Summary: Contracts for Difference (CFDs) are a flexible and accessible trading option that allows traders to profit from both falling and rising stock prices without actually owning any underlying assets. To start trading stock CFDs, investors can easily get started by registering an account with a regulated CFD trading platform such as Plus500.
Recommended Multi-asset Broker for Online CFD Trading
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Reliable & Regulated by CySEC (#250/14) - Plus500 Ltd is a FTSE 250 company listed on the London Stock Exchange
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Wide range of instruments - CFDs on stocks, crypto, forex, commodities, ETFs, and more
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Low cost investing - No commissions and tight spreads.
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Transparent pricing on overnight funding, currency conversion fees, guaranteed stop orders, and inactivity fees.
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Advanced platform - Top notch analytical tools, real-time quotes, fast order execution, secure withdrawals
About CFDs
CFDs
When participating in stock CFD trading, investors enter a contractual arrangement with the broker and agree to exchange the disparity in share prices between the time the trade commenced and the time of its conclusion.
Investors trading CFDs often make use of margin, essentially borrowing funds from the broker when initiating the trade to be able to enter a trading position with more funds than they actually have at their disposal. While increasing the chances of profit, margin also entails greater loss potential.
Another important thing to note is the spread, which represents the variance between the asset’s purchase and sale prices. Brokers usually derive their earnings from the spread, making lower spreads more attractive to traders as they minimize transaction costs.
Where to trade CFD stocks
There are numerous CFD trading platforms that cater to various investors’ needs. Consequently, it’s important that you thoroughly research and compare them before choosing one that will accommodate your investment goals and strategies and, of course, feature your desired stock CFDs.
Our go-to broker for CFD trading is Plus500, a regulated trading platform that offers a wide range of stock CFDs. Plus500 is regulated by bodies such as the Financial Conduct Authority (FCA) and comes with features such as:
- Free demo accounts;
- Multi-asset Contracts for Differences (CFDs) on over 2,000 financial instruments, including stocks, commodities, Forex pairs, and cryptocurrencies;
- Mobile app for convenient on-the-go investing;
- Convenient deposit options including PayPal, Visa, and Mastercard;
- Free withdrawals.
Recommended Multi-asset Broker for Online CFD Trading
-
Reliable & Regulated by CySEC (#250/14) - Plus500 Ltd is a FTSE 250 company listed on the London Stock Exchange
-
Wide range of instruments - CFDs on stocks, crypto, forex, commodities, ETFs, and more
-
Low cost investing - No commissions and tight spreads.
-
Transparent pricing on overnight funding, currency conversion fees, guaranteed stop orders, and inactivity fees.
-
Advanced platform - Top notch analytical tools, real-time quotes, fast order execution, secure withdrawals
Note
4 best CFD stocks
When trading stock CFDs, you must consider the CFD trading platform you are opening your account with, the research tools available on it, and the educational resources it offers. Moreover, you should stay informed about global market trends to combine your knowledge with accurate and relevant information from reliable sources.
In short, good CFD stocks, such as those on our list below, are characterised by high historical and implied volatility, as well as high liquidity. That is, trading CFDs with volatility can provide traders with higher profit potential because, with more volatile assets, there is a greater chance that its price will move significantly in a short period. On the other hand, higher loiquidiy enables effortless purchasing and selling (with narrower bid/ask spreads), which ensures trades are executed without any delays.
The 4 best CFD stocks to trade include:
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1. Moderna
Moderna became a popular stock for CFD trading due to its strong performance and involvement in the development of COVID-19 vaccines. Although the pandemic is now waning, traders can still benefit from the stock’s price fluctuations, as it has shown increased volatility compared to the rest of the pharmaceutical market, which can provide opportunities for experienced CFD traders who focus on technical analysis and risk management.
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2. Netflix
Netflix, the streaming industry leader, has become a much more volatile stock in the second half of 2023, as the company has seen lower subscriber growth and increased competition. However, its global market presence and strong subscriber base still help it retain its liquidity in spite of the volatility, which makes it a solid choice for CFD traders.
3. Nvidia
Nvidia is another top pick among CFD traders due to its dominant position in the graphics card (GPU) market and increasing demand for artificial intelligence (AI) technologies. Trading on CFD platforms such as Plus500 allows investors to access Nvidia CFDs with leverage, potentially making more significant profits from smaller price movements.
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4. AMD
Whereas Nvidia has long been regarded as the king of GPUs, AMD holds sway over the computer processors (CPU) market thanks to its Ryzen series of chips. However, thanks to its fierce competition with Intel, its rival CPU manufacturer, its stock can be highly volatile, which makes it a solid potential choice for CFD investors looking to capitalize on its rapid price fluctuations.
Pros and cons of CFD stocks
Pros
- Higher leverage: CFDs offer higher leverage compared to traditional trading, ranging from 30:1 to 2:1;
- Global market access: CFD brokers provide access to major global markets, enabling 24/7 trading;
- Various order types: CFD brokers offer various order types, similar to traditional brokers;
- No day trading requirements: CFD trading has no capital or day trade limits;
- Spread-based costs: The spread size varies with asset volatility. Fixed spreads are also a thing.
Cons
- Traders pay the spread: CFDs require traders to pay spreads. This eliminates the potential for profit from small price moves and reduces profits;
- Weak regulation: The CFD industry lacks significant regulation;
- Risks: CFD trading is fast-paced and involves substantial risks, especially since leverage amplifies potential profits and losses.
Conclusion
In summary, CFD stocks can be a solid alternative to traditional stock trading for those looking to benefit from price fluctuations and market volatility. However, the success of CFD trading depends on several factors, including the experience, research, and risk tolerance of each individual trader. Consequently, carefully selecting the best CFD stocks and an appropriate strategy are essential if you wish to optimize your returns and minimize risks.
FAQs about CFD stocks
Where to trade stock CFDs?
You can trade stock CFDs on various online CFD trading platforms, such as Plus500.
Is CFD trading safe?
CFD trading is risky, and your chances of success will depend on your market knowledge, risk tolerance, and broker of choice.
Is CFD trading better than investing in stocks directly?
Whether CFD trading is better than investing in stocks directly will depend on your financial goals and status, your risk tolerance, and your trading experience.
Recommended Multi-asset Broker for Online CFD Trading
-
Reliable & Regulated by CySEC (#250/14) - Plus500 Ltd is a FTSE 250 company listed on the London Stock Exchange
-
Wide range of instruments - CFDs on stocks, crypto, forex, commodities, ETFs, and more
-
Low cost investing - No commissions and tight spreads.
-
Transparent pricing on overnight funding, currency conversion fees, guaranteed stop orders, and inactivity fees.
-
Advanced platform - Top notch analytical tools, real-time quotes, fast order execution, secure withdrawals
