Buying a share makes you a part-owner of a company: you can vote, you receive dividends and you can hold it for decades with no ongoing charge beyond any custody fee. A stock CFD gives you exposure to the share price only. You do not own the share, but you can go short, use leverage and trade without a stockbroker account, and you pay overnight financing for as long as the position is open.
Key takeaways
- Owning shares suits long holding periods; stock CFDs are built for shorter-term positions.
- CFD holders receive a cash dividend adjustment rather than a dividend, and have no voting rights.
- Stock CFDs can be sold short and traded with leverage; ordinary share accounts usually cannot.
- Overnight financing makes a CFD increasingly expensive to hold over months.
- In some countries CFDs avoid taxes that apply to share purchases, such as UK stamp duty, but tax treatment differs by country and person.
| Buying shares | Ownership · voting rights · dividends · no leverage by default · no daily financing |
|---|---|
| Stock CFD | Price exposure · no votes · dividend adjustments · leverage · short selling · daily financing |
| Best fit | Shares: long-term holding · CFDs: short-term and two-way trading |
| Tax | Depends on your country; seek local advice |
Stock CFDs vs shares side by side
| Feature | Buying shares | Stock CFD |
|---|---|---|
| Do you own the share? | Yes | No |
| Voting rights | Yes | No |
| Dividends | Paid to you | Cash adjustment: credited to longs, debited to shorts |
| Short selling | Not in an ordinary account | Yes |
| Leverage | None unless you borrow on margin | Yes; limits apply |
| Main costs | Commission and spread; possible taxes on purchase | Spread, possible commission, daily financing |
| Cost of holding for a year | Low | Can be significant |
| Corporate actions | Applied to your holding | Replicated by adjustments |
| Typical use | Investing over years | Trading over days or weeks |
Do stock CFDs pay dividends?
Not as such. On the ex-dividend date the share price usually falls by roughly the dividend amount. To leave CFD holders in a similar position to shareholders, providers make a cash adjustment: a long position is typically credited with the dividend, sometimes net of a withholding-tax equivalent, and a short position is debited. The exact rules are set by the provider.
What each costs over time (illustrative)
| Holding period | Buying shares | Stock CFD |
|---|---|---|
| A day | Commission and spread in and out | Spread and commission, one night of financing |
| A month | Same as a day | About 30 nights of financing added |
| A year | Same, plus any custody fee | A year of financing, which can amount to several per cent of the position |
| With a dividend | Dividend received, taxed as income | Adjustment credited to longs, debited to shorts |
Financing is usually a reference interest rate plus a margin, charged on the full value of the position, not on the margin you put up. That is why a CFD is rarely the cheaper way to hold a share for a long time. See what a swap is and where to find swap rates on MT5.
Which fits which aim?
| Your aim | Better fit | Why |
|---|---|---|
| Own a company for years | Shares | No daily financing, full rights |
| Profit from a fall in a share | CFD | Short selling is built in |
| Trade around results | CFD | Two-way exposure; see stock CFDs and earnings season |
| Hedge shares you already hold | CFD (short) | Offsets price risk without selling |
| Vote at company meetings | Shares | CFD holders have no votes |
Leverage changes the risk, not just the size
A share bought outright can halve in value, and you still hold it. A leveraged CFD of the same size can be closed automatically long before that, because the loss exceeds the margin. Single shares can also gap by 10% or more on results. Size positions from the loss you can accept; see position sizing and how leverage increases trading risk.
What it costs to trade stock CFDs as a CFD
A stock CFD tracks the share price. See what stock CFD trading is and what a CFD is.
| Cost | When it applies | Note for stock CFDs |
|---|---|---|
| Spread | Every trade | Widest at the open and after results |
| Commission | May apply per trade | As set in the symbol specification |
| Overnight financing | Each night a position is open | On the full position value. |
| Dividend adjustment | Ex-dividend dates | Credited to longs, debited to shorts. |
| Slippage | Gaps and fast markets | Largest on results days |
Key risks
Financing drag. Holding a CFD for months costs more than holding the share.
Single-stock gaps. Results and news can move a share 10% or more overnight. See gap risk.
Leverage. Forced closures can happen during ordinary volatility.
No ownership rights. No votes, and dividends only as adjustments.
Negative balance protection applies to all Marketsall account types, so a retail account cannot fall below zero. It caps the worst case. It does not reduce the chance of losing the money in the account. More in gap risk and how leverage increases trading risk.
Risk warning. Trading CFDs carries a high level of risk since leverage can work both to your advantage and disadvantage. As a result, the products offered on this website may not be suitable for all investors because of the risk of losing all of your invested capital. You should never invest money that you cannot afford to lose, and never trade with borrowed money.
Frequently asked questions
What is the difference between a stock CFD and a share?
A share is part-ownership of a company, with voting rights and dividends. A stock CFD is a contract that pays the change in the share price; you own nothing, but you can go short and use leverage, and you pay overnight financing while the position is open.
Do CFDs pay dividends?
Not directly. On the ex-dividend date providers make a cash adjustment: long positions are usually credited with an amount equal to the dividend, sometimes net of tax, and short positions are debited. The rules vary by provider.
Is it cheaper to buy shares or trade CFDs?
For short periods a CFD can be comparable or cheaper, and in some countries it avoids purchase taxes on shares. For long periods buying shares is usually cheaper, because a CFD charges financing on the full position value every night.
Do stock CFDs have voting rights?
No. Voting rights belong to the registered owner of the shares. A CFD holder has only a contract with the provider and cannot vote at company meetings.
Can you short a stock with a CFD?
Yes. A CFD lets you sell first and buy back later, so you profit if the share price falls and lose if it rises. Short positions are usually debited with dividend adjustments.
Related reading
Count the nights before you choose
How many nights will the position stay open? Multiply that by the nightly swap for your direction, using how to read contract specifications on MT5 to find it, then weigh the cash a leveraged CFD ties up with what margin is.
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