CFD vs Equity Swaps Differences and Similarities

Choosing which instrument to trade can be challenging, especially for traders. Continue reading our article on CFD vs equity swaps to discover which instrument is right for you.

Also, find out how you can begin your trading journey with us at CAPEX – the best CFD online broker for traders and experts alike.

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Author:

Roy Connor

Last Updated on:

11/05/2023

Topic:

Trading

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Wide range of tradable assets

Having a wide range of assets to invest in can be a great way to diversify your trades & avoid extreme losses. it’s never wise to put all your eggs in a single basket / invest all your money in a single market. Luckily, here at CAPEX, we offer CFDs on a wide range of instruments including stocks, indices, forex, ETFs, bonds, blends, commodities, and cryptocurrencies. So, with CAPEX.com you can enjoy the benefits of diversifying your trades with high leverage in an extensive range of markets.

Top-notch trading platform

The platform that you choose to trade with plays a significant role in shaping your trading experience. The last thing you want is a trading platform that isn’t easy to access or use.

At CAPEX, we offer our traders two trading platforms (CAPEX WebTrader & the MT5 trading platform), both of which are extremely user-friendly and highly intuitive. Our trading applications are also available on Android and iOS, so you can access your trading account with ease and convenience. Plus, we’ve integrated several tools and features to support traders throughout their trading journey.

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Understanding how CFDs work

CFD, short for contract for difference, is a contract between a buyer and a seller where both parties speculate on an asset’s future price. They then reach an agreement to exchange the difference in the value of an asset after a contracted time period. If their prediction of the asset’s price is correct, they end up in profit. However, if the buyer predicted that an asset’s price would go up yet it didn’t, the buyer would end up in loss.

What does it mean for traders?

CFD traders don’t actually own the underlying asset; but instead, they’re only betting on the value of an asset. On a positive note, the leverage factor in CFD trading enables you to get greater market exposure with limited funds. Here at CAPEX, you can trade CFDs on over 5000 securities and assets, that too, with high leverage and low trading costs.

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Experience a new level of trading with the right support when you need it. Sign up for a free account and trade smart with CAPEX.com.

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Pros and cons of trading CFDs

Pros of CFD trading

Plentiful trading options as CFDs can be traded on numerous instruments, including stocks, indices, commodities, forex, and even cryptocurrencies.

You don’t need to own an underlying asset in order to profit from it.
Trading with leverage allows you to gain greater market exposure with fewer funds.
If traded with the right strategies and right broker, CFDs can prove to be extremely profitable.

Cons of CFD trading

CFDs are complex instruments with high risk.
When trading with CFDs, you don’t own the underlying asset.

Here at CAPEX, we allow traders to trade CFDs on forex, indices, commodities, ETFs, shares, bonds, blends, and cryptocurrencies. You can invest in several markets with the help of numerous learning tools designed to help you trade profitably. If you’re unsure as to whether CFDs are the right instrument for you, you can try out our free CFD demo trading account to get a better insight into CFDs and to trade them profitably.

How do Equity Swaps work?

An equity swap refers to a financial derivative contract between two parties, where both parties agree to exchange a set of future cash flows on a given future date. The cash flows in equity swaps are referred to as ‘legs’ of the swap, where one leg is linked to the performance of equity or stocks, whereas the other is linked to a fixed income cash flow.

What does it mean for traders?

Equity swaps are known for being an effective way for both parties to diversify their income for a given time period while keeping ownership of their assets. In simpler words, equity swaps are a great way to gain market exposure without actually gaining ownership of stocks or equities.

At CAPEX, we’re dedicated to offering our users the best possible trading experience through a top-notch trading platform and numerous tradable assets. Though we do not offer equity swaps, you can trade over 5000 instruments through CFDs on our smooth and user-friendly trading platforms.

Start Trading with the best

The key to becoming a successful trader is focusing on ongoing learning. Here at CAPEX, we offer traders several learning tools and features, including the CAPEX Academy, where traders can learn basic trading through video content. Similarly, we also have an integrated feature in our trading platform that allows you to follow expert trading coaches and learn from them along the way. You can also follow our traders blog, where experts post about ongoing market trends.

Pros and cons of trading Equity swaps

Pros of equity swaps

Equity swaps let you avoid transaction costs & provide tax benefits
Equity swaps allow you to hedge against negative returns or loss
Traders can access more securities rather easily through equity swaps as there are fewer restrictions

Cons of equity swaps

They’re highly risky instruments as they’re traded in OTC markets
You can’t get open-ended exposure to equity due to a predetermined termination date.
They’re complicated instruments.

