CFD Stock Trading
CFDs are generally not available to retail traders in the US under SEC and CFTC rules. Most CFD brokers do not accept US residents. As an alternative, consider exchange-traded futures or options.
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
Here is a short summary of why we think each broker belongs in this top list:
- Interactive Brokers - IBKR provides access to an unparalleled array of equity products originating from 24 diverse countries. Whether seeking capital appreciation, dividends, or voting rights, you can directly invest in stocks. Alternatively, you can engage in speculative trading on price movements through CFDs, futures and more than 13,000 ETFs. IBKR also enhanced its European equity derivatives offering in 2024 by adding trading on CBOE Europe Derivatives (CEDX).
- xChief - xChief offers 100 US company stock CFDs for MT4 DirectFX and Classic+ account holders. Alongside popular multinationals like Apple and Coca-Cola, you can also speculate on several major stock indices with spreads from 2.
- InstaTrade - InstaTrade offers an average selection of around 200 global stocks and indices, subject to your location. A modest commission rate of 0.1% on US shares is applied, complemented by various tools designed to keep you informed on stock market developments, though its 'Stock Markets' analytics hadn't been updated for 4+ months during our latest round of testing.
- Focus Markets - Focus Markets is building up its roster of stocks, standing at 650+ equites covering major sectors like finance, technology, manufacturing and mining, with big names like Apple and Meta available. 8+ major stock indices, such as S&P500, also provide opportunities to speculate on broader economies.
- RoboForex - RoboForex provides one of the broadest selections of real equities and stock CFDs spanning the US and 14 regional European markets, including direct access to the NASDAQ. It’s also one of the few brokers to offer a dedicated platform for stock trading, sporting leverage up to 1:20 and a robot builder that enables traders to automate and backtest stock trading strategies.
- XM - XM offers hundreds of shares spanning major markets and sectors, including the US, UK, Europe and Asia. The broker also stands out for its turbo stocks with high leverage and fractional shares that reduce the entry barrier for beginners. The regularly updated dedicated stock market analysis from XM can also help active traders identify opportunities.
CFD Stock Trading Comparison
| Broker | CFD Leverage | Minimum Deposit | Minimum Trade | Regulators |
|---|---|---|---|---|
| Interactive Brokers | 1:50 | $0 | $100 | FCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA, AFM |
| xChief | 1:1000 | $10 | 0.01 Lots | ASIC |
| InstaTrade | 1:1000 | $1 | 0.01 | BVI FSC |
| Focus Markets | 1:500 | $100 | 0.01 Lots | ASIC, SVGFSA |
| RoboForex | 1:2000 | $10 | 0.01 Lots | IFSC |
| XM | 1:1000 | $5 | 0.01 Lots | CySEC, DFSA, SCA, FSCA, FSA, FSC Belize, FSC Mauritius, CMA |
Interactive Brokers
"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."
Christian Harris, Reviewer
Interactive Brokers Quick Facts
| 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, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA, AFM |
| Platforms | Trader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, TradingView, eSignal, TradingCentral, ProRealTime, Quantower |
| Fractional Shares | Yes |
| Demo Account | Yes |
| Minimum Deposit | $0 |
| Automation | Yes |
| Account Currencies | USD, EUR, GBP, CAD, AUD, INR, JPY, SEK, NOK, DKK, CHF, AED, HUF |
Stock Exchanges
Interactive Brokers offers trading on 18 stock exchanges:
- Abu Dhabi Securities Exchange
- Borsa Italiana
- CAC 40 Index France
- Chicago Mercantile Exchange
- Euronext
- IBEX 35
- Japan Exchange Group
- Korean Stock Exchange
- London Metal Exchange
- London Stock Exchange
- Nairobi Securities Exchange
- Nasdaq
- Nasdaq Nordic & Baltics
- New York Stock Exchange
- Russell 2000
- Shenzhen Stock Exchange
- Tadawul
- Toronto Stock Exchange
Pros
- The TWS platform has clearly been built for intermediate and advanced traders and comes with over 100 order types and a reliable real-time market data feed that rarely goes offline.
