Been looking at both options lately and honestly can’t decide which direction to go.
CFDs seem more flexible with leverage but the overnight fees add up quick. Stocks feel safer but the capital requirements are way higher for decent position sizes.
It depends on your goals.
CFDs work well for quick trades since they allow you to short easily. Leverage is useful for smaller accounts but fees can eat into profits if you hold too long.
Stocks provide true ownership and avoid daily fees, making them better for longer positions. You do need more capital upfront, but that encourages more careful trading decisions, which often leads to better results.
CFDs hit you with overnight fees. I stick with stocks since I don’t day trade.
Most brokers offer both, so start small with each and see what clicks.
I like CFDs for testing strategies - shorting’s easy and you need less cash upfront. When something works, I switch to actual stocks for longer-term positions.
If you’re making money, the tax benefits on stocks are huge.
CFDs work if you close trades fast otherwise fees kill profits
Figure out your break-even point between CFD financing costs and how long you plan to hold. Most retail traders don’t realize how fast those overnight fees add up. That 3% annual rate? It’s actually 0.25% every month. If you’re holding longer than 30 days, stocks usually cost less overall. Less than two weeks? CFDs can be cheaper even with wider spreads. Your broker choice matters way more than which instrument you pick. Some CFD providers hit you with 7-8% annually while others stick around 2-3%. Shop around and build those costs into your position sizing.
Started with CFDs for the leverage - traded IG Markets and XM for a couple years.
Biggest problem? Spreads are brutal, especially on smaller stocks. Kills your profits before you even start.
Stocks need way more cash upfront, which sucked for me. Moved to penny stocks and smaller positions instead. Growth’s slower but I actually sleep at night.
These days I do both - CFDs for quick plays, stocks for long-term stuff.
Oh, and taxes are different too. Stock gains usually get better rates than CFD profits. Worth asking your accountant about.
CFDs are good for short trades. Leverage lets you trade with smaller amounts but watch those overnight fees. Many traders lose money holding CFDs for too long. Stocks are better for long-term investing. Sure, you need more capital upfront, but you own real assets without daily fees. Decide your trading style first. If you plan to trade for under a week, choose CFDs. If your strategy is longer, go with stocks.