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.
Find out how CFD stock trading works and popular strategies. We have also vetted and listed the top CFD stock brokers.
Best CFD Stock Trading Brokers
These are the top-rated brokers for CFD stocks based on our hands-on tests:
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- FTSE Spread: 1.4
- GBPUSD Spread: 0.8
- Stocks Spread: 1.79 (Apple)
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- FTSE Spread: 0.5
- GBPUSD Spread: 1.5
- Stocks Spread: 0.13
-
- FTSE Spread: From 0.4
- GBPUSD Spread: From 0.6
- Stocks Spread: Variable
-
- FTSE Spread: 17.5
- GBPUSD Spread: 0.4
- Stocks Spread: 0.01
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- FTSE Spread: 1.0
- GBPUSD Spread: 0.4
- Stocks Spread: 0.02
73-89% of retail investor accounts lose money when trading CFDs -
- FTSE Spread: 1.0
- GBPUSD Spread: 0.23
- Stocks Spread: 0.02
Learn how we test brokers and why you can trust our ratings.
Here is a short summary of why we think each broker belongs in this top list:
- XM 4.8/5 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.
- AvaTrade 4.9/5 AvaTrade offers hundreds of shares on leading exchanges including the US NYSE and UK FTSE. You can take positions on leading tech firms like Tesla, Apple and Microsoft with no day trading restrictions and 24/5 support that impressed during testing. There is also an above-average selection of 45+ indices and 60+ ETFs for additional stock market opportunities.
- Trade Nation 4.4/5 Access UK, European and Asian shares with a good selection of flexible deposit methods. The broker's useful educational insights can also help you develop robust strategies and stock analysis techniques.
- RoboForex 4.5/5 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 a robot builder that enables traders to automate and backtest stock trading strategies.
- Pepperstone 4.8/5 Pepperstone presents a huge suite of share CFDs spanning the US, UK, Australian, and European stock markets. Whether you’re interested in iconic names like Tesla, Apple, or Netflix, Pepperstone provides the flexibility to take long or short positions, backed by deep liquidity and competitive commissions. The platform has also introduced 24-hour trading on 37 US stock CFDs, providing opportunities to trade following earnings reports and unexpected news.
- IC 4.8/5 IC offers access to 2,100+ stocks from Australian and US markets - NASDAQ, NYSE and ASX. You can choose between 4 platforms, though cTrader excels for seasoned stock traders looking for the widest range of indicators, timeframes and chart types. Over 25 indices also provide exposure to diverse regions and economies.
CFD Stock Trading: Trading Guide and Top Brokers Comparison
| Broker | CFD Leverage | Minimum Deposit | Minimum Trade | Regulators |
|---|---|---|---|---|
| XM | 1:1000 | $5 | 0.01 Lots | CySEC, DFSA, FSCA, SCA, FSA, FSC-Belize, FSC-Mauritius, CMA-Kenya, CMA-UAE |
| AvaTrade | 1:30 (Retail) 1:400 (Pro) | $100 | 0.01 Lots | ASIC, CySEC, FSCA, ISA, CBI, JFSA, BVI, FSRA/ADGM, AFM, CMA-Kenya, CIRO (via Friedberg Direct) |
| Trade Nation | 1:30 (FCA, CMVM, ASIC), 1:200 (FSCA, SCB), 1:500 (FSA) | $0 | 0.1 Lots | FCA, ASIC, CMVM , FSCA, SCB, FSA |
| RoboForex | 1:2000 | $10 | 0.01 Lots | FSC |
| Pepperstone | 1:30 (Retail - UK, EU, Australia), 1:500 (Pro), 1:200 (Offshore), 1:400 (Kenya) | $0 | 0.01 Lots | FCA, ASIC, CySEC, BaFin, DFSA, SCA, SCB, CMA-Kenya |
| IC | 1:5000 | $200 | 0.01 Lots | ASIC, CySEC, FSA, SCB, CMA-Kenya |
Community Sentiment
See how users rate these brokers based on the average customer ratings submitted on DayTrading.com, plus ratings from Trustpilot, the Apple App Store and Google Play.
| Broker | Our Users' Rating | Trustpilot Score | Trustpilot Reviews | iOS App Rating | Android App Rating |
|---|---|---|---|---|---|
| XM | 3100 | ||||
| AvaTrade | 13614 | ||||
| Trade Nation | 2170 | ||||
| RoboForex | 776 | ||||
| Pepperstone | 3703 | ||||
| IC | 2 |
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.
