Tesla Trading Guide: How to Trade Tesla Shares CFDs

Tesla (TSLA) is a leading American electric vehicle (EV) manufacturer. Let’s explore the advantages and limits of trading Tesla, some potential ways to trade Tesla stocks, and how to trade Tesla shares with Contracts for Difference (CFDs):

TL;DR

• Tesla is a car company that manufactures electric vehicles (EVs).
• Tesla was founded in 2003.
• Tesla’s revenue mostly comes from the automotive sector (95%), but the company also makes money from energy generation and storage (5%).
• Tesla shares can be traded with CFDs.
• When trading Tesla, traders can refer to various stock trading strategies like trading economic data such as when Tesla’s financial results are published (sales, revenue, Earnings Per Share (EPS), etc.), breakout trading, and trend trading among others.

Overview of Tesla Company and Shares

Established in 2003, Tesla has become synonymous with innovation in the realm of transportation. While widely recognized for its groundbreaking electric vehicles, the company’s scope extends beyond cars to encompass cutting-edge energy storage solutions and solar panel technology.

Electric vehicles (EVs) mark a significant change in car design, swapping out traditional gasoline (RB) engines for electric motors. These cars use rechargeable batteries to power the motor, moving the vehicle efficiently.

These vehicles present several potential benefits compared to traditional gasoline vehicles, such as the potential for reduced emissions, cost savings, and a quieter driving experience. Nonetheless, they also come with limitations, including shorter driving ranges on a single charge, challenges related to charging infrastructure, and relatively long charging times.

As of late April 2024, Tesla’s stock price stands at around $193 per share, reflecting a remarkable surge of over 16,979% from its initial public offering (IPO) on June 29, 2010. While the IPO price was $17 per share, accounting for splits, it adjusted to $1.13 per share after the 5-for-1 and 3-for-1 splits in August 2020 and August 2022 respectively.

To learn more about Tesla and the evolution of its price share, read our article titled ’Tesla Stock Price Guide: What Drives Tesla Share Price?’

Advantages of Trading Tesla Shares

Let’s take a look at some of the potential advantages of trading Tesla:

• Success Story, Leadership and Brand Recognition: Tesla’s story is one of innovation and disruption. Tesla has established itself as a leader in the electric vehicle revolution, challenging the dominance of traditional automakers. Its commitment to clean energy and cutting-edge technology has fostered strong brand recognition.
• Growth Stock: Tesla’s position as a growth stock in recent years stems from its unique blend of car manufacturing and technological innovation. These growth stocks are valued for their potential for rapid future earnings growth. Tesla is fueled by anticipated leadership and an innovative approach in the fast-growing electric vehicle and clean energy markets.
• Most Valuable Car Company in the World: As of the end of April 2024, Tesla’s market capitalisation is more than $608 billion, which makes it the most valuable car company globally. Tesla has been in this position since 2020.
• Among the Largest Company Globally: As of January 2024, Tesla was among the top 10 most valuable companies in the world by market cap alongside firms like Microsoft (MSFT), Apple (AAPL), Saudi Aramco, Alphabet (GOOG), Amazon (AMZN), Nvidia (NVDA), Meta Platforms (META), and Berkshire Hathaway (BRK.B).
• World’s Top Seller of Battery Electric Cars: As of the first quarter of 2024, Tesla is in the leading position as the largest seller of Battery Electric Vehicles (BEVs) in the world.
• Growing Foothold in the Electric Battery Business: Tesla’s growing battery expertise provides a potential dual benefit for its business: it allows it to continuously reduce production costs for its cars while maintaining a significant competitive edge in battery technology.
• Technological Advancements in Related Markets: Tesla works on other services related to its cars that could potentially support its growth over time, such as its advanced driver-assistance service (Full Self Driving or FSD), which the company plans to launch in China in 2024.
• Key Acquisitions: Over the years, Tesla has strategically acquired several companies to bolster its manufacturing capabilities, streamline operations, and ultimately reduce costs. These key acquisitions include SolarCity Corp. (solar energy), Maxwell Technologies (energy storage), Grohmann Engineering (automation), Perbix Machine Co. (manufacturing), and Hibar Systems (battery technology).
• Unique Business Model: Tesla’s market disruption goes beyond the product. Its approach intends to revolutionise traditional car sales by bypassing dealerships with a direct-to-consumer model. Recognising the importance of infrastructure, the company prioritises building charging stations, addressing a key barrier for widespread EV adoption. Tesla has further expanded its reach by offering energy storage solutions for homes and businesses.

