CFD Stock Trading

CFD stock trading is a popular method that traders use to speculate on the price movements of equities and the market as a whole. Investors can be bullish or bearish on their value without the need to physically purchase company shares.

Read on to find out what CFD stock trading is, how it works and how to get started. This article will also run through some popular strategies and a few trading tips to get you going. We have compiled a list of our top recommended CFD stockbrokers below.

Best CFD Stock Trading Brokers

  1. Interactive Brokers - Over 8,000 CFDs are offered on a vast array of instruments, encompassing stocks, indices, forex, and commodities. Moreover, the TWS platform lends itself to seasoned day traders, offering a comprehensive selection of over 100 order types and algorithms, alongside premium market data sourced from reputable sources such as Reuters and Dow Jones.
  2. DNA Markets - DNA Markets offers a small suite of 250 CFDs covering stocks, indices, forex, commodities and cryptos, providing opportunities to speculate on rising and falling prices. There are no restrictions on strategies with leverage up to 1:30 (Australia) or 1:500 (rest of world).
  3. LQDFX - LQDFX offers a modest collection of CFDs covering currencies, metals, stocks, indices, commodities and cryptos. The 50+ technical indicators and drawing tools pre-included in MT4 will facilitate both short-term and long-term strategies.
  4. IG - IG offers a huge selection of 17,000+ CFDs, providing more trading opportunities than most CFD brokers. Traders can go long or short on popular markets like stocks, currencies, commodities and cryptos, while custom price alerts and the IG Academy continue to enhance the trading experience.
  5. Videforex - Videforex CFDs are available on forex, indices, cryptocurrencies and commodities with up to 1:500 leverage and tight spreads from near zero. CFDs incur a commission fee of 1%–2.5% and up to 5% for leveraged trades.

CFD Stock Trading Comparison

CFD Stock Trading Comparison
Broker CFD Leverage Minimum Deposit Minimum Trade Regulators Visit
Interactive Brokers logo
1:50 $0 $100 FCA, SEC, FINRA, CBI, CIRO, SFC, MAS, MNB Visit
DNA Markets logo
1:500 $100 0.01 Lots ASIC Visit
LQDFX logo
1:1000 $20 0.01 Lots - Visit
IG logo
1:30 (Retail), 1:250 (Pro) $0 0.01 Lots FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA Visit
Videforex logo
1:500 $250 $0.01 - Visit
ForexChief logo
1:1000 $10 0.01 Lots VFSC Visit
Axofa logo
1:1000 $1 0.01 Lots SVGFSA Visit
Sage FX logo
1:500 $10 0.01 Lots Pending Visit
Coinexx logo
1:500 0.001 BTC 0.01 Lots - Visit
RaceOption logo
1:500 $250 $0.01 - Visit
BinaryCent logo
1:500 $250 $0.01 VFSC Visit
World Forex logo
1:1000 $1 0.01 Lots SVGFSA Visit

#1 - Interactive Brokers

Why We Chose Interactive Brokers

Over 8,000 CFDs are offered on a vast array of instruments, encompassing stocks, indices, forex, and commodities. Moreover, the TWS platform lends itself to seasoned day traders, offering a comprehensive selection of over 100 order types and algorithms, alongside premium market data sourced from reputable sources such as Reuters and Dow Jones.

"Interactive Brokers is one of the best brokers for advanced day traders, providing powerful charting platforms, real-time data, and customizable layouts, notably through the new IBKR Desktop application. Its superb pricing and advanced order options also make it highly attractive for day traders, while its diverse range of equities is still among the best in the industry."

- DayTrading Review Team
  • FTSE Spread: 0.005% (£1 Min)
  • GBPUSD Spread: 0.08-0.20 bps x trade value
  • Stocks Spread: 0.003
  • Leverage: 1:50
  • Regulator: FCA, SEC, FINRA, CBI, CIRO, SFC, MAS, MNB
  • Platforms: Trader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, eSignal, TradingCentral

About Interactive Brokers

Interactive Brokers (IBKR) is a premier brokerage for experienced traders, providing access to 150 markets in 33 countries, along with a suite of comprehensive investment services. With over 40 years of experience, this Nasdaq-listed firm adheres to stringent regulations by the SEC, FCA, CIRO, and SFC, amongst others, and is one of the most trusted brokers for trading around the globe.

