What Is a Share CFD?
Understanding Share CFDs
A Share CFD is a Contract for Difference that allows you to trade the price movements of a company’s shares without owning the actual stock. You’re essentially speculating on whether the value of a share will rise or fall, rather than purchasing the asset itself.
How Share CFDs Work
When you open a Share CFD, you enter into a contract where you and your broker agree to exchange the difference in the share price from the time you open the position to when you close it. This means:
- Go long if you expect the share price to rise;
- Go short if you believe the share price will fall.
Profit or loss is determined by the difference between the opening and closing prices, multiplied by the number of CFDs you hold.
Benefits of Trading Share CFDs
- Leverage: Gain exposure with a smaller initial outlay, enhancing both potential returns and risks.
- Flexibility: Trade across markets and time zones without owning the underlying stock.
- Short-Selling: Profit from falling markets by placing sell trades.
Important Considerations
- High Risk: Leverage amplifies both gains and losses—only trade with capital you can afford to lose.
- No Ownership: You won’t receive shareholder rights or dividends unless your provider offers equivalent adjustments.
- OTC Trading: Share CFDs are traded over-the-counter, which introduces counterparty risk—choose a trustworthy partner.
How Prime Capital FX Supports You
At Prime Capital FX, we simplify your experience with Share CFDs through transparent trading, expert guidance, and a client-first approach.
Ready to explore equities without owning the stock? Register with us and let our team guide you.