The Disadvantages of Trading Tesla Shares

While trading Tesla can offer some benefits, it can also be risky to trade Tesla shares:

• Growing Competition: As the EV sector matures, Tesla has to face increasing competition, not only from other EV manufacturers such as Li Auto (LI), Xpeng (XPEV), BYD (1211. HK) and Rivian (RIVN) but also from traditional auto manufacturers like BMW (BMW.DE), Mercedes-Benz (MBG.DE), General Motors (GM) and Volkswagen (VOW.DE) who are also getting into the EV industry.
• Upcoming Potential EV Slower Growth: While BloombergNEF predicts continued growth in electric vehicle demand beyond 2024, the pace is expected to slow. After surging 62% in 2022 and 31% in 2023, sales of all-electric and plug-in hybrid vehicles are forecast to rise by 21% in 2024.
• Waning Government Incentives About EVs Globally: Government incentives, particularly in the US, China, and Europe, have played a significant role in boosting the young EV industry and making electric vehicles more affordable for consumers in the last few years. However, access to these incentives might diminish for potential buyers and impact Tesla’s affordability.
• High Car Price: Even with price cuts, Tesla vehicles are expensive to produce and remain pricier than the average EV, even after factoring in government incentives.
• Multiple Vehicle Recalls: There is an increasing number of warnings and alerts sent to Tesla’s owners because of vehicle recalls, mostly due to light and steering problems. As of the end of January 2024, the National Highway Traffic Safety Administration announced the recalling of about 2.2 million vehicles in the United States.

Trading Tesla with CFDs

Speculating on Tesla’s stock price movement through Contracts for Difference (CFDs) is a popular way to trade Tesla over the short term for retail traders.

How Do CFDs on Tesla Shares Work?

Owning physical Tesla shares makes you a shareholder of the company.

CFDs on Tesla, however, allow you to track the price movements of Tesla shares without the ownership of said shares. Instead, CFDs function as a contract with a CFD provider like Plus500 to exchange the difference in Tesla’s price between the time you enter and exit the market.

Using CFDs to trade Tesla’s share price also means that traders rely on leverage and margin trading. While it can magnify their potential profits, it can also magnify their potential losses.

Let’s look at a simple example:

​​Imagine that Tesla shares are worth $170 per share and you want to buy 10 Tesla shares (total value of the position: $1,700). With CFDs, you can use leverage to be able to trade Tesla without having to invest the full $1,700 or owning the shares.

Let’s say you use a leverage of 1:5, meaning you must allocate an initial margin of 20% (which is $340) to open a CFD position on 10 Tesla shares.

Profits can be made by closing your CFD position when Tesla’s price rises above $170 from your entry point. Conversely, losses occur if you close your CFD trade when the price falls below $170. Remember, overnight funding fees and other charges can influence your final profit or loss.

To find out more about CFD and share trading, read our article titled ’What Are the Differences Between CFD and Share Trading?’

What Are the Benefits of Trading Tesla with CFDs?

Deciding whether to trade Tesla with CFDs mostly depends on your risk tolerance, your strategy, as well as trading experience and knowledge among other things. While there are a number of other trading strategies, here are some potential common factors supporting the use of CFDs in short-term trading strategies:

• Long and Short Positions on Tesla: One feature of CFD trading is the ability to trade both bullish and bearish markets.
• Accessibility: With CFD trading, traders can use leverage and margin trading, which means that they can potentially start trading with relatively little capital. Moreover, CFD trading platforms are online, making it easier for traders to trade with a computer, a tablet or a smartphone and an internet connection.
• Diversification: CFD providers usually offer the possibility to trade CFDs over shares and other financial markets like Forex, commodities, indices, and cryptocurrencies among others, allowing traders to potentially create a diversified portfolio.

