and may be difficult to understand. CFD KIDs carry it.
4. What is this product? Type, objectives, the intended retail investor and term.
5. What are the risks and what could I get in return? The summary risk indicator and the performance scenarios.
6. What happens if the firm is unable to pay out? Information on investor compensation schemes.
7. What are the costs? The cost tables.
8. How long should I hold it and can I take money out early? The recommended holding period.
9. How can I complain?
10. Other relevant information.

Below, each section in the order you will meet it, with what to look for in a CFD KID.

The product section: check the legal entity

The product section names the firm that produced the document and its regulator. Before you read anything else, check that this matches the firm you are signing up with. Many brands operate several legal entities in different countries, some regulated in the EU or UK and some offshore. The entity named in the KID should be the one named in your client agreement, and you should be able to find it on the regulator's register. The how to check a broker licence guide explains how, and the regulator registers page lists where to look.

The date matters too. KIDs must be reviewed and updated, so an old date can be a sign that the cost examples no longer reflect current pricing.

What is this product?

This section describes the CFD in plain terms. For a forex CFD, you will typically read that:

• The product is a contract between you and the firm based on the price movement of a currency pair, and you do not own the underlying currencies.
• You can go long (buy) or short (sell), and the position is leveraged, so you put up only a fraction of the position's value as margin.
• The product has no fixed maturity, and the firm can close your position if your margin falls below a set level.
• The intended retail investor is someone who understands leverage, can bear losses up to the amount invested and has a short-term horizon.

The intended investor description is worth reading honestly. If it describes someone with knowledge or experience you do not have, the firm is telling you, in the regulated language available to it, that the product is not designed for you. The what is a CFD guide explains the product mechanics in more depth.

The term section also usually explains margin close-out. Under the ESMA rules for retail clients, firms must close positions when your margin falls to 50% of the required level. The KID will state the firm's close-out level and the circumstances in which it can close positions without your consent. The margin call and stop-out guide works through what that looks like in an account.

The summary risk indicator

The summary risk indicator (SRI) is a scale from 1 (lower risk) to 7 (higher risk), shown as seven boxes with one highlighted. It combines a measure of market risk, based on how much the price of the product has varied, with a measure of credit risk, the chance that the firm cannot pay you.

For CFDs, the indicator is almost always 7. That is not a quirk of a particular broker: leveraged products tend to sit at the top of the scale because small price moves create large changes in the value of your investment. If you are comparing CFD KIDs, the SRI will rarely help you choose between them, but it is a useful reminder when set beside other products. A broad equity fund might be rated 4 or 5; a CFD sits at the top of the scale.

Next to the indicator, the KID will include some important plain-language statements. Read these slowly, because they are where the real risk information sits. Typical points include:

• Leverage magnifies both gains and losses, and you can lose your entire investment.
• Losses can build quickly, and you may need to add funds or have positions closed.
• Market conditions, such as gaps over weekends or around news, can mean an order is filled at a worse price than requested.
• Whether you can lose more than your deposit. For retail clients in the EU and UK, negative balance protection means your account cannot go below zero, and the KID should say so.
• That the return may be affected by currency conversion if your account is in a different currency from the instrument.

If the KID says that you could lose more than you invested without mentioning negative balance protection, check whether you are dealing with an EU or UK retail entity at all. The ESMA leverage limits guide explains the protections that should apply.

Performance scenarios

This is the part of the KID that confuses people most. The scenarios show what would happen to an example position under different price moves. They usually come as a table with stress, unfavourable, moderate and favourable outcomes, sometimes for both a long and a short position.

The key point: these are not forecasts. They are calculated from a set method using past price variation, and the method was designed with long-term investment products in mind. For a CFD with no recommended holding period and positions that may last minutes or days, the scenarios are best read as a worked example of leverage: a given percentage move in the underlying price produces a much larger percentage gain or loss relative to the margin.

The methodology for these scenarios has been criticised by regulators and the industry for producing figures that can mislead in some market conditions, and the rules were revised to address this. Treat the specific numbers with caution and focus on the shape: the losses in the bad scenarios are large relative to the margin, and the stress scenario shows what happens when markets move sharply against you.

