XM Stocks | How to Trade Individual Stock CFDs (2024)

FAQs

Is stock trading the same as CFD trading? ›

Stock investing is in effect taking a small ownership stake in a company you believe in. When you buy a stock, you pay the full price for each share. CFD stands for contract for difference. By CFD trading online, you can speculate on the price of a security without owning the underlying asset.

Range of Trading Instruments

Our clients can choose to trade forex and CFDs on stock indices, commodities, stocks, metals and energies from the same trading account. With a wide range of trading instruments available from a single multi asset platform XM makes trading easier and efficient.

Usually you need to open an account with a broker to buy and sell stocks online. Some publicly traded companies, however, do offer a direct stock purchase plan (DSPP), where you can buy shares directly.

Leverage and Margin

CFD trading allows you to trade with leverage, which means you can control a larger sum of money with a small deposit. It can increase your profits but also amplify your losses. Stock trading typically does not involve leverage, so you need to have enough money to buy shares directly.

Some advantages of CFDs include access to the underlying asset at a lower cost than buying the asset outright, ease of execution, and the ability to go long or short. A disadvantage of CFDs is the immediate decrease of the investor's initial position, which is reduced by the size of the spread upon entering the CFD.

For this reason, CFDs are also more complex financial products, which can be higher risk trades than share trading. This is because, with CFDs, your profits and losses can far outweigh your initial outlay.

Yes, we allow scalping across any of our account types.

It offers ultra-low spreads, starting from 0.6 pips, making it ideal for scalpers and high-frequency traders. Separate Ultra Low Standard and Ultra Low Micro accounts are available (under CySEC).

Yes, you are free to hedge positions on any of your trading accounts, but not between two different accounts. Hedging is when you simultaneously open a long and short position on the same instrument. When hedging Forex, Gold and Silver, positions can be opened even when the margin level is below 100%.

The Solo Day Traders

Individual traders often manage other people's money or simply trade with their own. Few have access to a trading desk, but they often have strong ties to a brokerage due to the large amounts they spend on commissions and access to other resources.

Should you trade individual stocks? ›

If you have enough money to invest, are willing to accept the risk and want a high degree of involvement, individual stocks may be a good choice.

Direct Stock Purchase Plans (DSPPs) allow investors to purchase shares of company stock directly from the company itself. Specifically, trades are completed through a transfer agent. That means you could buy stocks without a broker, full-service or online, to complete the transaction.

Additionally, most CFD brokers don't accept US citizens or US residents as clients. CFDs are illegal in the US because they are an over-the-counter (OTC) trading product. OTC trading products aren't listed on regulated exchanges like the New York Stock Exchange (NYSE), bypassing US regulatory bodies.

CFDs offer flexibility, leverage and cost effectiveness to institutional, professional and non-professional traders alike.

Share dealing can be used as a more long-term approach, where the investor expects the price to rise over a time frame of months to years. CFD trading, meanwhile, tends to be considered a short-term investment, where traders open and close positions within days or weeks, partially due to overnight fees involved.

It is not possible to trade stock CFDs at Robinhood. However, Robinhood does offer real stocks to trade. You should understand leverage and other sources of risk before picking a stock CFD broker.

Professional traders employed by investment banks or trading companies are able to utilise CFDs for speculation or hedging purposes. In this instance their ultimate goal is to gain from or hedge against the risk of, volatility of price movements in market instruments.

A contract for differences (CFD) is a financial contract that pays the differences in the settlement price between the open and closing trades. CFDs essentially allow investors to trade the direction of securities over the very short-term and are especially popular in FX and commodities products.

When you keep a long CFD position open overnight, you'll pay interest on the leverage you've used. So for long-term positions, investing can be more cost effective. CFDs are often popular with active traders who might only keep positions open for hours or days. Investors, on the other hand, are mostly more passive.