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    Traditional Stocks vs Shares CFD

    3 Minutes
    Updated May 9, 2023 01:20

    While both traditional stock and share CFDs allow you to profit from the fluctuation of stock prices. There are some benefits unique to CFD share trading,

    Traders who trade share CFDs do not own the actual underlying assets to profit from the price changes of the stock. A CFD is a contract between the two parties (the provider, and you, the trader), and the profit or loss is the difference between your entry and exit prices.

    1. Share CFDs allow traders to use leverage to trade, that is, use less capital to obtain greater potential returns. Of course, the use of leveraged trading also represents higher risks and losses.

    2. Share CFD traders do not own the stock and thus do not have the right to vote or any right to subscribe, issue, or split the shares. 

    Note: Mitrade will take measures, including adjustments to account balance to minimize the impact of corporate actions on trading position. Thus, the investor can check the adjusted amount (if applicable). Mitrade will credit the amount equivalent to the dividend payout to the traders’ account.

    3. Trading CFD offers traders more flexibility in the ability to go both long and short in the market. Even during bearish periods and trends, CFD traders can take on short-selling trades to profit from the market.

    4. Unlike traditional stocks, CFDs don’t have a settlement period. That means your profit or loss has calculated the instant you close your position. This makes it much easier to enter and exit trades and allocate your resources quickly to your next position. On the other hand, stock positions can take up to two days for your trade to settle before you gain access to your capital.

    Summary

     Shares CFDTraditional Stocks
    LeverageYes
    Ownership, Ability to exercise voting rights
    Yes
    Go both long and shortYes
    Settlement PeriodImmediateCan take two or three business days



    * The content presented above, whether from a third party or not, is considered as general advice only.  This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

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