Pros

  • IBKR is one of the most respected and trusted brokerages and is regulated by top-tier authorities, so you can have confidence in the integrity and security of your trading account.
  • The new IBKR Desktop platform takes the best of TWS while adding bespoke tools like Option Lattice and Screeners with MultiSort to create a genuinely impressive trading experience for day traders at every level.
  • IBKR continues to deliver unmatched access to global stocks with tens of thousands of equities available from 100+ market centres in 24 countries.

Cons

  • You can only have one active session per account, so you can’t have your desktop program and mobile app running simultaneously, making for a sometimes frustrating trading experience.
  • Support can be slow and frustrating based on tests, so you might find it challenging to reach customer service representatives promptly or encounter delays in resolving issues.
  • IBKR provides a wide range of research tools, but their distribution across trading platforms and the web-based 'Account Management' page lacks consistency, leading to a confusing user experience.

#2 - DNA Markets

Why We Chose DNA Markets

DNA Markets offers a small suite of 250 CFDs covering stocks, indices, forex, commodities and cryptos, providing opportunities to speculate on rising and falling prices. There are no restrictions on strategies with leverage up to 1:30 (Australia) or 1:500 (rest of world).

"DNA Markets is an excellent choice for short-term traders familiar with the MetaTrader platforms. The smooth sign-up process also makes it easy to get started while the $100 minimum deposit is accessible. That said, DNA Markets trails the top brokers in education, research and mobile trading. "

- DayTrading Review Team
  • FTSE Spread: 1.7
  • GBPUSD Spread: 1.0
  • Stocks Spread: 1.0 cent + $0.02 per share, per side (Apple)
  • Leverage: 1:500
  • Regulator: ASIC
  • Platforms: MT4, MT5

About DNA Markets

DNA Markets is a forex and CFD broker established in 2020. The broker operates two entities in Australia and the offshore jurisdiction, St Vincent and the Grenadines. Traders can access 250+ markets, with a Standard account for beginners and a Raw account for experienced traders. The reliable MetaTrader 4 and MetaTrader 5 platforms are available, alongside Signal Start.

Pros

  • Low trading fees with spreads from 0.0 pips in the Raw account and zero non-trading fees
  • Top-rate platforms and charting tools for day traders with access to MT4 and MT5
  • 24/5 customer support with response times of <2 minutes during testing

Cons

  • There are limited educational and research tools, reducing its appeal to beginners
  • Although it continues to strengthen its client base and reputation DNA Markets lacks the track record of top brokers like Vantage
  • The investment offering trails alternatives, especially in terms of stocks, cryptos and commodities

#3 - LQDFX

Why We Chose LQDFX

LQDFX offers a modest collection of CFDs covering currencies, metals, stocks, indices, commodities and cryptos. The 50+ technical indicators and drawing tools pre-included in MT4 will facilitate both short-term and long-term strategies.

"LQDFX is best for active day traders looking for ultra-tight spreads, low fees and high leverage up to 1:1000. Forex traders will particularly appreciate the strong range of 70+ currency pairs with minimum deposits starting from $20."

- DayTrading Review Team
  • FTSE Spread: 0.90
  • GBPUSD Spread: 0.1
  • Stocks Spread: 0.05 (Apple Inc)
  • Leverage: 1:1000
  • Platforms: MT4

About LQDFX

LQDFX is a straight-through processing (STP) broker based in the Marshall Islands. The offshore trading firm offers competitive spreads from 0.0 pips, free deposits, 24/5 support and access to the hugely popular MetaTrader 4 platform. LQDFX also runs a competitive bonus program for short-term traders.