What Are the Risks of Trading Tesla with CFDs?

Trading CFDs on Tesla shares can offer some advantages, but traders should also consider the risks and limits of using CFDs to trade Tesla, such as:

• No Voting Rights: Because you do not own the Tesla shares when trading CFDs, you have no voting rights.
• Volatility: Tesla’s stock can be quite volatile. One way to measure this is with beta, which indicates how much a stock’s price movements tend to amplify or dampen compared to the overall market. A beta above 1 signifies higher volatility, and as of the end of April 2024, Tesla’s beta sits above a significant 2.40.
• Leverage: It can be risky to trade Tesla CFDs due to the potential significant losses that can occur when the markets do not move in your favour.

Different Ways to Trade Tesla Stock

When trading Tesla stock, traders generally choose a market analysis method to assess its potential among other methods.

Common approaches include technical analysis (studying Tesla stock price, trading volume and historical price patterns to predict future price movements), fundamental analysis (evaluating the company’s fundamentals to determine its intrinsic value), or a combination of both.

Once the type of market analysis to use to determine whether to buy or sell Tesla shares has been chosen, traders have a trading style that is usually based on their trading strategy, risk tolerance, investment horizon, and availability.

For more proactive traders, there’s day trading, involving short-term positions held for minutes or hours and involves active monitoring, and is high risk. For traders that prefer a less active approach, swing trading involves holding positions for days or weeks to capture larger price movements and is more flexible but provides greater exposure to broader market swings.

How to Trade CFD Tesla Shares with Plus500 (Step by Step)

Here are a few steps that can guide you if you want to start trading Tesla shares with CFDs (among other steps):

1. Learn how to trade shares.
2. Consider stock market trading tips that are relevant to you.
3. Understand how CFD trading works, its risks and its advantages and disadvantages.
4. Write your trading plan.
5. Open your trading account on Plus500.
6. Make a deposit.
7. Find Tesla Shares CFDs on Plus500 trading platform.
8. Decide whether to buy Tesla Shares CFDs (go long) or to short-sell them (go short).
9. Execute your trade after confirming your order details (size, stop-loss, take-profit).
10. Monitor your position.
11. Learn how to evaluate your trading strategy to make necessary adjustments as and when required.

Tesla Trading — Frequently Asked Questions (FAQs):

What are some of the most popular trading strategies to trade Tesla shares?

When deciding to buy or sell Tesla stocks, traders generally use technical analysis, fundamental analysis, or a combination of both. These types of market analysis apply to various trading styles, whether it’s day trading (holding positions for minutes or hours) or swing trading (holding positions for days or weeks). Traders can then choose from a variety of strategies to guide their trading decisions with news trading, moving average crossovers, breakout trading, chart patterns, support and resistance levels, range trading, and trend trading being the most popular trading strategies.

What should I take into consideration when trading Tesla shares?

If you decide to trade Tesla shares, you should learn about the factors that can have an impact on the share prices, such as the evolution of the EV sector, environmental regulation, layoffs, car recalls, levels of cars produced and sold, major changes in the price of Tesla cars, progress in autonomous vehicles’ development, increasing competition, as well as trading psychology and market sentiment, among others.

How can I trade Tesla stock price?

You can trade Tesla share price through CFDs (Contracts for Difference), physical stock purchases, or Exchange-Traded Funds (ETFs) comprising Tesla stock, with Tesla Share CFDs potentially being a popular option for retail traders looking to speculate on Tesla shares price volatility.

How can I get started with trading Tesla Share CFDs?

Learn about CFDs, then practise on a Plus500 demo account to test your CFD strategy among other things in a virtual trading environment offering real-time trading conditions, before trading Tesla Share CFDs on a real trading account.