Worked example: reading a scenario as leverage

The following figures are illustrative and do not come from any specific broker's KID.

Suppose a KID uses an example position of 1 standard lot of EUR/USD (100,000 euros) at a price of 1.0800, so the notional value is 108,000 dollars. At 30:1 leverage the margin is 108,000 divided by 30 = 3,600 dollars.

1. A favourable scenario of a 1% rise in the price would add 1,080 dollars to a long position.
2. As a percentage of the margin, that is 1,080 divided by 3,600 = 30%.
3. An unfavourable scenario of a 1% fall would take away 1,080 dollars, also 30% of the margin.
4. A stress scenario of a 3.5% fall would take away 3,780 dollars, more than the whole 3,600 dollar margin. In practice the firm's margin close-out would usually try to close the position earlier, but in a gap the loss could go beyond the stop.

A 1% move in a major currency pair over a few days is not unusual. That is what the scenarios are trying to show: a modest price move becomes a large swing in your money. The leverage and margin guide explains this relationship in detail.

What happens if the firm cannot pay out?

This section explains whether you would be covered by an investor compensation scheme if the firm failed and could not return your money. For EU firms this is usually the national scheme of the firm's home country. For example, Cyprus-regulated firms are members of the Investor Compensation Fund, and UK-regulated firms fall under the Financial Services Compensation Scheme. The limits, and who is eligible, differ between schemes.

Three points to note:

• Compensation schemes cover the firm failing to return client money or assets. They do not cover trading losses.
• Coverage often depends on your client category. In the Cypriot scheme, for example, professional clients are not covered; see professional client status explained.
• The firm should hold client money in segregated accounts, separate from its own, which is a separate protection from compensation.

The costs section

This is the part worth reading carefully, because it is the closest thing to a standardised price list. Under the PRIIPs rules, costs are presented in two parts:

• Costs over time, showing the total effect of costs on an example investment.
• Composition of costs, breaking costs down by type.

For CFDs, the breakdown usually includes:

• One-off entry and exit costs. The spread, and any commission. Some firms also list a currency conversion fee here if your account currency differs from the instrument's.
• Ongoing costs. Overnight financing, also called swap or rollover, charged for each night a position is held, and possibly any other recurring charges.
• Incidental costs. Usually none for a standard CFD, but read the line.

Most CFD KIDs express costs for an example trade, often 1 lot or a set notional amount, sometimes in currency amounts and sometimes as a percentage of the notional value. That last point matters more than it looks.

Worked example: rescaling the costs to your trade

The figures below are illustrative and do not come from any specific broker.

Suppose the KID's example is a 1 standard lot EUR/USD position with a notional value of 108,000 dollars. It shows:

• Spread cost: 8 dollars per round trip, equal to 0.0074% of the notional value.
• Overnight financing on a long position: 9.50 dollars per night (a cost; it may be a credit on the other side).

You plan a 0.2 lot position held for 10 nights.

1. Spread cost scaled: 8 multiplied by 0.2 = 1.60 dollars.
2. Financing scaled: 9.50 multiplied by 0.2 = 1.90 dollars per night, multiplied by 10 nights = 19 dollars.
3. Total: 1.60 + 19 = 20.60 dollars.

Two things stand out. First, a cost of 0.0074% of the notional sounds tiny, but the margin for 1 lot at 30:1 is 3,600 dollars, and 8 dollars is 0.22% of that. Measured against the money you actually put up, costs are about 30 times larger than they look as a percentage of notional. Second, for a position held over several nights, the financing can easily dwarf the spread. In this example it is more than ten times the spread cost.

Also check the date of the financing figures. Swap rates change with interest rates, so a KID's example rate may be out of date. The firm's live swap rates in the platform or on its website are the ones that apply. The swap calculator lets you work through overnight costs with current numbers, including the triple charge applied once a week to cover the weekend, and the swap and overnight financing guide explains how the rates are set.

How long should I hold it?