Pros

  • Leverage is available up to 1:1000 for experienced day traders
  • The $20 minimum initial deposit is accessible for beginners, and the Micro account will serve those looking to trade in smaller volumes
  • The broker offers the industry favorite MT4 platform and mobile app, with 30 technical indicators for chart analysis

Cons

  • Market research tools and educational resources are very limited compared to top brands like IG
  • It's a shame that there's no copy trading platform for beginners or experienced strategy providers
  • There are no additional charting platforms available, such as MT5 or a proprietary solution

#4 - IG

Why We Chose IG

IG offers a huge selection of 17,000+ CFDs, providing more trading opportunities than most CFD brokers. Traders can go long or short on popular markets like stocks, currencies, commodities and cryptos, while custom price alerts and the IG Academy continue to enhance the trading experience.

"IG continues to provide a comprehensive package with an intuitive web platform and best-in-class education for beginners, plus advanced charting tools, real-time data, and fast execution speeds for experienced day traders."

- DayTrading Review Team
  • FTSE Spread: 1.0
  • GBPUSD Spread: 0.9
  • Stocks Spread: 0.02
  • Leverage: 1:30 (Retail), 1:250 (Pro)
  • Regulator: FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA
  • Platforms: Web, ProRealTime, L2 Dealer, MT4, AutoChartist, TradingCentral

About IG

Founded in 1974, IG is part of IG Group Holdings Plc, a publicly traded (LSE: IGG) brokerage. The brand-US offers spread betting, CFD and forex trading across an almost unrivalled selection of 17,000+ markets, with a range of user-friendly platforms and investing apps. For 50 years, IG has maintained its position as an industry leader, excelling in all key areas for traders.

Pros

  • The ProRealTime advanced charting platform is free as long as certain modest monthly trading activity requirements are met
  • As a well-established broker, IG operates under strict regulatory guidelines in multiple jurisdictions, maintaining a high level of trust
  • The proprietary web-based platform continues to caters to traders of all levels, with advanced charting tools and real-time market data useful for day trading

Cons

  • While there is negative balance protection in the UK and EU, there is no account protection or guaranteed stop losses for US clients
  • IG has discontinued its swap-free account, reducing its appeal to Islamic traders
  • Beginners might find IG’s fee structure complex, with various fees for different types of trades or services, potentially leading to confusion or unexpected charges

#5 - Videforex

Why We Chose Videforex

Videforex CFDs are available on forex, indices, cryptocurrencies and commodities with up to 1:500 leverage and tight spreads from near zero. CFDs incur a commission fee of 1%–2.5% and up to 5% for leveraged trades.

"Newer traders will find a lot to enjoy about trading binary options on Videforex's easy-to-use proprietary platform, as well as the broker's copy trading solution. Payouts also remain higher than most alternatives climbing to 98%."

- DayTrading Review Team
  • FTSE Spread: Floating from 0.2
  • GBPUSD Spread: Floating from 0.1
  • Stocks Spread: NA
  • Leverage: 1:500
  • Platforms: TradingView

About Videforex

Launched in 2017, Videforex offers access to stock, index, crypto, forex and commodities markets via binary options and CFDs. The proprietary platform, mobile app and integrated copy trading are user-friendly and will suit new and casual traders, and the market analysis tools and trading contests provide good ways to improve your trading skills.

Pros

  • You can easily mirror the trades of experienced investors with low fees
  • The support times are fast and reliable based on tests - few brokers offer 24/7 multi-lingual video support
  • Global clients can make free and fast transfers via a wide range of payment types, from credit cards to cryptocurrencies

Cons

  • No MetaTrader 4 integration
  • US clients aren’t accepted due to legal restrictions
  • The broker isn’t overseen by a trusted regulatory agency

What Is CFD Stock Trading?

A contract for difference (CFD) is an agreement between a broker and a trader that states the latter will either pay or be paid the difference between the value of an asset at the start of the contract and the end. Typically, these contracts have no expiry date and can be opened and closed whenever the trader wishes.

