CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing all your money. Read our full Risk Warning.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Based on your current location/IP address, you will be provided services by Fortrade Cyprus. 76% of retail CFD client accounts lose money

What Are Single-Stock CFDs?

Single-stock CFDs offer an easy way to trade with the price change of a stock without having to actually own it. Read to learn more about them.

Filip Dimkovski - Writer for Fortrade
By Filip Dimkovski
Joel Taylor - Editor for Fortrade
Edited by Joel Taylor

Updated November 6, 2023.

Jargon and technical terminology that come with CFD trading often scare new traders. This seemingly confusing lingo is actually not that difficult to understand—a perfect example of this is the term single-stock CFDs.




Single-Stock CFD Trading Explained

CFDs are derivative financial products that allow you to trade with the price change of an instrument without requiring you to own it physically and can be made for many instruments classes, including the price of shares or stocks, commodities, and indices.

Single-stock CFDs are simply contracts for differences that are based on a single stock, rather than an index or basket of stocks. Single-stock CFDs are primarily used for two main purposes: price speculation and hedging.



Speculation

The majority of CFD traders use CFDs for speculation, i.e., they take a view on the price direction of an instrument and then open a trade accordingly.

Let's say you want to trade Apple Inc. (AAPL) CFD. If you believe that the value of AAPL CFD is going to increase, your goal would be to open a long position and buy AAPL CFD.

On the other hand, if you believe that the value of AAPL CFD is going to decrease, your goal would be to open a short position by selling AAPL CFD. Once you are satisfied with the profits, you can close the position and earn a potential profit on the price difference.

Hedging

Hedging is a risk management strategy where you take an offsetting position in an instrument to protect yourself from downside price movements.

Let's say that you owned 100 CFD shares of AAPL stock. Given that the stock market is generally volatile, you might be worried about a potential decrease in the value of the price of your AAPL shares.

To hedge this risk, you could open a short position on AAPL CFDs. So, if the value of AAPL shares decreases, your long position would offset some of the losses from your short position. Still, most experts don't recommend holding hedged positions for too long, as they could drastically decrease your potential profits.

Single-stock CFD trading has many benefits, and mastering it could be a potentially profitable endeavor—however, be sure to consider your trading goals and risk tolerance before getting started with single-stock CFDs.



» Ready to start trading single-stock CFDs? Learn more about opening an account with Fortrade