How to trade share CFDs

All share CFDs are traded using leverage

Since CFDs are derivative products, you’ll open your position for a small initial deposit, known as margin. This is called trading on leverage. When you trade share CFDs using leverage, you’d only pay a fraction of the full value of the position to open it. For example, let’s say you wanted to go long on 10 share CFDs at £100 each – you might only pay £200 to open the position (20% of the full value of £1000).

Your profit or loss depends on the difference in price from when you opened your position to when you close it. So, if you bought 10 share CFDs at £100, and the share price rose by £5 to £105, you’d make £50 (10 share CFDs x £5).

You can hedge with share CFDs

Trading share CFDs enables you to hedge your position by going long and short on the same market with the intention of offsetting any losses from the initial position with gains from the other.

This practice is a useful risk management strategy when you discover that the market is moving against your initial prediction. That’s why CFDs are a great tool with which to hedge a shares investment portfolio. If you believe your shares may decline in value, you could open a short CFD position to hedge against losses.

It’s important to note that hedging doesn’t guarantee that no loss will be incurred, as it’s done at a cost of opening a new position and you may only recover a fraction of the losses. However, you may be able to offset any losses against profits for tax purposes.¹

Share CFDs vs other ways to trade stocks

CFDs are not the only one way to trade shares. You can also choose to get exposure to shares via spread bets. Both CFDs and spread bets are leveraged derivative products, and you can open both accounts with us.

If you don’t want to trade using leverage, you can open a share dealing account instead to invest and take direct ownership of the asset. It’s important to remember that share dealing is non-leveraged, which means you’ll need to pay the full value of the position upfront.

Stock CFDs: cash vs options

Most people trade cash share CFDs. This uses the real-time trading price of stocks and has lower spreads, making it a popular choice for day traders. Stock options, on the other hand, give you the right to buy or sell shares at a specific date in the future. Options are often the vehicle of choice for traders with a medium- to long-term outlook.

How to trade share CFDs

Traders can choose from 17,000+ international shares that we offer on our platform. We’ve compiled a quick step-by-step guide to help you get started, from opening a trading account to closing a position.

Learn all about CFDs and share trading

CFD trading involves speculating on the underlying price of a financial asset by going long if you think the price will rise, or short if you think it’ll fall. You need to learn how to trade CFDs before you get exposure to different assets. Trading shares is different from investing in them and owning a stake in a company.

Choose the stock you want to trade

Get exposure to some of the most popular stocks to watch this year, from UK shares like Lloyds Banking Group and Vodafone Group to top performing US stocks such as Tesla, Uber and Twitter.

Open your first shares trade

Open your position either by going long or short, based on your trading strategy and risk appetite. You should assess the merits of your trade based on the necessary technical analysis and fundamental analysis before you open your position.

On our platform, you can track trading signals and set up alerts to notify you when there’s market movement in order to reconsider your strategy. It’s important to remember that it’s your responsibility to track your positions and you shouldn’t only rely on alerts.

Monitor your position

Once your position is open, you can track how the market moves by observing economic events or technical conditions.

You can also monitor signals to observe when a certain point is reached and attach stops to your positions to help mitigate your exposure to risk.

Note that even if you set a stop order, there may be sudden movement in the market price that may meant that the trade may not be closed in time and the stop may not be triggered at the level at which it was set. This is called slippage.

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