CFD vs Equity swaps differences and similarities

Both CFDs and Equities are financial derivatives & don’t require that you own the underlying asset in order to profit from them. However, both instruments have their differences as well, out of which a few are:

Primarily, CFDs offer much more trading opportunities as you can trade CFDs on stocks, indices, ETFs, forex, commodities, blends, bonds, and cryptocurrencies. Whereas when it comes to equity swaps, you’re limited to equity or equity indices only.
While CFDs can be renewed with the agreement of both parties, that’s not the case with equity swaps. Equity swaps expire at an agreed date and can’t be extended or renewed, which limits their potential outcome.
If you trade CFDs with shares involved, there’s a fair chance that you can obtain dividends. Unfortunately, you can’t get dividends with equity swaps.

If you’re interested in trading CFDs with the best CFD broker out there, hop on to our website and sign up for free today.

Choose the best CFD trading platform

It’s important that the platform you sign up with is user-friendly, offers enough tradable assets, promotes ongoing learning, has excellent customer support, and is secure & regulated. Luckily, we, at CAPEX, are known for being the best and securest CFD broker out there as we’re licensed and regulated under CySEC, which is a tier 1 financial regulator. We also offer over 5000 tradable instruments, excellent customer support that is available five days a week, and several integrated learning tools to help you throughout your trading journey.

Is CFD trading right for traders? – Tips for trading CFDs securely

When it comes to CFD vs equity swaps, CFDs might be the better choice as you can trade CFDs in dozens of markets, which is a great way to diversify your investments. Though CFDs are quite risky instruments, they can be traded securely if you follow a few basic tips and tricks.

Carry out proper research

Those who jump into trades without knowing the factors that affect a market’s direction along with other relevant details tend to end up losing their money. It’s essential that you’re aware of the market that you’re investing in. Knowing your market well allows you to determine market directions better, and in return, make profitable trades. We also recommend that you invest in markets you’re familiar with to increase your chances of gaining profits.

Practice on a demo account

Practicing on a demo account is beneficial because it not only allows you to understand where you stand in terms of trading knowledge, but it also gives you an idea of the risks involved with trading any certain instrument while giving you the opportunity to practice before investing actual capital. Here at CAPEX, you can sign up for our free demo account feature and take advantage of our learning tools to get a hold of CFD trading before you invest in it.

Apply trading strategies

Having a few strategies up your sleeve can do wonders when it comes to trading CFDs, so it’s essential that you learn and practice expert strategies before beginning your investment journey. At CAPEX, we allow traders to follow experts on our trading platform so they can learn while making profitable trades. Although, another great way to learn and practice strategies is to read about them online and apply them to our demo account features. You can practice your strategies to see which one works best for you and finally apply them in real life when you feel ready to do so.

Register

Register an account on CAPEX.com and start trading.

Verify

Send over your documents and verify your account.

Deposit

Login into your CAPEX.com account and deposit money.

Trade

Start trading with CFD’s and over 5000 other instruments.

Register Account

Signing up with CAPEX is a quick and simple process; here’s our step by step guide to give you a helping hand:

Hop on to our website and click on the sign up for an account option.
Enter your basic details, including your name and email address.
You’ll then be guided to our trading platform, where we’ll ask you to complete your sign up process.
You’ll be required to enter further details such as your income, taxation details, and credit history.
The final step is an assessment, which is designed to test your trading knowledge. The purpose of this assessment is to protect traders from trading beyond their knowledge, skills, and capacity.
Right after you’ve completed the sign-up process, we’ll verify your account, and you can begin your trading journey.

Final thoughts – Trade CFDs at CAPEX

While choosing the right instrument for your trading journey can be a tough decision, it’s not an impossible one to make. When it comes to CFD vs equity swaps, the choice is quite easy. If you prioritize having more trading options, more flexibility with trades, or the option to trade stocks with best dividends, your go-to choice should be CFDs.

Here at CAPEX, we offer an exceptional CFD trading experience with low trading fees and the lowest commission rates. Sign up for an account with us now, or give our demo account a try to see if CFDs are the right instrument for your trading journey.

CFD vs Equity – FAQ

Can CFD trading make you rich?

Are CFDs suitable for all traders?

Can I invest 100$ in CFDs?

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