CFDs on shares

CFDs on shares are financial instruments that allow you to speculate on the price movement of shares of specific companies. We explain exactly how they work.

1. How to trade share CFDs?
2. Difference between CFD trading and investing – which is more advantageous for me?
3. What does going long or short mean?
4. Who trades CFDs?
5. How does leverage work in share CFDs?
6. Which shares can be speculated with CFDs?
7. Example of trading share CFDs

How to trade share CFDs?

A Contract for Difference (CFD) represents an agreement between the trader and the broker where the trader speculates on the price movement of a specific share. At any moment, two prices are available – the buy price and the sell price. If the trader expects the share price to rise, they decide to buy. Conversely, if they expect a decline, they choose to sell.

The key thing to realize is that when trading CFDs, you do not actually own or buy the shares of the company. You achieve profit by correctly predicting the price movement and timely closing the contract with the broker. If the price moves in the opposite direction than you expected, the trade results in a loss.

Difference between CFD trading and investing – which is more advantageous for me?
Share CFDs and traditional investing are two different strategies in financial markets, each with its own advantages.

CFD trading is suitable if you want to:

• Use financial leverage
  
  

• Speculate on both price rises and falls (long and short positions)
  Traditional investing is the better choice if:
  
  

• You are ready to invest the full value of the asset upfront
  
  

• You want to actually own shares or other assets
  It depends on your goals and risk tolerance.
  
  

What does going long or short mean?

When trading share CFDs, you have two options:

• Long position (Long) – means buying CFDs expecting the share price to rise. If the price increases, you make a profit.
  
  

• Short position (Short) – means selling CFDs aiming to profit from a decline in the underlying asset’s price. This strategy is especially useful in bear markets.
  Regardless of whether you anticipate price increases or decreases, CFD trading is quick and simple – you just need to correctly predict the market direction and open the trade with a single click.
  
  

Who trades CFDs?

CFDs are popular mainly among active traders who open multiple positions and constantly monitor market developments. Unlike traditional investors who buy shares for months or years aiming for long-term returns, CFD traders often speculate on price movements in a short timeframe – sometimes even within a single day.

However, that does not mean CFDs cannot be used for longer-term strategies. Some traders hold positions open for several weeks or months.

Main advantages of CFDs compared to traditional investing:

• Financial leverage – ability to trade larger capital volumes
  
  

• Short positions (short selling) – ability to profit even from price declines
  
  

• Broad market access – trading different assets from one account
  
  

How does leverage work in share CFDs?

Leverage is one of the main features of share CFD trading, allowing you to trade larger positions than you could with direct share purchase. Although leverage is common in forex trading, it also plays a key role in share CFDs.

How leverage works in practice:

When trading CFDs, you do not need to deposit the full position value, only a part of it – the margin. Margin requirements (MMR) for share CFDs are usually higher than for other assets. For example:

• If MMR is 40%, your available leverage is 2.5:1 (100 ÷ 40).
  That means to open a position worth 10,000 USD, you only need 4,000 USD of your own capital.
  
  

Advantages and risks of leverage:

• Profit potential – you gain 100% of the profit from a correct trade, even if you invested only part of the position value.
  
  

• Risk of losses – you also bear 100% of potential losses, which can quickly result in losing all your capital if the market moves against you.
  Therefore, risk management is essential when trading with leverage. It is recommended to use tools such as:
  
  

• Stop‑loss orders – limit the maximum loss on a trade
  
  

• Take‑profit orders – lock in profit when the target price is reached
  
  

• Guaranteed stop‑losses – protect against large losses even during market volatility
  Trading with leverage offers higher profit potential but also higher loss risk. Thus, it’s important to always monitor margin requirements and have sufficient account reserves to avoid forced position closure.
  
  

Which shares can I trade?

When trading share CFDs, you have access to thousands of leading international companies, including firms from the USA, the UK, and other emerging markets. This allows you to diversify your portfolio and speculate on price movements in various regions.
Key factors when trading share CFDs:

• Variable spreads – buy price is always slightly higher than sell price
  
  

• Low commissions – for example 0.05% per trade (with a minimum fee)
  
  

• Trading hours – markets vary by region, e.g., London (GMT) is five hours ahead of New York (ET)
  A wide range of shares gives traders flexibility to create their own strategy. It is important to monitor time zone differences between markets and actively manage positions.
  
  

Trading share CFDs: Example

Let’s assume IBM shares are currently trading with a sell/buy price of 150 USD/155 USD.

Opening the position:

You decide to buy 10 CFD contracts on IBM shares, expecting the price to rise. The total position value is 1,550 USD (10 × 155 USD).

The minimum margin requirement (MMR) for IBM CFDs on the FOREX.com platform is 5%.

This means you only need to deposit 77 USD (5% of 1,550 USD) to open this position.

Closing the position and profit calculation:

One week later, it turns out you were right – the IBM price rises and new sell/buy prices are 180 USD/187 USD.

You decide to close the trade by selling at 180 USD (new sell price).

The price moved 25 points in your favor (180‑155).

Total profit: 25 USD × 10 units = 250 USD (minus commissions).

This example illustrates how you can profit from share price movement using CFD trading while leveraging leverage to open a larger position with less initial capital.

How to start trading CFDs on Y4Trade.com

If you understand the risks of CFD trading, are ready to invest, you can open an account on Y4Trade.com.

You can first try with a free demo account valid for 90 days. It provides 50,000 USD in virtual capital to test various strategies and monitor market movements without risking real money.

CFD trading steps:

1. Choose the share you wish to trade.
   
   

2. Open a position:
   
   

• Buy (long) if you expect the price to rise
  
  

• Sell (short) if you expect the price to fall
  
  

3. Monitor your open position and consider adding stop‑loss and take‑profit orders for risk and profit management.
   
   

4. If the trade doesn’t close automatically via your set limits, you can close it at any time manually.