CFD stock trading involves derivative instruments, which means that the trader does not purchase the asset itself, they only speculate upon its price movements.

Therefore, investors do not take ownership of the underlying asset. For example, purchasing a CFD on Tesla shares does not give the investor shares in the company, simply the opportunity to be paid if their value goes up.

How CFD Stock Trading Works

With CFD share trading, investors essentially invest, or speculate, on the price movement of a stock, with the capability to profit (or loss) from both bullish and bearish markets.

CFD stock trading can be carried out by either going long or short on an asset if they believe its price will rise or fall, respectively.

What is CFD stock trading?

Profit (or loss) is then determined by the difference between the value of the stock when the position is opened and its value when it is closed. Commissions are usually charged to open and close a CFD, typically around 0.1% for UK stocks.

Let us look at a CFD stock trading example where an investor believes the value of Lloyds Banking Group stock will rise from its current point ask/bid price of 45.55/46.55 pence.

They then purchase 10,000 units going long, meaning they stake £4,655 (10,000 * 46.55p bid price), and the broker charges a 0.1% commission with a minimum fee of £8. Since the commission would only be £4.66 (0.1% of £4,655), the minimum charge of £8 is charged.

After eight hours, the value of the stock CFD has risen to 65.55/66.55 pence and the trader closes the contract for £6655 (10,000 * 66.55p), for a gross profit of £ 2,000 (£6655 – £4655).

However, another £8 commission charge is taken (the 0.1% charge of £6.56 is less than the minimum). So, the total commission taken is £16 taken from a gross profit of £2,000, leaving the trader with a net profit of £1,984.

The same process is followed for short CFDs, except the price difference is in the other direction. That is, the stock price dropping to 25.55/26.55p would produce the same profit.

CFD Stock Trading Vs Spot Stock Trading

So what is the difference between CFD stock trading and traditional (spot) stock trading? Are you better off CFD share trading or just share trading?

Spot stock trading would entail purchasing some company shares if you believe the stock price will increase. This would come with all the benefits of owning the shares, gaining voting rights, dividends etc.

However, if the stock price falls, you will lose money as the value of your holding has decreased.

CFD stock trading, on the other hand, does not provide ownership but allows you to profit (or lose) from bidirectional price movements and execute trades much more quickly, better facilitating day trading strategies.

Each share trading style has its benefits, for example, spot stocks are probably better if you wish to hold the shares for a long time, earn voting rights and dividend yields.

However, if you wish to speculate on short term price movements, CFD stock trading may be better for you.

CFDs also come with the opportunity to leverage your trades, borrowing a portion of the contract cost from the broker so that you can increase your market exposure and take larger positions.

Experienced investors may use CFDs to hedge against traditional stock holdings. If you are holding for the long term but believe it may do poorly in the short term, you can purchase a selling CFD to balance this out, without affecting your shareholdings.

The Influence Of CFDs On The Price Of Stocks

Does CFD stock trading affect stock prices in any way? The simple answer is no. CFDs are derivative contracts that are related to the price movement of stocks. When buying stock/share CFDs, the trader never actually buys or owns the underlying asset. Therefore, CFDs have no impact on the value of the stock they are based on.

What Platforms Can I Trade On

You might have heard that share CFD trading is only available on MetaTrader5 (MT5) but this is not the case. Even though it’s commonly associated with forex, CFD and share trading is possible on MetaTrader4 (MT4). However, MetaTrader5 was designed with CFDs in mind and therefore presents an easier interface and is more suited to a CFD stock/share trader.

There is also a large number of other, less popular, trading platforms that support CFD stock trading. Many brokers offer their own proprietary or commercial platforms, such as cTrader or NinjaTrader. If a broker offers CFD shares trading then they will almost always provide access to a platform that supports it.

CFD Stock Trading Strategies

With CFD stock trading, strategy is important. Here, we have highlighted a few of our favourite strategies, though more detail can be found on our strategies page:

Pair Trading

This strategy entails investing in two different stock CFDs, with one long position and one short. The two stocks should be highly correlated assets that have recently become less correlated.