- While primarily geared towards experienced traders, IBKR has made moves to broaden its appeal in recent years, reducing its minimum deposit from $10,000 to $0.
- Interactive Brokers has launched ForecastTrader, a unique, zero-commission product where users can trade yes/no Forecast Contracts on political, economic, and climate events, with fixed $1 payouts per contract, 24/6 market access, and 3.83% APY on held positions.
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.
- TWS’s learning curve is steep, and beginners may find it challenging to navigate the platform and understand all the features. Plus500's web platform is much better suited to new traders.
- 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.
xChief
"xChief continues to prove popular with investors looking to trade highly leveraged CFDs on the popular MetaTrader platforms. The broker's rebate scheme and investment accounts will particularly appeal to seasoned traders. However, the lack of top-tier regulatory oversight is a major drawback."
xChief Quick Facts
| FTSE Spread | 70 |
|---|---|
| GBPUSD Spread | 0.9 |
| Stocks Spread | 50 |
| Leverage | 1:1000 |
| Regulator | ASIC |
| Platforms | MT4, MT5 |
| Fractional Shares | No |
| Demo Account | Yes |
| Minimum Deposit | $10 |
| Automation | Yes |
| Account Currencies | USD, EUR, GBP, JPY, CHF |
Stock Exchanges
xChief offers trading on 14 stock exchanges:
- Australian Securities Exchange (ASX)
- CAC 40 Index France
- DAX GER 40 Index
- Deutsche Boerse
- Dow Jones
- Euronext
- FTSE UK Index
- Hang Seng
- Hong Kong Stock Exchange
- IBEX 35
- Japan Exchange Group
- Nasdaq
- New York Stock Exchange
- S&P 500
Pros
- The low minimum deposit of $10 will appeal to beginners, as well as the beginners’ guides in the Library
- xChief delivers a high-quality day trading environment via the MT4 and MT5 platforms, with market-leading charts, indicators and tools
- The broker offers a turnover rebate scheme geared towards active investors, as well as trading credits and several other occasional bonuses
Cons
- Fees and minimums are imposed on most withdrawal methods, including a €60 minimum for SWIFT bank transfers
- The broker trails competitors when it comes to research tools and educational resources
- The total range of 150+ assets is much lower than most competitors who typically offer hundreds
InstaTrade
"Although InstaTrade offers active trading on a comprehensive platform, it stands out with its fairly unique Fixed Income Structured Product (FISP), providing passive investment opportunities with up to 50% returns in 6 months if conditions are met. "
InstaTrade Quick Facts
| FTSE Spread | 660 |
|---|---|
| GBPUSD Spread | 0.2 |
| Stocks Spread | 8 (Apple Inc) |
| Leverage | 1:1000 |
| Regulator | BVI FSC |
| Platforms | InstaTrade Gear, MT4 |
| Fractional Shares | No |
| Demo Account | Yes |
| Minimum Deposit | $1 |
| Automation | Yes |
| Account Currencies | USD, EUR, RUB |
Stock Exchanges
InstaTrade offers trading on 12 stock exchanges:
- Australian Securities Exchange (ASX)
- CAC 40 Index France
- DAX GER 40 Index
- Dow Jones
- Euronext
- FTSE UK Index
- Hong Kong Stock Exchange
- IBEX 35
- Japan Exchange Group
- Nasdaq
- S&P 500
- SIX Swiss Exchange
Pros
- InstaTrade delivers an excellent suite of charting tools for day traders with its web trader comprising 250+ indicators, 11 chart types and a user-friendly design.
- InstaTrade claims to "guarantee" returns through the structured element of its passive trading solution (FISP), with applications approved within 24 hours.
- VPS hosting caters to algo trading strategies with a dedicated physical server providing rapid execution speeds as low as 9 milliseconds.
Cons
- InstaTrade’s growing educational tools provide valuable information for aspiring traders, but still trail category leaders like eToro with no structured course based on experience level.
- InstaTrade sports one of the most cluttered websites and client cabinets in the industry, potentially overwhelming new traders, especially compared to XTB’s intuitive trading journey and resources.
