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ETFs are investment funds that hold a basket of securities or other assets and can be traded on exchanges during trading hours, like individual shares. As these funds can track specific categories, replicate whole indices, or follow broader market themes, they are especially useful for investors wishing to diversify their portfolios.
For those who are not interested in owning the fund but still want to speculate on its price movements, CFDs offer a derivative instrument that lets you trade the value of an ETF.
The wide range of available ETFs makes exploring diverse market opportunities both convenient and cost-effective. Going beyond traditional shares, ETFs offer exposure to various asset classes, sectors, and global trends. For example:
Index ETFs aim to replicate the performance of specific market benchmarks, such as the S&P 500 or Nasdaq-100. Sector ETFs concentrate investments within industries like technology, healthcare, or energy. Thematic ETFs provide exposure to broader, often forward-looking, trends such as artificial intelligence, clean energy, or the metaverse. Beyond equities, Commodity ETFs track the prices of raw materials like gold or oil, while Bond ETFs offer diversified access to treasuries and corporate bonds.
Axi provides access to ETF CFDs covering a range of popular interests, enabling traders to align their strategies with global trends, specific purposes, or values:
Tech and Innovation: Target companies driving advancements in AI, robotics, cloud computing, and other disruptive technologies, such as the Global X Robotics & Artificial Intelligence ETF (BOTZ).
ESG and Clean Energy: Invest sustainably in environmental, social, and governance-focused companies, including those leading in solar, wind, and low-carbon innovations, exemplified by the Invesco Global Clean Energy ETF (PBD).
Biotech and Healthcare: Back companies at the forefront of life-changing research and medical breakthroughs, like the iShares Biotechnology ETF (IBB).
Emerging Markets: Gain exposure to the growth potential of fast-developing economies, such as the iShares Emerging Dividend (DVYE).
Metaverse and Gaming: Engage with the expanding world of immersive experiences, eSports, and virtual entertainment, with examples like the Roundhill Sports Betting & iGaming ETF (BETZ) or VanEck Video Gaming and eSports ETF (ESPO).
Among the most significant recent developments in the ETF space has been the introduction of crypto ETFs, which have redefined access to digital assets.
Bitcoin ETFs have profoundly impacted the broader ETF landscape. Launched in the US in January 2024, they introduced what was considered a novel asset class into the mainstream, providing both retail and institutional investors with regulated and accessible exposure to cryptocurrencies without the complexities of direct digital asset ownership.
This development expanded product offerings within the ETF market, attracting new investor demographics who were previously hesitant due to concerns around custody, security, or regulation.
Since their introduction, US spot Bitcoin ETFs have witnessed remarkable capital inflows, with cumulative net inflows nearing $63 billion by May 2025. BlackRock’s iShares Bitcoin Trust (IBIT), for example, amassed over $70 billion in assets under management within its first year, making it the fastest ETF in history to reach this milestone and one of the most successful ETF launches ever.
Bitcoin ETFs have, at times, surpassed the inflows into traditional gold ETFs, indicating a changing preference among some investors for digital over traditional safe-haven assets.
These ETFs allow investors to access the blockchain revolution without having to hold crypto directly. Examples include the ARK 21Shares Bitcoin ETF (ARKB), the Bitwise Crypto Industry Innovators ETF (BITQ), and the Global X Blockchain ETF (BKCH).
Exchange Traded Funds (ETFs) differ from traditional investment funds primarily in how they're traded. Traditional funds are priced only once daily after the trading day ends, while ETFs trade continuously throughout the day on stock exchanges, similar to individual shares. ETF prices fluctuate in real time based on supply and demand, reflecting movements in the underlying assets, market sentiment, and liquidity conditions.
The Net Asset Value (NAV) is an essential benchmark used by investors to determine if an ETF is trading at a premium or discount. Calculated daily at market close, NAV represents the total market value of the ETF's assets minus liabilities, divided by the number of outstanding shares.
ETFs keep their market prices aligned with NAV through the Creation and Redemption process managed by Authorized Participants (APs), typically large financial institutions.
If an ETF trades above its NAV, APs buy underlying securities, exchange them for new ETF shares from the issuer, and sell these shares, increasing supply and moving the price closer to the NAV. Conversely, when an ETF trades below the NAV, APs purchase ETF shares, redeem them for underlying securities, and sell the securities, reducing supply and raising the ETF's price towards the NAV.
ETFs offer a way to create a globally diversified, low-maintenance portfolio that delivers returns over long-term market exposure, all without the need to constantly change tactics.
However, for those not concerned with ownership, especially short-term traders and those seeking specific trading capabilities, CFDs present an alternative. One of their main benefits is the ability to trade with leverage, allowing for larger positions with smaller initial capital, which amplifies the potential profits and losses.
CFDs also simplify short selling, enabling traders to potentially profit from falling prices. This process can be more complex with actual ETFs, requiring borrowing shares or the use of “inverse” ETFs.
Furthermore, since trading an ETF CFD involves speculating on price movements rather than owning the underlying shares, it reduces administrative complexities and helps avoid certain taxes associated with owning the physical asset. CFDs can also provide market access to a wider range of global ETFs that might be otherwise difficult or more expensive to trade directly on various exchanges.