Christian Harris, Reviewer
XM quick facts
- FTSE Spread
- 1.4
- GBPUSD Spread
- 0.8
- Stocks Spread
- 1.79 (Apple)
- Leverage
- 1:1000
- Regulator
- CySEC, DFSA, FSCA, SCA, FSA, FSC-Belize, FSC-Mauritius, CMA-Kenya, CMA-UAE
- Platforms
- MT4, MT5, TradingCentral
- Fractional Shares
- ✔Yes
- Demo Account
- ✔Yes
- Minimum Deposit
- $5
- Automation
- ✔Yes
- Account Currencies
- USD, EUR, GBP, JPY, ZAR
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
- Korea Exchange
- Nasdaq
- Russell 2000
- S&P 500
- SIX Swiss Exchange
Pros
- XM has rolled out platform upgrades with integrated TradingView charts and an XM AI assistant, delivering faster execution, smarter analysis, and a sleeker, more intuitive trading experience.
- XM’s customer support has delivered over years of testing, with 24/7 assistance in 30 languages, response times of under 2 minutes and a growing Telegram channel.
- XM’s growing roster of 1,400+ instruments provides diverse short-term trading opportunities, with unique turbo stocks, fractional shares, and more recently thematic indices.
Cons
- Although trusted and generally well-regulated in some regions, XM also has global entities registered with the weak regulators like FSC (Belize) and FSA (Seychelles), whilst UK clients are no longer accepted, reducing its market reach.
- XM is falling behind the curve by not offering cTrader, which is favored over MetaTrader by some serious traders for its smoother user experience and superior charting package.
- XM relies solely on the MetaTrader platforms for desktop trading, so there’s no in-house downloadable solution for a more beginner-friendly user experience with unique features.
AvaTrade
AvaTrade offers active traders everything they need: an intuitive WebTrader, powerful AvaProtect risk management, a smooth 5-minute sign-up process, and dependable support you can rely on in fast-moving markets.
Jemma Grist, Reviewer
AvaTrade quick facts
- FTSE Spread
- 0.5
- GBPUSD Spread
- 1.5
- Stocks Spread
- 0.13
- Leverage
- 1:30 (Retail) 1:400 (Pro)
- Regulator
- ASIC, CySEC, FSCA, ISA, CBI, JFSA, BVI, FSRA/ADGM, AFM, CMA-Kenya, CIRO (via Friedberg Direct)
- Platforms
- WebTrader, AvaTradeGO, AvaOptions, AvaFutures, MT4, MT5, AlgoTrader, TradingView, TradingCentral, DupliTrade
- Fractional Shares
- ✘No
- Demo Account
- ✔Yes
- Minimum Deposit
- $100
- Automation
- ✔Yes
- Account Currencies
- USD, EUR, GBP, CAD, AUD, ZAR
Stock Exchanges
AvaTrade offers trading on 15 stock exchanges:
- Australian Securities Exchange (ASX)
- Borsa Italiana
- Deutsche Boerse
- Euronext
- Hang Seng
- IBEX 35
- Japan Exchange Group
- London Stock Exchange
- Nasdaq
- Russell 2000
- SIX Swiss Exchange
- Shanghai Stock Exchange
- Shenzhen Stock Exchange
- Taiwan Stock Exchange
- Toronto Stock Exchange
Pros
- AvaTrade launched AvaFutures to offer low-margin access to global markets, then expanded in 2025 as one of the first brokers to add CME’s Micro Grain Futures, and then later in the year went further by integrating with TradingView.
- Years on, AvaTrade remains one of the few brokers offering a bespoke risk management tool, AvaProtect, that insures losses up to $1M for a fee and is easy to activate on the platform.