- Profits are only guaranteed in the FISP if investors do not reach the 50% profit level and attract other users with a total sum of $4 for each dollar in compensation.
Focus Markets
"Focus Markets is perfect for experienced traders familiar with MetaTrader 5, offering flexible crypto transactions (USDT and BTC) and access to over 90 cryptocurrencies for seamless speculation, deposits, and withdrawals."
Focus Markets Quick Facts
| FTSE Spread | 1.2 |
|---|---|
| GBPUSD Spread | 0.0 |
| Stocks Spread | Variable |
| Leverage | 1:500 |
| Regulator | ASIC, SVGFSA |
| Platforms | MT5 |
| Fractional Shares | No |
| Demo Account | Yes |
| Minimum Deposit | $100 |
| Automation | Yes |
| Account Currencies | USD, EUR, GBP, CAD, AUD, NZD, JPY, SGD |
Stock Exchanges
Focus Markets offers trading on 8 stock exchanges:
- CAC 40 Index France
- DAX GER 40 Index
- Dow Jones
- Euronext
- FTSE UK Index
- Hang Seng
- Nasdaq
- S&P 500
Pros
- While its meagre four commodities won’t meet the needs of some serious traders interested in softs and metals, Focus Markets offers a huge suite of 90+ cryptos, providing short-term opportunities on high-reward, high-risk assets.
- Focus Markets is regulated by ASIC – one of the most respected regulatory bodies in the financial industry with robust safeguards like negative balance protection, ensuring you can’t lose more than your balance in volatile markets.
- Focus Markets excelled in the deposit and withdrawal category during testing, offering more base currencies than most competitors, including USD, CAD and EUR - and a range of traditional and popular crypto payment options, including BTC and USDT.
Cons
- A significant drawback of Focus Markets is the lack of platform variety. It only support MT5, excluding popular platforms like MT4, cTrader, and TradingView, plus it hasn't developed its own software that could better meet the needs of beginners.
- Focus Markets still has a long way to go to compete with the best brokers - with virtually zero research tools and education, plus limited value-add features like VPS hosting, copy trading and swap-free accounts.
- Regulatory protection is a location lottery at Focus Markets – Australian traders benefit from strong ASIC oversight, but those using the SVGFSA-registered entity face limited recourse options in disputes.
RoboForex
"RoboForex is great if you want a vast range of 12,000+ day trading markets with ECN accounts, powerful charting and loyalty promotions. It also stands out for stock traders with its user-friendly R StocksTrader platform, featuring 3,000+ shares, fees from $0.01 and sophisticated watchlists."
RoboForex Quick Facts
| GBPUSD Spread | 0.4 |
|---|---|
| Stocks Spread | 0.01 |
| Leverage | 1:2000 |
| Regulator | IFSC |
| Platforms | R StocksTrader, MT4, MT5, TradingView |
| Fractional Shares | No |
| Demo Account | Yes |
| Minimum Deposit | $10 |
| Automation | Yes |
| Account Currencies | USD, EUR |
Stock Exchanges
RoboForex offers trading on 13 stock exchanges:
- Australian Securities Exchange (ASX)
- CAC 40 Index France
- DAX GER 40 Index
- Deutsche Boerse
- Dow Jones
- Euronext
- FTSE UK Index
- IBEX 35
- Japan Exchange Group
- Nasdaq
- New York Stock Exchange
- S&P 500
- SIX Swiss Exchange
Pros
- RoboForex secured the 'Best Forex Broker 2025' title in DayTrading.com's Awards after broadening their FX offering, cutting spreads and opening up services in various countries.
- RoboForex is known for its tight spreads starting from 0 pips and low minimum deposits from $10, making it accessible to those on a budget. The ability to trade with micro lots further lowers the barrier to entry for new traders.
- The R Stocks Trader platform rivals leading solutions like MT4, with netting and hedging capabilities, comprehensive backtesting, Level II pricing, and a flexible workspace.
