What’s the difference between CFDs and share trading?

PC showing the differences between cfd trading and share trading

The main difference between CFD trading and share trading is that you don't own the underlying share when you trade on a share CFD.

With CFDs, you never actually buy or sell the underlying asset that you’ve chosen to trade, but you can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional share trading you enter a contract to exchange the legal ownership of the shares for money, and you own this equity.

CFDs are a leveraged product, which means that you only need to deposit a percentage of the full value of the share CFD trade in order to open a position. But with traditional share trading, you buy the shares for the full amount. 

^Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.
*Based on Hargreaves Lansdown’s fee to buy or sell a share.

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