Markets.com Logo
euEnglish
LoginSign Up

How to trade CFD cannabis stocks

Jan 29, 2021
4 min read
Table of Contents
  • 1. Trading cannabis stock CFDs 
  • 2. The industry and products 
  • 3. What cannabis stocks can I trade? 
  • 4. Cannabis CFD Trading: risk vs reward 
  • 5. Which asset do you want to trade? 
  • 6. Trading vs investing in marijuana 

The cannabis industry is fertile ground for investors, being relatively new. Legal medical and recreational consumption is gaining support globally. As such, cannabis stocks can create exciting opportunities for adventurous investors. Here’s how. 

Trading cannabis stock CFDs 

The industry and products 

Cannabis is split mostly between recreational and medical marijuana. The industry itself is expanding quickly. Reports and research from the likes of Grand View Research suggest the worldwide cannabis industry will be worth US$73.6bn by 2027, growing at a CAGR of 18.1%. 

At present, the focus is more on medical cannabis stocks, although legal personal use could gain more traction as the decade progresses. Medicinal marijuana has been legalised in many nations, including the UK, Canada, Germany, and Australia, and in 30 US states (despite being illegal on a federal level). 

What cannabis stocks can I trade? 

Cannabis stocks are split into three main categories: 

  • Growers – As the name suggests, these are the companies that grow, harvest, and wholesale distribute the plant. Legal constraints mean there are fewer companies operating in this area than others, however, Canadian companies are starting to emerge as market-leading growers as cannabis were fully legalised for recreational use there in 2018. 
  • Biotechs – Biotech companies concentrate more on medical marijuana development. Often, their products will be synthetic, rather than natural, but biotechs are still classed under cannabis stocks. 
  • Supply providers – These types of companies are concerned with the tools and materials needed to grow the plant itself. Think of products like light systems, hydroponic equipment, and soils and fertilisers.  

Cannabis CFD Trading: risk vs reward 

If you are thinking about taking the plunge into the world of cannabis trading, then you will need to consider its potential risks. 

Firstly, despite the UN removing cannabis from its schedule of narcotics, the drug is still illegal for both medical and personal use in many countries around the world. Only Canada and Uruguay have fully legalised it.  

That means, when choosing, you might want to consider UK cannabis stocks from medicinal companies, Canadian growers, and so on because they will not face the same legal hurdles as say US firms where it is still technically illegal on a federal level. 

Price volatility is another aspect to take into consideration. Because of the industry’s growth potential, marijuana shares may not reflect the company’s actual profitability and individual growth. Much of the talk around cannabis is based on optimism, rather than current fundamentals. 

Which asset do you want to trade? 

Marijuana stocks are shares in publicly traded cannabis firms. In the past, such companies may have struggled to be listed on stock exchanges. But things have changed with the softening of attitudes towards the drug. You will now find cannabis stocks on exchanges like the NYSE, NASDAQ and Toronto Stock Exchange (TSX). 

Companies identified as ones to watch in the world of cannabis include: 

  • Canopy Growth – An R&D focussed firm 
  • Tilray Corp – Tilray has just signed a merger with fellow Canadian grower Aphria to form the world’s largest cannabis company worth US$2.8bn. 
  • Aurora Cannabis – A producer first listed on the TSX and subsequently has been on the NYSE since October 2018. 

Trading vs investing in marijuana 

It’s important to learn the difference between trading and share investing. The key differences are: 

  • The timeframe positions are held for
  • How profit is made
  • Speculating on the product without ownership vs. physical share ownership

Investing 

Investors buy shares outright. They hope that they will increase in price so they can be sold for a profit at a later date. That means they tend to hold onto shares for a long period of time, so they can attempt to profit from any changes in share price, and through any dividend payments they may be accorded as share owners. 

Trading 

Trading stocks uses derivative products like stock contracts for difference (CFDs) or spread bets. This means they take their value from the underlying market the asset is drawn from. Traders in this case do not own the shares. However, they can make a profit on the share price movement from rising or falling shares. As such, these trades take short to medium-term positions, instead of long ones. 

Traders should conduct thorough research before investing even if trading seems attractive on paper, a detailed understanding of the trading tools and assets is crucial to make informed decisions. Failure to do so could lead to trading high-risk assets with little chance of returns, resulting in substantial losses.  

 


Risk Warning: this article represents only the author’s views and is for reference only. It does not constitute investment advice or financial guidance, nor does it represent the stance of the Markets.com platform.When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice. Trading cryptocurrency CFDs and spread bets is restricted for all UK retail clients. 

Written by
SHARE

Markets

  • Palladium - Cash

    chartpng

    --

    -1.17%
  • EUR/USD

    chartpng

    --

    -0.12%
  • Cotton

    chartpng

    --

    -0.74%
  • AUD/USD

    chartpng

    --

    -0.49%
  • Santander

    chartpng

    --

    0.16%
  • Apple.svg

    Apple

    chartpng

    --

    -0.02%
  • easyJet

    chartpng

    --

    -0.54%
  • VIXX

    chartpng

    --

    -0.28%
  • Silver

    chartpng

    --

    -2.40%
Tags DirectoryView all
Table of Contents
  • 1. Trading cannabis stock CFDs 
  • 2. The industry and products 
  • 3. What cannabis stocks can I trade? 
  • 4. Cannabis CFD Trading: risk vs reward 
  • 5. Which asset do you want to trade? 
  • 6. Trading vs investing in marijuana 

Related Articles

LKQ Stock Hits 52-week Low: What’s Happening with LKQ Corp?

