CFD Trading Vs Shares Dealing

  • CFDs are a popular alternative to physical shares dealing for a number of reasons.

    • Go short - take advantage of falling prices
    • Leverage - gain a large exposure with a small deposit
    • Instant access to over 10,000 markets at any time – trade shares, indices, forex, commodities and more
    • No Stamp Duty*

    See how CFD trading measures up to traditional shares dealing and find out which form of trading is most suitable for you using our handy table below.

     

    Feature CFD trading Shares dealing
    Ability to go long - take advantage of rising prices Yes Yes
    Ability to go short - take advantage of falling prices Yes  
    Ability to hedge - go short and mitigate against potential losses in your shares portfolio Yes  
    Free from Stamp Duty* Yes  
    Pay Capital Gains Tax* - CGT to be paid on profits Yes Yes
    Leveraged trading - gain a large exposure for a fraction of the value Yes  
    Immediate dealing - instant trading both in and out of a market Yes Yes
    Access to other asset classes - such as Indices, FX etc Yes  
    Access to global shares - trade over 10,000 different shares from around the world Yes Yes
    Receive dividend and interest adjustments Yes1 Yes
    Physical ownership - benefits include the ability to attend AGMs   Yes

    ¹Positions are adjusted to reflect dividends.

    No Stamp Duty

    Unlike shares dealing, a CFD is a derivative product that enables you to speculate on the price moves of shares and other global markets without having to actually own the physical asset. This means that there is no Stamp Duty to pay.

    Leveraged access

    With traditional shares dealing, you’d have to pay your broker the full value of the shares you want to purchase. For example, if you‘d like to purchase £10,000 Facebook shares, you’d have to deposit the full £10,000.

    Importantly, CFDs are leveraged which means you only have to put down a small fraction of the total value of a trade (usually a deposit of between 2% and 10%) to get the same level of exposure.

    Leverage comes with significant benefits and risks: your investment capital can go further, but you can also lose more than your initial deposit.

    Go long or short

    Unlike conventional shares trading, CFDs allow you to take a position on the value of an asset whether you think it will go up or down. So if you thought Facebook’s share value was overpriced, you could take a position on it falling. This would not be possible through traditional shares dealing.

    The more the market moves in the direction you’ve predicted, the greater your profit. The more the market moves against the direction you’ve predicted, the greater your loss could be.

    With CFDs, it’s important to remember that you’re trading on the price of the market, rather than physically owning the share. This means you don’t own any assets.

    CFD trading in the UK is free from stamp duty, with the exception of Irish stocks, which are charged 1% of the notional trade value. This value is, however, refundable if you trade out within 30 days.

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