When you trade CFDs you are speculating on underlying price movements in your chosen market rather than investing directly in that market.
Depending on your trading strategy and market conditions, you can open either a Buy position (going long) or a Sell position (going short), offering you opportunities to trademarket volatility.
For example, if you decided to trade Barclays Shares and your research pointed to a potential dip in the share price, you could open a Sell (short) CFD position on Barclays. For every point the Barclays Share price fell below the point at which you opened your position, you would profit.
Remember though that CFD Trading is a leveraged product and the opposite is also true, if the market moves against you, you would lose a multiple of your stake for every point the market moved against you.
CFD Trading is also popular with Shares investors as a tool for hedging physical Share portfolios and this can be an effective strategy to offset risk if you currently own a physical portfolio.
Advantages of CFD Trading
There are plenty of advantages to CFD Trading for investors looking for a tax efficient*, flexible way to trade the markets. With thousands of global assets available at ETX, as well as the ability to trade on our powerful trading platforms, CFD Trading offers plenty of benefits.
- Go short as well as long - Unlike with more traditional forms of investing, when you trade CFDs you can open both Buy (long) and Sell (short) positions
- Trade 24 hours a day - Never miss a trading opportunity with a huge range of global markets open 24/6
- Find the trading opportunity right for you - At ETX you can trade on thousands of markets including Forex, Indices, Shares, Commodities and Cryptocurrencies, so you’ll always be able to find a trading opportunity that suits your strategy
- Tax efficient trading* - You won’t pay Stamp Duty when trading CFDs in the UK
- Powerful leverage opportunity - CFD Trading offers you the ability to hedge your physical Shares portfolio by going short, allowing you to manage your risk more efficiently during times of volatility
Which markets can I trade CFDs on?
When you trade CFDs at ETX you’ll have plenty of choice when it comes to the markets you are able to choose from.
We offer competitive pricing on thousands of global markets across Forex, Indices, Shares, Commodities, Cryptocurrencies and more.
With a range of incredibly popular benchmark markets, as well as smaller, more niche markets available, we offer something for every type of trader.
Below is a selection of some of our most popular markets across major asset classes, for a full list of all our available markets and for more pricing information, please see our Trading Costs page.
- UK 100
- Wall Street
- Germany 40
- SP 500
- US Tech 100
- Lloyds Banking Group
- Brent Crude
- Bitcoin Cash
* Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
Is CFD trading for me?
CFD Trading could be for you if you are looking for a flexible, tax efficient way (You won’t pay Stamp Duty on profits in the UK) to speculate on market movement across a range of popular global markets.
Additionally, CFD Trading can be a tool that allows you to hedge your physical Shares portfolio thereby offsetting some of your risk, particularly in times of higher volatility.
CFD Trading will particularly suit you if you have a strong understanding of the financial markets and appreciate the risks involved in leveraged trading.
When you trade CFDs at ETX you’ll be able to trade using our award-winning TraderPro platform and can monitor and amend your positions on the go using our powerful Android and iOS apps.
In the next section of this guide we’ll cover how to open your first CFD Trading position and look at ways to help you responsibly manage your risk exposure when trading.