- Support at AvaTrade performed excellently during testing, with response times of 3 minutes and localized support in major trading jurisdictions, including the UK, Europe and the Middle East.
Cons
- AvaTrade’s WebTrader has improved, but work is still needed in terms of customizability – frustratingly widgets like market watch and watchlists can’t be hidden, moved, or resized.
- While signing up is a breeze, AvaTrade lacks an ECN account like Pepperstone or IC Markets, which provides the raw spreads and ultra-fast execution many day traders are looking for.
- The AvaSocial app is good but not great – the look and feel, plus the navigation between finding strategy providers and account management needs upgrading to rival category leaders like eToro.
Trade Nation
Trade Nation suits discretionary traders who want to speculate on major indices like the US 500 or liquid FX pairs, and want the predictable all-in costs of fixed spreads. In tests, we found the fixed-spread TN Trader environment particularly useful for trading around scheduled economic releases owing to its reliable charting environment and because published spreads stayed capped.
Christian Harris, Reviewer
Trade Nation quick facts
- FTSE Spread
- From 0.4
- GBPUSD Spread
- From 0.6
- Stocks Spread
- Variable
- Leverage
- 1:30 (FCA, CMVM, ASIC), 1:200 (FSCA, SCB), 1:500 (FSA)
- Regulator
- FCA, ASIC, CMVM , FSCA, SCB, FSA
- Platforms
- TN Trader, MT4, TradingView
- Fractional Shares
- ✘No
- Demo Account
- ✔Yes
- Minimum Deposit
- $0
- Automation
- ✔Yes
- Account Currencies
- USD, EUR, GBP, AUD, ZAR, SEK, NOK, DKK
Stock Exchanges
Trade Nation offers trading on 16 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
- London Stock Exchange
- Nasdaq
- New York Stock Exchange
- S&P 500
- SIX Swiss Exchange
Pros
- In testing of the TN Trader account under normal market conditions, fixed spreads held while fills were prompt on major forex pairs, with a slight drift in the entry level as price ticked between click and fill.
- Trade Nation accounts can now be linked with TradingView, providing advanced multi-charts and the ability to execute trades directly.
- The demo comes with a $5,000 practice account and you can request a one-on-one platform walkthrough by callback - this level of personal help is rare.
Cons
- The 2–20% rebate scheme is closed to FCA, CMVM, and ASIC clients, meaning active day traders in these regions who would benefit from transaction rebates cannot claim them.
- Offshore SCB and FSA entities allow retail clients up to 1:200 and 1:500 leverage compared to 1:30 in regions like the UK, Europe and Australia, so an FSA client can have 16 times the exposure of a UK retail client on the same trade, but with less oversight and no compensation scheme.
- Withdrawals can take up to five business days, which is around the industry average but slower than the 1-3 days we’re increasingly seeing brokers offer in an attempt to quash withdrawal complaints from retail investors.
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.
Christian Harris, Reviewer
RoboForex quick facts
- FTSE Spread
- 17.5
- GBPUSD Spread
- 0.4
- Stocks Spread
- 0.01
- Leverage
- 1:2000
- Regulator
- FSC
- 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
- In July MobileTrader Telegram Mini App was released - bringing out one of the first solutions we've seen that lets users execute trades and manage positions without leaving the Telegram messaging app.
- 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
- 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.
- RoboForex now restricts base currency options to USD and EUR. This limitation may inconvenience day traders preferring to manage their accounts in other currencies, while potentially leading to conversion fees.
- Despite 15+ years in the industry and registering with the Financial Commission, RoboForex is authorized by one ‘Red-Tier’ regulator – the FSC in Belize, lowering the level of regulatory protections for traders.
Pepperstone
Pepperstone stands out as a top choice for day trading, offering razor-sharp spreads, ultra-fast execution, and advanced charting platforms for experienced traders. New traders are also welcomed with no minimum deposit, extensive educational resources, and exceptional 24/5 support (18h a day on weekends).
