What is stock CFD Trading

Stock CFD Trading is the buying or selling of stocks without owning the underlying financial asset. Discover how to trade CFD stock with its advantages

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Stock CFD Trading is among the popular ways to make potential returns in the financial market. However, many people are unable to differentiate between stock trading and stock CFD. Let us discuss how to trade CFD stocks with key benefits.

Introduction to stock CFD trading

Stock Trading is the process of buying and selling shares in a company to make a profit from their price fluctuation.

Investing in a company stock enables the trader to become the stockholder of the company and enjoy benefits like voting rights, dividends, ownership, etc.

Meanwhile, stock CFD trading also involves buying and selling stocks to benefit from stock price movements.

However, the major difference under CFD trading is exchanges take place without owning the underlying asset.

CFD stands for  contract for differences. In CFDs, no physical deliveries take place, but settlement is done with the difference between the current value of a stock and its value at the contract time.

Traders enter into an agreement with the CFD providers and buy and sell the stock without owning the physical shares.

Trading in stock CFD is quite similar to forex trading. Traders simply buy the shares when they think their price will rise and sell the shares when they feel their price will fall. If their speculation goes right, they make a profit and loss in the opposite case.

Let us have a look at the stock CFD trading example for a better understanding. Suppose you buy the shares worth 1000$, and at the time of the expiry of the agreement, their price rises to 1050$. In this case, you will receive the difference that 50$ as your profit.

How to trade CFD stocks

Learn about the stock market

Stock CFD Trading for beginners can be a complex process. There are a range of instruments, multiple trading strategies, indicators, and tools to start trading.

The stock market is a vast market to trade in, affected by different political, social, economic, and financial factors. Basically, trading in stock requires knowledge to make the right decision at the right time.

So, before investing your hard-earned money in the market, get yourself well-versed in stock trading and how it functions. You can also refer to our blogs and courses for this purpose.

Selection of Stock

One of the best parts of stock trading is you can trade in the stock of global companies and make a profit with the growth of the company.

However, this means that there is a wide range of options, and choosing an ideal stock can be a complex task. So, a trader should first identify the stock based on his interest, knowledge, time frame, capital, risk, and other factors.

The stocks of companies like Tesla, Amazon, Microsoft, Alphabet Facebook, are quite popular amongst traders and offer significant returns.

Proper Planning

Once you are done with the stock selection, it is time to prepare an effective plan to execute your trade. Determine the pivot points of your trade, including risk per trade, leverage ratio, trading methods, indicators, etc.

Remember, a trader should know how, when, and where he will place trade. Proper planning increases the profit potential and eliminates the chances of excessive losses. So, plan your trade efficiently.

Select a Broker

A Broker acts as an intermediary between the market and the trader. The broker will provide you with facilities like trading systems, analysis tools, courses, economic calendars, news, and many more accessories.

It is essential to select a broker after proper research, analysis, and comparison. Beirman Capital is amongst the leading brokers for stock CFD trading, with a range of instruments and competitive spreads to start your trading journey.

Open an Account

Once you have selected the right broker, you can now open an account with the platform. There are different types of accounts: standard, mini, premium, Islamic, and managed accounts.

Each account type offers different features; select the best according to your needs. Demo accounts are best to learn trading CFD stocks for beginners, as these are risk-free accounts with no profit or loss. After proper learning, you can switch to real accounts and trade with real money.

Start Trading

Well, you are done with planning and formalities to start trading. It’s now time to fund your account and place real trades. Placing your first trade is a crucial step that you will remember forever.

So, make effective use of tools and resources for positive results. Start with a mini account and a small investment and wait for the right time.


Benefits of Stock CFD trading

24/5 Hour Market

Unlike the traditional stock market, stock CFDs allow traders to trade round the clock. It is beneficial for part-time traders and offers more flexibility.

Global Exposure & Diversification

As we have studied, stock CFD trading offers traders opportunities to trade in global companies without actually owning them. These are amongst the best financial instruments to diversify your investment portfolio.

Leverage Trading

Another key benefit of stock CFD is it allows traders to open large positions with relatively small capital. At Beirman Capital, you can take advantage of competitive leverage to expand your profitability.

Short Selling Opportunities

CFD trading allows stock traders to take advantage of short-selling opportunities without borrowing physical shares. As a result, traders can make a profit by opening both short and long positions.

Excellent Liquidity

Liquidity is the extent of how quickly stock is bought and sold in the market. It basically depends on the volume; the larger the buyer and seller, the higher the liquidity, resulting in easy entry and exit from a trade.

Competitive Trading Cost

Trading in traditional stock is quite expensive as compared to CFDs. Stock CFDs offer trading at low trading fees. As a result, it will not affect your overall profit.

Wrapping Up

Stock CFD trading is a popular trading option suitable for all kinds of strategies, whether long-term, short term or medium-term. In addition, it offers great liquidity, exposure, and flexibility.

However, with these amazing benefits, there are limitations, too, like counterparty risk, regulatory restrictions, or risk of losing money.

Traders should understand that money-making opportunities come with a significant risk. So, they should focus on effective execution and try to make the best use of opportunities while taking risk management measures.