For a CFD, this section usually says there is no recommended holding period, or that the product is designed for short-term trading. It also explains that you can close at any time during market hours. The practical message is that CFDs carry a daily financing cost, so they become more expensive the longer you hold them, which is why they are generally used for short-term positions.

What the KID does not tell you

The KID is useful, but it has limits:

• It describes the product, not the firm's conduct. It does not tell you about execution quality, slippage, requotes or how the firm handles complaints in practice. See ECN, STP and market maker execution and slippage explained.
• It may not show every fee. Deposit and withdrawal charges, inactivity fees and currency conversion on deposits may sit in a separate fee schedule. The hidden broker fees guide lists what to look for.
• The cost figures are examples. Spreads are often variable, and the KID may show typical or average figures. Your actual cost depends on when you trade; spreads tend to widen around news, at rollover and in thin markets, as explained in why spreads widen.
• It does not show the firm's loss disclosure. The standard risk warning stating the percentage of retail accounts that lose money is shown on the firm's website and marketing, not necessarily in the KID. It is worth reading both. Across firms, typically between about 60% and 90% of retail CFD accounts lose money; see why most retail CFD traders lose.
• It is not an assessment of you. The firm's appropriateness test, which asks about your knowledge and experience, is a separate process.

A quick checklist for reading a CFD KID

1. Does the legal entity in the product section match your client agreement, and is it on the regulator's register?
2. Is the document dated recently?
3. What does the intended retail investor description say, and does it describe you?
4. What is the margin close-out level, and does the KID confirm negative balance protection?
5. What do the scenarios show as a percentage of margin, not just in currency terms?
6. What are the spread, commission and overnight financing costs for the example trade, and what do they come to at your own trade size and holding period?
7. Which compensation scheme applies, and are you eligible in your client category?

To compare the costs you find across firms, the how to compare trading costs guide shows how to build an all-in figure per trade.

Common mistakes

• Treating the scenarios as forecasts. They are calculated illustrations. A favourable scenario says nothing about what is likely to happen.
• Reading costs as a percentage of notional. Tiny percentages of the notional value become meaningful percentages of the margin you actually put up.
• Ignoring the financing line. For positions held more than a day or two, overnight financing is often the largest single cost.
• Using an outdated KID. If rates have changed since the document date, the financing figures may no longer be accurate.
• Assuming the KID covers all fees. Check the separate fee schedule for deposit, withdrawal, inactivity and conversion charges.
• Reading the KID of a different entity. A brand's offshore entity may not provide a PRIIPs KID at all, and its protections differ.

Frequently asked questions

What is a key information document?

It is a standardised summary, of at most three A4 pages, that firms in the EU must give retail clients before they buy a packaged investment product such as a CFD. It sets out what the product is, its risk level on a scale of 1 to 7, example performance scenarios, costs, the recommended holding period and how to complain, under the same headings for every product.

Why do CFDs have a risk rating of 7?

Because leverage means small price moves create large changes in the value of your position relative to the margin you put up, and losses can build quickly. The rating combines market risk and credit risk, and leveraged products typically sit at the top of the scale. It is the same for almost all CFD KIDs, so it does not help you choose between firms.

Are the performance scenarios in a KID predictions?

No. They are calculated using a set method based on past price variation, to show what different price moves would do to an example position. They illustrate the effect of leverage. They are not forecasts and say nothing about what is likely to happen.

Where can I find a broker's KID?

KIDs are usually published in the legal documents or regulatory section of a broker's website, with a separate document for each product type, such as forex CFDs, index CFDs or share CFDs. The firm must provide the relevant KID before you trade, free of charge.

Do UK brokers still provide KIDs?

UK firms followed the PRIIPs rules after Brexit, but the UK is replacing them with a new disclosure framework for consumer composite investments, with a transition from April 2026 to June 2027. Depending on timing and the product, a UK firm may provide a PRIIPs-style KID or a document in the new format. The same reading principles apply.

Does the KID show all the costs of trading?

It shows the main product costs, typically the spread, commission and overnight financing, for an example position. It may not include account-level charges such as deposit, withdrawal, inactivity or currency conversion fees, which are usually listed in a separate fee schedule.