CFDs provide great flexibility, allowing traders to speculate on ETF price movements without actual ownership. This flexibility stems from several key features:
CFD trading strategies differ from long-term ETF investment approaches like dollar-cost averaging or buy-and-hold. Instead, CFDs offer flexibility for various active strategies focused on capitalising on market movements.
Trend (momentum) trading: ETFs are well-suited for this, as they often exhibit clear, sustained trends tracking indices or sectors. CFD traders can use technical analysis to identify and follow these directional movements.
Hedging and portfolio protection: CFDs are ideal for hedging, allowing traders to easily go short on an ETF CFD to offset potential losses in a long stock portfolio during market downturns.
Sector rotations and thematic positioning: ETFs provide diversified exposure to specific sectors or global themes. CFD trading facilitates quick shifts of capital between these areas based on anticipated performance.
Another consideration when trading ETF CFDs is how the dividends from companies in the ETF basket are handled. CFD traders don't receive direct dividend payouts. Instead, brokers apply "dividend adjustments" to your account.
If you hold a long position, your account will typically be credited with a cash amount equivalent to the net dividend, factoring in any applicable withholding tax. Conversely, if you hold a short position, your account will be debited the gross dividend amount.
Suppose you hold a long CFD position on the SPDR S&P 500 ETF (SPY), and SPY goes ex-dividend with a $1.00 dividend per share. If you held 100 ETF CFDs:
These adjustments directly impact your profit and loss, especially for longer-term positions or trades around ex-dividend dates, and should be considered in your overall trading strategy.
Category |
ETFs |
ETF CFDs |
| Definition | Pooled investment funds traded on stock exchanges | Derivative contracts tracking ETF prices, traded via CFD brokers |
| Ownership | Yes | No |
| Leverage | No | Yes |
| Short Selling | No (unless or margin) | Yes |
| Dividends | Paid to investors | Cash dividend adjustments |
| Custody | Held with custodian | No |
| Fees | Low ongoing fund fees & brokerage commissions | Spreads and swaps |
| Execution Speed | Market execution on exchange | Instant execution via broker |
| Suitability | Long-term investors, passive strategies, asset allocation | Short-term traders, speculation, intraday opportunities |
| Risk Profile | Low | High |
| Margin Calls / Stop Out | Rare (unless on margin) | Possible due to leverage |
ETFs typically have lower management fees compared to actively managed mutual funds.
As each ETF can be comprised of a large number of underlying assets, they enable traders to easily diversify their portfolios with a single investment.
Their thematic or global sector construction makes them ideal for targeting specific industries or trends, allowing traders to align their investments with purposeful strategies.
Traders can go long (buy) if they anticipate a price increase or go short (sell) if they expect a decrease, potentially profiting from both rising and falling markets.
Using leverage, CFDs enable traders to control a larger market position with a smaller initial deposit, amplifying potential profits (and potential losses).
Unlike actual ETFs limited to regular stock exchange hours, ETF CFDs often offer extended trading, beneficial for reacting to market developments outside core trading windows.
CFDs make short selling easier, avoiding complexities sometimes associated with shorting physical ETFs.
Trading an ETF CFD involves speculating on price movements rather than owning the underlying shares, reducing administrative complexities and potentially avoiding certain taxes associated with physical asset ownership.
CFDs can offer market access to a broader range of global ETFs that might be difficult or more expensive to trade directly on various exchanges.
Trading ETFs (direct ownership) carries the inherent risks of securities trading and is subject to market sentiment. Some ETFs, particularly in highly specific (niche) sectors, may offer less diversification and be highly volatile, and they might also be subject to the liquidity risk of their underlying assets.
Trading ETFs in the form of CFDs amplifies the potential for losses due to leverage. Additionally, CFD positions held overnight are typically subject to overnight financing fees, which can accumulate over time.
With Axi, you can trade ETF CFDs on MetaTrader 5 (MT5) and the Axi Trading Platform. To do so:
ETFs offer a powerful and diversified pathway to global markets, enabling exposure across various sectors, themes, asset classes like commodities and bonds, and even innovative categories such as cryptocurrencies.
For active traders, ETF CFDs further enhance this access by providing speed, leverage, and the flexibility to speculate on both rising and falling prices without direct asset ownership. With a broad range of ETF CFD offerings and user-friendly features, Axi simplifies the process, allowing traders to efficiently align their strategies with major market trends and trade with purpose.
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This information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. It has been prepared without taking your objectives, financial situation and needs into account. Any references to past performance and forecasts are not reliable indicators of future results. Axi makes no representation and assumes no liability with regard to the accuracy and completeness of the content in this publication. Readers should seek their own advice.
FAQ
An ETF is an investment fund holding multiple assets, traded on exchanges, where you own the underlying assets for long-term strategies. An ETF CFD is a derivative that allows speculation on ETF price movements without ownership, offering leverage and easier short-selling, typically for active, short-term trading.
ETFs themselves can pay dividends, but with ETF CFDs, you don't receive direct payouts. Instead, brokers apply "dividend adjustments." For long CFD positions, your account is credited a cash amount; for short positions, it's debited. These adjustments impact your profit and loss.
