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CFD Trading In Sweden

Written By

Paul Holmes

Written By

Paul Holmes

Paul has over 14 years experience in the trading industry, both as a full-time trader and working with leading brokers. He’s traded indices and forex, developed proprietary day trading techniques, and built his own MetaTrader algorithms. He excels at delivering simple-to-follow guides for beginners to experienced traders.  

» Paul Holmes Profile Page

Edited By

James Barra

Edited By

James Barra

James is an investment writer with a background in financial services. As a former management consultant, he has worked on major operational transformation programmes at prominent European banks. James authors, edits and fact-checks content for a series of investing websites.

» James Barra Profile Page

Fact Checked By

Michael MacKenzie

Fact Checked By

Michael MacKenzie

Michael is a writer and editor with over a decade in journalism and publishing. His niche lies in editing and fact-checking content in the financial services sector, with a focus on online brokers and trading platforms. Michael previously reported on politics and economics in the Middle East and edits books for established publishers.

» Michael MacKenzie Profile Page

Updated

Oct 21, 2024

Many retail investors in Sweden are exploring contracts for difference (CFDs) to tap into financial markets without owning the underlying assets.

Whether you’re looking to trade Swedish stocks, vital global commodities, or even cryptocurrencies, CFDs let you speculate on price movements with just a fraction of the krona you’d need for traditional investing.

In this beginner’s guide, we’ll break down the basics of CFD trading in Sweden, walk through how it all works, highlight both the opportunities and risks, and give you helpful tips to get started.

Quick Introduction

• A unique feature of CFDs is that you can make a move whether prices are going up or down. For instance, you can “go long” on the OMX Stockholm 30 Index if you think prices will rise or “go short” if you think they’ll drop.
• CFDs allow you to use leverage, meaning you only need to put up a fraction of the trade’s total value. Basically, you can control a larger position with less money, which can amplify profits (but keep in mind losses can add up just as quickly).
• CFDs give you access to a wide range of Swedish, European and global financial markets from one platform. It’s like a one-stop shop for all your trading interests without needing to own the assets themselves.
• CFD trading is overseen by Sweden’s Financial Supervisory Authority, or Finansinspektionen (FI), which follows the rules laid down by the European Securities & Markets Authority (ESMA), including limiting leverage to 1:30 for retail investors.

How Does CFD Trading Work?

CFDs give you the opportunity to trade financial markets without the added expense of owning the actual assets, making them derivatives.

Leverage is one of the most attractive elements of CFD trading. Leverage lets you open larger positions while committing a fraction of the total value or margin needed to, for example, buy the same amount of shares listed on Swedish stock markets.

To show you how it works, let’s examine a potential trading scenario using a CFD to trade a popular Swedish stock market index: the OMX Stockholm 30.

If you believe the OMXS30 will rise, then you go long/buy a CFD position. If each contract is valued at 2,600 Swedish krona (SEK), and your brokerage requires a 5% margin, then to take a position on 10 contracts, you’d need a margin of SEK 1,300 (2,600 per contract x 10 contracts x 5%).

If the OMXS30 rises to 2,700, the price increase yields SEK 100 per contract. By closing your position, you could realize a total profit of SEK 1,000 (10 contracts x SEK 100), excluding broker fees. However, if the index falls to 2,500, you would lose SEK 1,000.

This illustrates the risks involved with CFD trading; although you can control significant size with leverage, both gains and losses increase.

Getting to know how margin and leverage work is critical for your future trading success.

If CFD trading is new to you, have you considered opening a demo trading account? It’s a terrific introduction to practice CFD trading strategies. You can build confidence before you risk real krona.

Paul Holmes

Author

What Can I Trade?

CFD trading offers opportunities on many diverse financial markets, both in Sweden and internationally:

• Stock CFDs – Trade individual Swedish shares listed on the Nasdaq Stockholm stock exchange using CFDs without the extra expense of buying the shares. Alternatively, trade highly liquid and well-capitalized stocks from other European and global exchanges.
• Index CFDs – The OMX Stockholm 30 is Sweden’s leading share market index. It is a market capitalization-weighted index of the top 30 listed companies on the  Nasdaq Stockholm stock exchange. You might choose index CFDs to capitalize on a stock exchange’s overall market performance rather than trade individual shares. Alternatively, consider CFDs on global indices like the Dow Jones, the NASDAQ, or the ASX. Liquidity is always high in these indices; consequently, the trading costs are very competitive.
• Forex CFDs – The Swedish Krona (SEK) is reasonably well traded in the foreign exchange market. Sweden’s most popular currency pairs are SEK/USD and SEK/EUR. These pairs are liquidity-rich and provide opportunities for short-term traders, though less so than majors like the EUR/USD.
• Commodity CFDs – Commercial commodities like gold, silver, and crude oil are actively traded as CFDs, allowing you to speculate on the price movements of these valuable global resources.
• Crypto CFDs – The fascination surrounding digital asset trading has also reached Sweden. Investors can trade cryptocurrencies like Bitcoin and Ethereum as CFDs for access to the volatile but high-risk world of crypto.

Is CFD Trading Legal In Sweden?

CFD trading is legal and tightly regulated in Sweden. The country’s financial markets are overseen by Finansinspektionen (FI), Sweden’s Financial Supervisory Authority.

This government body ensures that financial institutions, including CFD brokers, operate fairly, transparently, and in the best interest of traders like you.