Cons
- While RoboForex offers competitive spreads, some of its account types come with high trading commissions up to $20 per lot, trailing the cheapest brokers, such as IC Markets.
- RoboForex provides a variety of account types, which, while offering flexibility, can be overwhelming for newer traders trying to choose the most suitable option for their trading style. Alternatives, notably eToro, provide a smoother entry into online trading with one retail account.
- Despite offering a range of platforms, RoboForex still doesn't support the increasingly popular cTrader. This might deter traders who prefer this specific platform for their day trading activities and is available at firms like Fusion Markets.
XM
"With a low $5 minimum deposit, advanced charting platforms in MT4 and MT5, expanding range of markets, and a Zero account offering spreads from 0.0, XM provides all the essentials for active traders, even earning our ‘Best MT4/MT5 Broker’ award in recent years."
XM Quick Facts
| FTSE Spread | 1.4 |
|---|---|
| GBPUSD Spread | 0.8 |
| Stocks Spread | 0.002 |
| Leverage | 1:1000 |
| Regulator | CySEC, DFSA, SCA, FSCA, FSA, FSC Belize, FSC Mauritius, CMA |
| Platforms | MT4, MT5, TradingCentral |
| Fractional Shares | Yes |
| Demo Account | Yes |
| Minimum Deposit | $5 |
| Automation | Yes |
| Account Currencies | USD, EUR, GBP, JPY |
Stock Exchanges
XM offers trading on 16 stock exchanges:
- Australian Securities Exchange (ASX)
- Borsa Italiana
- CAC 40 Index France
- DAX GER 40 Index
- Deutsche Boerse
- Dow Jones
- Euronext
- FTSE UK Index
- Hang Seng
- IBEX 35
- Japan Exchange Group
- Korean Stock Exchange
- Nasdaq
- Russell 2000
- S&P 500
- SIX Swiss Exchange
Pros
- XM’s customer support has delivered over years of testing, with 24/5 assistance in 25 languages, response times of under 2 minutes and a growing Telegram channel.
- XM’s growing roster of 1,000+ instruments provides diverse short-term trading opportunities, with unique turbo stocks, fractional shares, and more recently thematic indices.
- XM stands out for its commitment to trader education, with a wealth of well-presented resources, including webinars, tutorials, and even real-time trading sessions through XM Live.
Cons
- While the XM app stands out for its usability and exclusive copy trading products, the selection of technical analysis tools needs to be improved to meet the needs of advanced traders.
- XM relies solely on the MetaTrader platforms for desktop trading, so there’s no in-house downloadable or web-accessible solution for a more beginner-friendly user experience with unique features.
- XM is falling behind the curve by not offering cTrader and TradingView which are increasingly being favored over MetaTrader for their smoother user experience and superior charting packages.
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.
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
- No stamp duty
- Higher leverage
- Instant order execution
- Trade short or long positions
- You can offset losses against profit for tax purposes
- You can use CFDs to hedge against traditional stock holdings
Cons
- Lack of ownership and voting rights
- Financing fees for holding overnight
- High concentration levels are required
- You won’t earn dividends from holding contracts
- You can incur large losses
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:
- Whether they are regulated
- Customer service levels
- Financing (overnight) fees
- How the trading platform works/feels
- Deposit and withdrawal minimums/fees
- Commissions or opening and closing charges
- The stocks they offer or exchanges they have access to
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:
- Do Your Homework: Do plenty of market research before you purchase any CFD stock contracts. Make sure you have seen all the past charts, trends and dips. History may repeat itself, so give yourself the best chance by learning about the past.
- Follow The News: News releases have a huge impact on stock prices. Keep up to date on any new announcements and stay ahead of the curve.
- Use A Demo Account: Demo accounts are your friend. They let you practise strategies, refine approaches and get a feel for platforms, all without spending real money. Take time on a CFD share trading demo account before you jump into the real deal.
- Keep Learning: There are so many educational resources available for free that you can use to your advantage. YouTube has some great CFD share trading demo videos and there is a wealth of books and PDFs available on the subject.
Final Word
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.
Is CFD Stock Trading Legal In The UK?
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.