Trading has never been easy, but still, many people are eager to bear the risks and delve into the attractive world of finance. However, if you’re smart enough, you’d never take a leap in the dark, but first consider all the available options very carefully.
Overthinking your trading prospects and all the available instruments that can help you increase your profits and minimise risks, you inevitably come to a dilemma: CFDs vs Shares. Here's a short guide that may help to choose which suits you best.
is rather similar to shares trading with a one particularly important difference – when trading contracts for difference (CFDs), you don't own the underlying shares.
Another important trait of CFD trading is . Buying a share of XYZ, you pay its full cost. In the case of CFDs, you trade on , which means your broker leverages your capital to purchase a stock. So you have to pay just a particular percentage (or margin) of its full value.
Sounds too good to be true? Well, find out more to define, what works best for your portfolio and trading needs. Spot the major differences between CFDs or shares trading:
Now let’s take a closer look at the major advantages of share CFDs over share trading:
Leverage is probably the primary benefit of . For the same amount of money you deposit for shares, when trading CFDs you have the possibility to trade way more.
For example, having $20,000 on your account, you can trade 2-3 times more and take total positions equal to $40,000–$60,000, which is impossible with ordinary share trading.
Probably not. Well, trading on margin you often have to put only 5% of the total asset’s value. Sounds much better now, doesn’t it?
Short the market
The possibility to go short during the downtrend gives you twice as many trading opportunities, compared with classic shares trading (when you gain profit only if the prices go up).
Trading contracts for difference you can speculate on both stocks ups and downs.
Today, the majority of CFD trading platform providers allow you to trade both local and foreign markets. Therefore, you can trade on the major global stock exchanges, including the New York Stock Exchange (NYSE), the London Stock Exchange (LSE), the Frankfurt Stock Exchange (FWB) and the NASDAQ.
You can easily diversify your trading portfolio with stocks from various industries including technology, energy, healthcare, retail, etс.
Why shares only?
CFD trading does not end with shares. Modern CFD trading platforms offer you the benefit of trading more than 10,000 instruments from one single account.
Choosing contracts for difference (CFDs) over actual stocks you get the freedom to trade not only share CFDs, but also indices, commodities, Forex and cryptocurrencies.