What do you mean by underlying stocks
What is the difference between CFDs and stocks?
The ownership structure of CFDs and stocks
The main difference between CFD and stock trading is that when you trade a stock CFD, you don't own the underlying stock.
With CFDs, you never buy or sell the underlying asset that you have chosen to trade. Even so, you can make a profit when the market moves in your favor or lose when it moves against you. Instead, in traditional stock trading, you enter into a contract to acquire legal ownership of the stock and you own that capital.
CFDs as opposed to leverage stocks
In traditional stock trading, you buy the stocks for the full amount. CFDs, on the other hand, are a leveraged product, which means that you only need to wager a percentage of the total value of the stock CFD trade to open a position.
You deposit the fraction of the acquired position value with your broker. This takes over the remaining part. This increases your chances of winning if the price changes are correctly forecast, but also your risk of loss if the forecasts are incorrect.
CFDs vs. stocks: a comparison
To make it easier for you to compare, we have compiled the most important differences in terms of leverage and the effects on your costs or profits or losses in the following infographic:
Differences in Trading CFDs and Stocks;Source: CMC Markets
With regard to the properties of the two products, we show you the difference in this overview:
Find out more about what CFDs are or find out more about CFD trading in our learn section.
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