CFDs allow traders to profit from leveraged amounts and trade on margin, so despite the risks, they have become popular trading tools。Traders enter the financial markets without depleting the funds on hand。Another equally favored type of derivative is the stock swap。

This involves the two parties agreeing in advance to exchange a set of determined cash flows at a predetermined time。These two types of derivatives are easily confused, so let's compare。

the same point	different points
They are all derivative instruments.	With a stock swap, you can only swap stocks or stock indices; you can use more in CFDs, including stocks, commodities, foreign exchange, cryptocurrencies, etc.
Benefit from market volatility without owning the underlying asset	Theoretically, CFDs have no expiration date because they can be renewed, but stock swaps are made over a fixed predetermined period of time
	You will certainly not receive dividends from stock swaps, but you can receive dividends through CFDs

How CFDs and stock swaps differ

1.Leverage

Knowing how to use leverage is crucial to understanding how CFDs work。As a trader, you don't need to take out the full amount of cash needed to trade, but only a small part of it。

You can profit several times from the money you deposit, but you can also lose much more than you put in。So you can also go long or short a position。

2.Interest Payment

As a CFD trader, one of the most important pieces of advice is to understand how you are earning and incurring costs, depending on whether you are holding a long or short position。

If you hold a long position, you will have a daily payment obligation, but will benefit in the form of a dividend。Conversely, if you hold a short position, you will need to pay the cost of dividend payments。

However, due to the short sale of the underlying stock, you will receive daily interest。

When calculating CFDs expenses and gains, don't forget to consider interest rate movements, their volatility depends on market movements and the degree of volatility of the asset。

3.Market Access

Broad market choice is probably one of the most attractive aspects, you can choose cryptocurrencies, commodities, stocks, etc.。In theory, there is no expiration date and you are free to renew and extend CFD transactions, unlike futures and options that have a clear expiration date.。

4.Stock swap and its defining characteristics

In a stock swap, you and the other party exchange future cash flows over a set periodic period。The difference is that the underlying securities that do not determine value。

One leg is tied to a floating rate; the other leg is tied to a floating rate, based on the performance of a stock or market index。This floating trading and stock trading are at the heart of the swap.。

For example, one leg can be based on a stock index, while the other leg is tied to a foreign currency。They are also known as index return swaps.。Cash flows are sometimes pre-specified, although they are usually exchanged at the end of a swap agreement。

5.tax preference

Properly structured stock swaps can avoid capital gains tax。

As you begin to learn how to trade CFDs, you must be familiar with the complexities of CFDs versus stock swaps。Because each factor has a certain risk, if confused, it is very likely that opportunities will be missed or even losses will occur.。