CFD Trading vs Shares Trading: What Are the Differences?

Trading CFDs and shares are two completely different things but both of these types of assets are traded on financial markets. Trading CFDs and shares should be done through the services of a licensed brokers. It is also important to know the difference between trading CFDs and other financial instruments, such as options and futures.

CFD vs stock shares trading comparison as follows:

  1. With CFD trading you can open both a long and a short position, or in other words you can benefit from prices going both ways – up and down, whereas when you trade stock shares you can expect to make profits only with increasing stock prices or paid dividends minus the commission of a broker
  2. CFD trading takes place 24/7, stock shares are traded when stock markets are open (usually from 9am to 9pm Monday-Friday)
  3. Costs of trading CFDs include: brokers commission, spread, overnight financing of open leveraged positions, inactivity and withdrawal fees. We cover in more detail all ‘Commissions And Spreads’ of CFD trading it our article “How Does CFD Trading Work“. Costs of trading shares consist of: brokers commission, withdrawal fees, additional government taxes (e.g. UK stamp duty) and other costs, associated with market liquidity.
  4. When trading CFDs you don’t get to be offered dividends as a form of payment for opening a position. Dividends are payments made by companies to share profits with its stockholders
  5. CFD trading is not limited to equity markets. The range of markets where CFDs are traded is broad and includes all global financial markets, including equities, commodities and bonds
  6. When you buy a CFD you do not enter a legal contract of ownership of a share (or shares) that are associated with a CFD trading. When you buy a share, you become a shareholder of the company who has issued the share
  7. CFDs are traded with a leverage (or a margin loan), making it possible to enter high-payout deals with small deposits. On the contrary, shares trading requires paying a full amount of the market price at the instant of purchase
  8. Traders’ attitude towards risk is usually different when comparing CFDs trading and share trading. CFDs trading is referred to as a high-risk high-return short-term investment. On the contrary, investing in shares is associated with less risk or market volatility, and more moderate returns

Infographics On The Differences Between CFDs and Shares Trading

Our team has created a short infographics booklet that illustrates and explains all major differences between CFD Trading vs Shares Trading. It is quite simple for experienced traders but useful for those who are still getting used to the Australian CFD trading market. By the way, feel free to share it anywhere as long as you leave a link to our page!

Trading CFDs Vs Trading Shares