The aim is to take advantage of a divergence between the two underlying assets. You open a long position on the weaker asset and a short position on the stronger one.

The direction of the market shouldn’t matter, you will be winning with one position and losing with the other.

Any potential gain is then based on the price difference between these assets, rather than the direction of their price movements.

Hedging

This is almost like a CFD stock trading insurance policy and works if you already own stocks or have open positions.

Let’s say you own stocks in Coca-Cola and you believe the value is going to drop in the short term. You don’t want to sell the stock, as in the medium or long-term, you expect it to recover.

This is where hedging comes in. You can go short on Coca-Cola and, if the price does drop, you can cash these in and balance out any losses from your original holding.

Check that your broker allows hedging prior to trading.

News Trading

News trading is all about staying up to date with the latest announcements and releases from different companies. These will have a large impact on the value of a company’s stocks. With news trading, there are two approaches.

Firstly, you can purchase CFD contracts before the announcement in an attempt to predict the reaction to the release and the effect it will have on a stock’s price, this can be high risk. The other method is to use CFD stock trading just after the announcement, this way you can see the initial change in value and follow it. You may not see the full price swing, but it is less risky.

Pros Of CFD Stock Trading

Cons Of CFD Stock Trading

CFD stock trading strategy

How To Start CFD Stock Trading

If you are looking to start trading stock CFDs, follow this step-by-step guide:

Choose A Broker

The first thing to do to begin CFD stock trading is to find a broker. There are many brokers out there, so selecting the best one can be daunting. Here are a few things to compare:

Research The Market

Once you’ve found a broker and opened an account, you should research the market. Look at the trends for different stocks, 1- or 3-year price charts can often show regular patterns. Also, search news sites to see if there are any new developments related to the companies you’re looking at.

Open A Position

If you have found a suitable stock and know whether you want to go short or long, you are ready to open a position and begin CFD stock trading. Purchase the number of CFD contracts you are comfortable with and be sure to keep an eye on the margin you need to put down and any potential losses.

Implement Risk Management Strategies

CFD stock trading comes with a level of risk, especially if you are using margin.

It is always wise to implement some form of risk management, whether it be stop loss orders that automatically close the contract once a predefined loss has been seen or a complex combination of trailing stops, hedging and size calculations.

Monitor And Close Position

Make sure you are constantly checking the market and be ready to close at any point. If you are day trading, you will want to close multiple times within a day. Alternatively, if you have a longer-term approach, you should still keep an eye on the market, and use trade calculators to ensure overnight fees are taken into account.

Trading Tips

These tips could enhance your CFD stock trading skills:

Final Word On CFD Stock Trading

CFD stock trading presents a great way to access a range of different stocks on the market without owning the underlying asset.

Many experienced traders are adding stock CFDs to their portfolios, both as a stand-alone instrument and as a means of hedging existing holdings. Follow our guide to start CFD share trading today and make use of our tips and strategies to give yourself a head start. Also, check out our list of top recommended CFD stock trading brokers.

FAQs

Do You Own The Stock When CFD Stock Trading?

No, you do not own the underlying stock when you trade stock CFDs. You simply speculate and make a profit or a loss based on the price movement of the stock.

Yes, CFD stock trading is legal in the UK. Brokerages offering stock CFDs are regulated by the Financial Conduct Authority (FCA).

What Is The Best CFD Stock To Trade?

There is no simple answer as the market fluctuates so much. Stocks with the highest trading volume, liquidity and volatility are generally the best for traders.

Is CFD Stock Trading Taxable In The UK?

Yes, CFD stock trading is taxable in the UK. It is exempt from stamp duty, but any potential profits are eligible for capital gains tax (CGT) – over a certain threshold.

Is CFD Stock Trading Safe?

No financial instrument is 100% safe as the markets are inherently uncertain and constantly fluctuating. CFD stock trading can be carried out with reduced, although still very present, risk through the use of robust risk management strategies and limited leverage.