Finansinspektionen enforces the rules set by Swedish law and broader European Union (EU) financial regulations. Two significant frameworks that play a big role here are:

1. Markets in Financial Instruments Directive (MiFID II) – This EU-wide directive ensures transparency and investor protection. It requires brokers to provide clear information about the risks of CFD trading, fees, and the performance of financial instruments.
2. European Securities and Markets Authority (ESMA) – ESMA imposes strict rules to protect traders across the EU. One key aspect related to CFDs is leverage limits. Retail traders can use leverage, capped depending on the asset class (eg 1:30 for forex and 1:5 for stocks). These limits reduce the risk of significant losses.

In Sweden, you should only trade with CFD brokers licensed by Finansinspektionen or another recognized European financial regulator. You can easily verify a broker is legitimate by checking the FI’s official registry or ensuring the broker holds a licence under MiFID II.

Authorized providers should hold client funds in segregated accounts, separate from the broker’s money, provide negative balance protection, which means you can’t lose more than your initial deposit, and publish clear, detailed risk warnings to ensure you understand what you’re getting into.

Is CFD Trading Taxed In Sweden?

Understanding how taxation works concerning CFDs is essential to ensure you stay on the right side of the law.

In Sweden, profits from CFD trading are generally subject to capital gains tax. The tax rate on capital gains is 30%, which applies to most investment income, including profits from trading CFDs.

Losses can be offset against gains to reduce your taxable amount. Swedish tax laws allow you to deduct 70% of your losses from your capital gains, helping lower your tax liability, though we recommend consulting a tax professional for guidance tailored to your circumstances.

You’ll usually report your gains and losses to The Swedish Tax Agency (Skatteverket) in a section of your tax return dedicated to capital income.

One benefit of trading CFDs compared to traditional stocks is that stamp duty (a tax that sometimes applies to share purchases) is not applicable because you don’t own the underlying assets when trading CFDs.

While this doesn’t eliminate the capital gains tax, it’s still a nice perk.

Paul Holmes

Author

An Example Trade

To bring this all to life, here I will discuss a CFD trade I made on the Swedish stock SSAB AB (SSABb).

SSAB AB is a Swedish company specializing in steel production. Founded in 1978, it has the largest shareholders in LKAB and the Government of Finland.

Fundamental Analysis

When I’m looking to day or swing trade a stock, I don’t have much time to conduct my analysis and decide. Remember: this is not an investment decision; you’re searching for a day trading opportunity by identifying price-action.

I’m not looking to invest, only to profit in the short term, whether short or long. So, with that in mind, I don’t spend days analyzing detailed investment reports. Instead, I have a selection of go-to vital metrics to illustrate how well the firm is doing. I’ll also scour the financial wires for any stories on the firm, good or bad.

I examine metrics such as net revenue, 52-week range, P/E ratio, EPS (earnings per share), and 1-year change to get a brief overview, and such metrics are usually available on free-to-view sites like Investing.com.

This helps me understand whether the stock is oversold or overbought on a short-term basis, two fundamental conditions I’ll then quickly apply using technical analysis.

At the time, the recent news regarding SSAB was positive, especially concerning its adoption of green issues in manufacturing.

Technical Analysis

I’ll use several technical indicators to analyze the stock’s performance.

Typically, I’ll select indicators that cover trends, momentum, volatility, volume, oversold/overbought conditions, and entry and exit points. Combining EMAs, MACD, RSI, stochastic oscillator, PSAR and Bollinger Bands covers this range.

However, that’s a lot to put on a chart, and your timeframes (TFs) will be cluttered, potentially causing analysis paralysis. So, I tend to boil it down to two or three indicators combined with candlestick formations that reveal price action.

In this instance, I’m applying the RSI and stochastic oscillator to a 1-hour (1HR) timeframe. I’m judging the indicators using Heikin Ashi candlestick formations.

1 HR Timeframe

If you want to make a short-term day-trading decision, you generally need to concentrate on lower time frames, typically 15 minutes to 1 hour.

The higher time frames in scenarios like this, such as the 4HR and daily (D1), should only be used to support your decision-making. For example, is the short-term price action trend on the 1HR visible over the medium term on D1? If so, you might have identified a trend with considerable momentum.

In the above chart, we can see the following:

• Bearish momentum begins to fade as price makes higher lows. The indecisive doji, followed by a green bullish 1HR candle, indicated a rapid reversal in sentiment. I entered long as the stoch lines crossed and the RSI rose above the median 50 reading.
• After a brief ranging period, bullish momentum began to strengthen, and full bullish candles with upward shadows confirmed bullish sentiment. I exited the trade once the RSI reading rose above 70 and the stoch lines 80, indicative of an overbought asset.

I traded this stock using a stock CFD contract. To execute the trade, I used 20% margin. 100 contracts at SEK 48.70 required a margin of SEK 974 (100 x 48.70 x 20%).

I entered at 48.70 and exited at 50.00. Risking roughly 1% of my trading account on the trade, I banked about the same percentage amount once fees were accounted for.

Paul Holmes

Author

Bottom Line

CFD trading in Sweden offers exciting opportunities, whether you’re keen to explore a variety of markets, take advantage of leverage, or trade on both rising and falling prices. It’s a flexible way to engage with the financial markets, but as with any investment, it comes with its share of risks.

The good news is that Sweden provides a well-regulated environment, backed by Finansinspektionen and EU-wide rules, giving you a solid framework to trade securely.

On top of that, understanding how taxation works (like capital gains and loss deductions) means you can stay on the right side of the law and make the most of any CFD trading profits.

So, if you’re ready, just remember to stay informed, trade responsibly, and always weigh the rewards and risks.

To get started, turn to DayTrading.com’s selection of the top CFD day trading platforms.

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