CFD Trading and Online Share Trading have many differences in many aspects, they have uniqueness when it comes to how they are being traded in the market. In many articles, I have read, most of them tackled how one of them become better than the other which is not a point here. In this article, let this be an appreciation to both kinds of popular trading around the world today, the CFD Trading and Online Share Trading.
The CFD in CFD trading stands for “Contract for Difference” which means it is a contract agreed between the seller and the buyer, the buyer is responsible to pay the seller the difference amount on the current value of assets and its value during the contract time. This simply means that the investors and traders are gaining profit from the price movement without owning the assets in which its value relies on the price differences on the trade entry and trade exit. On the other hand, Online share trading works on buying and selling stocks through Capitality online websites or platforms. A trader can do it all by himself without a need of a broker but if he needs assistance, he can also hire a broker to do trading for him.
Capitality wants to share with you the characteristics of these two, here are some:
- They have different settlement periods.
When a trader purchase equity on the stock exchange, it takes three days to pay for them and it is the contrast when selling equities, a trader needs to wait for three days before receiving funds. This simplifies that the transaction day added with the 3 days settlement is the agreed period of payment and receiving of funds set by the clearinghouse. On the contrary, when a trader buys CFDs, there is no intermediary involved in the transaction process which means that the CFD provider sets rules since companies do not like taking the risk, so they will surely ask for the payment at the start of the transaction process.
- They also have uniqueness when it comes to their gearings.
The very nature of CFD lies in the notion of its leverage which enables the trader to get larger exposure to the market compared to the amount a trader has deposited to pen the market trade. It is taking the potential risk when earnings and losses are bigger however, it is also possible to lose more than the amount deposited while in online trading, a trader cannot lose more than the amount he has paid.
- They both have unrealized gains.
CFDs are being marketed every single day which means that each day the profit or the losses are debited or credited in the trader’s account. On the other hand, in online trading, the profit or the losses will be realized during the sale period.
- They differ in cost.
CFDs are believed to be cheaper than trading stocks in the financial market but the position is held open for a short period of time but stocks position can be held at any time possible.
In the meantime, hope that the following ideas feed you with the information you need when it comes to their uniqueness and distinctions as both popular trading tools today.