As you step into the world of trade, stocks and CDF are probably some trades you see and hear about often. That’s simply because these are one of the hottest markets today. These two markets have pulled in so many new trades from 2019 up to today.
And one of the things that have probably contributed to that is how easy it is to get in. Most novice traders today simply get into stocks or CFDs due to their popularity over the years and because of trading platforms, trading has never been easier!
But among the two, along with their own factors share one question, which is better? This has been an ongoing debate amongst trades, but what really matters is, which one are you choosing?
To help you make a decision, down below are Stocks and CFDs along with their pros & cons, similarities & differences and a couple of FAQs about the two.
CFD trading
CFD stands for Contract of Difference, and with that, you get the idea that you’re trading using contracts, so it’s basically a form of financial derivative. So you trade on the asset’s underlying value without having to take ownership of the actual thing.
So that means your options are limitless! You can trade with forex, commodities, indices, bonds, precious metals, cryptocurrency and so much more!
CFD trading is a contract between a trader (that’s you) and a broker. And how this works is by speculating on the asset’s underlying value, and depending on your assumption, your actions may vary: you can either buy or sell.
If you think the asset’s value will rise, go long and buy. But if you think it’ll decrease, go short and sell. It’s that simple, but of course, what’s tedious about trading is the process of coming to the conclusion, whether you go long, go short or hold.
Pros and Cons of CFD trading:
Now you know a gist about what CFD trading is, it’s time for you to know its advantages and disadvantages. So to better know this trade, you need to see its good and bad sides.
Pros of CFD trading
- You benefit from rises and falls.
- Gives you a wide scope of markets to trade with.
- Is high in leverage (this can turn your $1,000 into $50,000)
- No need to pay for stamp duty.
- Fewer regulations (this means this requires less cash in.)
Cons of CFD trading
- Is high in leverage (this can also turn your $50,000 into $1,000)
- High in volatility.
- Expect higher costs over the long term.
- Fewer regulations (this also means less protection.)
Is CFD trading good for beginners?
The answer is, yes. Although it’s usually taken on by more experienced traders, beginners can still take this trade on with a little bit of practice and study. You’ll surely get higher chances of profiting by knowing your market and mastering your strategies.
Stocks trading
This trade is the buying and selling of shares in establishments like companies and other businesses. How you profit from this trade is when the prices of the shocks you bought increase in price or demand. So you buy low and sell high.
How you start trading stocks is through a brokerage. So just create an account, fulfil all requirements and start trading. The main difference this trade has with CFDs is, in stocks, you take ownership of the underlying asset, whereas, in CFD trading, you don’t.
So in a nutshell, you trade and profit from the stocks of companies you’ve invested in. If they do well, you profit and if you don’t you lose money. So there’s not a lot of strategizing to do since it depends on how well the company sells the asset.
Pros and Cons of Stocks trading:
Knowing a bit about what stocks are in will make it easier for you to fully grasp their pros and cons. So to know if this trade is for you, check out its advantages and disadvantages:
Pros of Stocks trading
- You don’t need to be an expert in the trade to profit.
- Has a wide range of stocks to choose from.
- You can access your money faster.
- You can start with a small capital.
- Give you the advantage of being ahead of inflammation.
Cons of Stocks trading
- Trading with stocks takes time.
- Return of profits isn’t guaranteed.
- It’s volatile.
Is stock trading good for beginners?
Yes, it is. Some of the best stocks to get into as novices are EFTs, index funds and stock mutual funds. But if you have eyes on other particular stocks, make sure to do your research and study the market to amp up your chances of profiting.
Take away
Now you know a good sum about the two trades, you can now make a more accurate decision when picking between the two. But remember, in trade, what works for others might not work for you and vice versa, so get into a trade you personally like.
