CFD Trading Tutorial and Platform Top List with Reviews

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CFD Trading Explained – Forex, Stocks And Cryptocurrency

CFDs are becoming a popular alternative for traders looking for short-term leveraged trading of stocks and other assets. In this expert guide we will teach you what a CFD is and how CFD trading works. We also list and compare all the regulated CFD brokers on the market, with detailed reviews for readers who want all the facts before signing up.

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What Is a CFD?

A Contract For Difference (CFD) is a tradable product that mirrors an underlying asset. When trading CFDs, you’re making a contract to buy (or sell), on margin, and you collect (or pay) the difference when you close the position. Unlike buying a stock or futures contract, a CFD is a derivative, which means that you never actually own the underlying asset during the transaction. CFDs can be created to mirror almost any financial instrument or market, including individual equities, indexes, currency pairs, interest rate products or bonds. If it moves, and there is demand, you can be sure that there will be a CFD for it.

CFDs are generally not recommended for new traders. If you read the above paragraph and need to Google some of the terms used, it’s likely that you shouldn’t trade CFDs just yet. A solid understanding or leverage, margin, counterparty risk, and the complexity of derivative products is recommended. As a rule, you should only trade what you’re willing to lose, as CFD’s are volatile and you could be liable for extra losses. Set up a demo account and experiment, but make sure you do your research, understand the product and its ins and outs before you deposit real money into an account.

How Do You Trade A CFD?

The mechanics of trading CFD’s works much in the same way as buying or selling equities, futures or forex, except with a CFD you never actually own the underlying instrument. What you’re trading is the difference between the price when you first enter the trade and when you exit it. Hence the name, Contract For Difference. Most CFD providers also require that you cross the spread to enter or exit a position. Let’s run through a trade example for some clarity:

You want to BUY 100 “shares” in company XYZ, as you believe that the price is going up in the short term.

The current price is $10.55, the bid is $10.50 and the offer is $10.60.

  • You click BUY, crossing the spread, and pay $10.60 for 100 “shares”.
  • You’ve used $53 margin on your position (assuming a margin of 5%), instead of the $1050 + fees that you’d outlay if you bought the stock itself.
  • The stock quickly moves to your target of $11, where you decide to sell.
  • You click SELL, crossing the spread, and are filled at $10.95 on your 100 “shares”.

Congratulations! You made a profit of $35 (35c per “share” x 100) on your position.

As you can see, leverage is powerful. A $35 profit on a $53 margin (66%) is a far greater ROI than the 4-5% profit that you’d make buying the underlying, even if the total dollar amounts are a little less.

Here lies the attraction of leverage and CFDs. Of course, the opposite could also be possible. The equivalent move could wipe your CFD account of all of its capital (and more).

Why Trade CFDs?

As CFDs are leveraged products, they offer significant advantages and disadvantages over regular stocks or futures.