Christian Harris, Reviewer
Pepperstone quick facts
- FTSE Spread
- 1.0
- GBPUSD Spread
- 0.4
- Stocks Spread
- 0.02
- Leverage
- 1:30 (Retail - UK, EU, Australia), 1:500 (Pro), 1:200 (Offshore), 1:400 (Kenya)
- Regulator
- FCA, ASIC, CySEC, BaFin, DFSA, SCA, SCB, CMA-Kenya
- Platforms
- Pepperstone Trading Platform, MT4, MT5, cTrader, TradingView
- Fractional Shares
- ✘No
- Demo Account
- ✔Yes
- Minimum Deposit
- $0
- Automation
- ✔Yes
- Account Currencies
- USD, EUR, GBP, CAD, AUD, NZD, JPY, CHF, HKD, SGD
Stock Exchanges
Pepperstone offers trading on 21 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
- Korea Exchange
- London Stock Exchange
- Nasdaq
- New York Stock Exchange
- Russell 2000
- S&P 500
- SIX Swiss Exchange
- Shanghai Stock Exchange
- Shenzhen Stock Exchange
- Taiwan Stock Exchange
Pros
- Pepperstone has greatly improved the deposit and withdrawal experience in recent years, adding Apple Pay and Google Pay in 2025, as well as PIX and SPEI for clients in Brazil and Mexico in 2024.
- There’s support for a range of industry-leading charting platforms including MT4, MT5, TradingView, and cTrader, catering to various short-term trading styles, including algo trading.
- Award-winning customer support is available via telephone, email or live chat with response times of <5 minutes during testing and friendly agents knowledgeable about its products and trading tools.
Cons
- Despite improvements to its range of markets, crypto CFD offerings are still fairly limited compared to other brokers who focus on this area, such as Eightcap, and there's no option to invest in real coins.
- Pepperstone has removed support for several tools that elevated the trading experience for active retail traders, notably Autochartist, Capitalise.ai and a free VPS for qualifying traders (now only pro traders in some countries).
- Overnight holding fees are higher than that found with some Market Maker brokers (usually Benchmark + 2.5%). This makes pepperstone an ideal broker for day traders and forex scalpers but less suitable for swing traders who often keep position open overnight.
IC
IC (formerly IC Markets) offers superior pricing, exceptionally fast execution and seamless deposits. The introduction of advanced charting platforms, notably TradingView, and the Raw Trader Plus account, ensures it remains a top choice for intermediate to advanced day traders.
Christian Harris, Reviewer
IC quick facts
- FTSE Spread
- 1.0
- GBPUSD Spread
- 0.23
- Stocks Spread
- 0.02
- Leverage
- 1:5000
- Regulator
- ASIC, CySEC, FSA, SCB, CMA-Kenya
- Platforms
- MT4, MT5, cTrader, TradingView, TradingCentral, DupliTrade, Quantower
- Fractional Shares
- ✘No
- Demo Account
- ✔Yes
- Minimum Deposit
- $200
- Automation
- ✔Yes
- Account Currencies
- USD, EUR, GBP, CAD, AUD, NZD, JPY, CHF, HKD, SGD
Stock Exchanges
IC offers trading on 12 stock exchanges:
- Australian Securities Exchange (ASX)
- CAC 40 Index France
- DAX GER 40 Index
- Dow Jones
- Euronext
- FTSE UK Index
- Hang Seng
- IBEX 35
- Nasdaq
- New York Stock Exchange
- Russell 2000
- S&P 500
Pros
- As a tightly regulated and widely respected broker, IC prioritizes client security and transparency, helping to ensure a reliable trading experience globally.
- IC offers fast and dependable 24/7 support based on firsthand experience, particularly when it comes to accounts and funding issues.
- You have access to over 2,250 CFDs across various markets, including forex, commodities, indices, stocks, bonds, and cryptocurrencies, allowing for diversified trading strategies.
Cons
- Interest isn't paid on unused cash, an increasingly popular feature found at alternatives like Interactive Brokers.
- While IC offers a selection of metals and cryptos for trading via CFDs, the range is not as extensive as brokers like eToro, limiting opportunities for traders interested in these asset classes.
- The breadth and depth of tutorials, webinars and educational resources still need work, trailing alternatives like CMC Markets and reducing its suitability for beginners.
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.
FAQ
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.