Trading CFDs carries considerable risk of capital loss. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.

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Stock trading with CFDs

Thanks to CFDs (Contract for Difference) you can trade in stocks with a limited investment.

Remember, a CFD of a stock mirrors the behavior of the underlying asset.

This gives you access to many stock exchanges around the world. You can trade with shares from companies based in France, United States, Australia, Japan, etc.

You can diversify your portfolio covering a wide variety of markets and you have a big amount of trading options. With CFDs, you can speculate on rising prices (long positions), but you can also speculate on falling prices (short positions).

When trading with physical stocks, you can only trade on rising market conditions and you don't have the advantage of leverage. CFD trading is way cheaper than doing it with the actual stocks.

The contract takes place between you and the broker outside a regular exchange (over the counter).

The CFD market doesn't have a physical location. It's very important to work with a broker which is regulated. This can be done on the Plus500, Fortrade or IG platform (among others).

The advantages of CFD trading

  • Potential large profits with a limited investment, thanks to the leverage effect
  • Making money by speculating on rising and falling markets
  • You choose your own stop-loss and the risk you want to take
  • In the UK, you pay no stamp duty on CFD transactions on shares.
  • You can never lose more than the deposit on your account (for European regulated brokers such as Plus500 and Fortrade )
  • No commissions: the broker makes money on the spread between the bid and ask

Practical example: short Barclays

If you think that the price of Barclays is going to fall, then you can sell short the shares by clicking on the "Short" button.

BS

You want to short 50 shares at 165.50. The total exposure amounts to 8,275 pounds, but you only need a margin of 20% or 1,655 pounds to open this position.

You choose a stop-loss at 175.50: should Barclays rise above this level you would make a loss of £500. You can also choose a profit target, for example a decline of 25 pounds per share to £140.50, which would mean a total profit of £1,250.

Long trade on Tesla

If you think that the price of Tesla is going up, then you can open a long position by clicking on the "Buy" button.

Tesla

You want to buy 20 shares at 207.88. The total exposure amounts to 4,157.60 dollars, but you only need a margin of 20% or 831.52 dollars to open this position.

You choose a stoploss at 10 dollars: should Tesla fall below $197.88 you would make a loss of $200. You can also choose a profit target, for example 25 dollars per share, which would mean a total profit of $500 at a stock price of $232.88.

Open an account

Compare the CFD platforms and try the free demos or open an account right away.

With an account, you can trade CFDs on shares, indices, commodities (oil, gold, silver, platinum, etc.) and on the Forex market (currencies).

With the free demo, you can practice with a fictitious capital so that you learn how to trade with CFDs and familiarize yourself with the platform from the brokers we selected.