LKQ Corporation (NASDAQ: LKQ) has recently hit a 52-week low, raising concerns among investors and market analysts.

Ghko B|1 day ago

Intel Stock (INTC) Slides 7%: How to Trade Intel Stock CFDs?

Intel Stock (INTC) Slides 7%: Intel Corporation (INTC) has long been a cornerstone of the technology sector, known for its innovations in semiconductor manufacturing.

Ghko B|1 day ago

Deckers Stock Surges Today: How to Trade DECK Stock CFDs?

Deckers Stock Surges Today: Deckers Outdoor Corporation (DECK) has recently experienced a significant surge in its stock price, drawing attention from investors and traders alike.

Ghko B|1 day ago
Markets.com Logo
google playapp storeweb tradertradingView

Contact Us

support@markets.com+12845680155

Markets

  • Forex
  • Shares
  • Commodities
  • Indices
  • Crypto
  • ETFs
  • Bonds

Trading

  • Trading Tools
  • Platform
  • Web Platform
  • App
  • TradingView
  • MT4
  • MT5
  • CFD Trading
  • CFD Asset List
  • Trading Info
  • Trading Conditions
  • Trading Hours
  • Trading Calculators
  • Economic Calendar

Learn

  • News
  • Trading Basics
  • Glossary
  • Webinars
  • Traders' Clinic
  • Education Centre

About

  • Why markets.com
  • Global Offering
  • Our Group
  • Careers
  • FAQs
  • Legal Pack
  • Safety Online
  • Complaints
  • Contact Support
  • Help Centre
  • Sitemap
  • Cookie Disclosure
  • Awards and Media

Promo

  • Gold Festival
  • Crypto Trading
  • marketsClub
  • Welcome Bonus
  • Loyal Bonus
  • Referral Bonus

Partnership

  • Affiliation
  • IB

Follow us on

  • Facebook
  • Instagram
  • Twitter
  • Youtube
  • Linkedin
  • Threads
  • Tiktok

Listed on

  • 2023 Best Trading Platform Middle East - International Business Magazine
  • 2023 Best Trading Conditions Broker - Forexing.com
  • 2023 Most Trusted Forex Broker - Forexing.com
  • 2023 Most Transparent Broker - AllForexBonus.com
  • 2024 Best Broker for Beginners, United Kingdom - Global Brands Magazine
  • 2024 Best MT4 & MT5 Trading Platform Europe - Brands Review Magazine
  • 2024 Top Research and Education Resources Asia - Global Business and Finance Magazine
  • 2024 Leading CFD Broker Africa - Brands Review Magazine
  • 2024 Best Broker For Beginners LATAM - Global Business and Finance Magazine
  • 2024 Best Mobile Trading App MENA - Brands Review Magazine
  • 2024 Best Outstanding Value Brokerage MENA - Global Business and Finance Magazine
  • 2024 Best Broker for Customer Service MENA - Global Business and Finance Magazine
LegalLegal PackCookie DisclosureSafety Online

Payment
Methods

mastercardvisanetellerskrillwire transferzotapay
The markets.com/za/ site is operated by Markets South Africa (Pty) Ltd which is a regulated by the FSCA under license no. 46860 and licensed to operate as an Over The Counter Derivatives Provider (ODP) in terms of the Financial Markets Act no.19 of 2012. Markets South Africa (Pty) Ltd is located at BOUNDARY PLACE 18 RIVONIA ROAD, ILLOVO SANDTON, JOHANNESBURG, GAUTENG, 2196, South Africa. 

High Risk Investment Warning: Trading Foreign Exchange (Forex) and Contracts For Difference (CFDs) is highly speculative, carries a high level of risk and is not appropriate for every investor. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin. Please read the full  Risk Disclosure Statement which gives you a more detailed explanation of the risks involved.

For privacy and data protection related complaints please contact us at privacy@markets.com. Please read our PRIVACY POLICY STATEMENT for more information on handling of personal data.

Markets.com operates through the following subsidiaries:

Safecap Investments Limited, which is regulated by the Cyprus Securities and Exchange Commission (“CySEC”) under license no. 092/08. Safecap is incorporated in the Republic of Cyprus under company number ΗΕ186196.

Markets International Limited is registered  in the Saint Vincent and The Grenadines (“SVG”) under the revised Laws of Saint Vincent and The Grenadines 2009, with registration number  27030 BC 2023.

Close
Close

set cookie

set cookie

We use cookies to do things like offer live chat support and show you content we think you’ll be interested in. If you’re happy with the use of cookies by markets.com, click accept.