There are two main differences between buying shares and trading contracts for difference on a share.
First, when you buy a share, you’ll be taking ownership of a portion of a company – this will give you certain benefits, such as voting rights and dividend payments. However, when you trade on shares with CFDs, you won’t ever take ownership of the underlying shares – you’re just speculating on the future market price. One implication of this is that you can take advantage of leverage when trading CFDs; meaning you’ll only need to put up a fraction of the full value of the trade – the ‘margin’ – to gain full exposure. This means both profits and losses are magnified, and that losses can exceed deposits for Professional Clients.
Second, when you buy a share you will only profit when the underlying market price rises. When you trade CFDs, you can go both long and short – meaning you’ll have the opportunity to profit whether the market rises or falls.