  • Speculation: Because of the margin, CFDs are usually used by traders looking to trade short term or intraday moves. They can be very expensive to hold overnight, depending on the broker’s margin requirements and fee structure.
  • Leverage: The amount of leverage available differs from broker to broker, depending on the product and market. The biggest advantage is the potential ROI a trader can achieve using CFD’s when compared to common stocks. As illustrated in the example above, you can easily make a 50%+ ROI on your margin used, which can be very attractive for speculators who are comfortable with risk.
  • Margin: CFD brokers only require between 2% and 20% margin on your position, depending on the instrument and volatility. Much like forex, this allows you to trade larger size than you may otherwise be able to, or give you access to expensive stocks that you might not be able to trade. For example, if you want to buy 100 shares in Apple at $145, you’d need $14500 in your equity account, plus commissions. With a CFD broker, you may be able to trade the equivalent of 100 shares on a margin of $725, or 10 shares on $72.50. This opens up new markets and opportunities.
  • Exposure to global markets: Most CFD providers offer a huge variety of markets. You could just as easily trade the German DAX as you could an Australian Equity. This can all be done on one account, without the need for expensive data or execution fees.
  • Fees: Trading fees can add up pretty quickly, especially using retail brokers. There are no fee’s on CFD’s, only the spread (which represents its own challenge).
  • Hedging: CFD’s offer those with equity portfolios the opportunity to quickly and cheaply hedge their long equity positions. Options can be a daunting and difficult to structure, especially if you’re using them to hedge positions. CFD’s give savvy traders a cheap alternative and a variety of hedging opportunities.
  • Leverage: This is a double edge sword. While buying the equivalent of 100 shares in Apple is far cheaper using CFD’s, you’re exposing yourself to significant risk by doing so. A small move in the underlying can wipe out the value of your position or more, leaving you in the red with your broker.
  • Crossing the spread: Entering or exiting a CFD position requires you to cross the spread. There’s no limit orders. This means that you’re always paying a premium to enter or exit a position. This is the price paid for access to margin. While this may seem insignificant, paying the spread can add up to a fair amount of money, especially if you’re an active trader. It also makes some strategies very difficult to execute (e.g. scalping).
  • Betting against your broker: A CFD is a contract with your broker. They profit if you lose. This opens up many conflict of interest questions. It’s very important to research your broker, check if they’re regulated (many are not), and read online reviews. Get in touch with them directly if you have questions before depositing any money in the account.

Counterparty Risk

When trading CFD’s your making a contract with your broker regarding the future movement of a financial instrument. Unlike trading an underlying, the counter-party to your trade is your broker itself. As you can imagine, this raises a myriad of conflict of interest issues, and regulators continue to try and find an acceptable balance between protecting customers from predatory practices and allowing traders the freedom to trade what they wish.

The skeptic could argue that trading CFD’s with your broker is like gambling at a casino. It’s in the casino’s best interest that you’re a happy, smiling customer…so they can ultimately take as much money as they can from you.

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The believer would argue that it’s in a CFD broker interest to get longevity from clients, and that they make enough money from spreads and volume that there’s no incentive to do wrong by their customers. Shady practices would be reported to regulators, which would ultimately hurt their business and profitability.

The takeaway is that traders need to do their research on CFD brokers and regulation in their country. A good place to start is our list of recommended brokers.

Top 11 Best Day Trading Platforms & Software Review 2020

In-depth Review: Top day trading platforms need powerful chart analysis, backtesting, forecasting + real-time data, news & live chart trading

REVIEW BREAKDOWN
MetaStock – Best for powerful charting & trading system analysis, excellent real-time news with global data coverage.
TradingView – Best for beginners needing great social integration to learn from other traders and the best ease of use. Includes trading from charts for Europe and Asia.
Benzinga Pro – The best day traders news service, real-time news designed for traders
Firstrade – Best for commission free $0 trading with powerful tools stock and options tools.
TC2000 Brokerage – The best day trading software for U.S.A. & Canadian Exchanges, powerful real-time screening and excellent trading from charts.
Interactive Brokers – Best for global exchange execution, low commissions, great margin rates
TradeStation – Best for U.S. day traders wanting powerful tools, automated trading, and tight broker integration.
SpeedTrader – Best for day traders after direct market access (DMA) & fast execution for low-cost stock & options trading
LightSpeed – Best for active day traders seeking fast execution & very low commissions
ZACKSTrade – Best for low margin rates (5.9%), solid tools and very low commissions.
EquityFeed – Best for real-time news & trade execution integration with TD Ameritrade & Interactive Brokers

Table of Contents

Each broker’s software platform offers a unique mix of pricing, services, and software to try to meet the needs of the day trader. Read carefully through each review to see which one best meets your requirements as an active trader.

Cost is also a critical factor, choosing a very low cost or no commissions brokers can literally save you thousands of dollars per year.

Best Day Trading Platforms & Software Review & Comparison

6 Best Day Trading Platforms & Software

  • MetaStock – Best software for day trading systems, forecasting & backtesting
  • TradingView – Best platform for day trading stocks, forex & cryptocurrency
  • Benzinga Pro — Best Real-time News Feed for Day Traders
  • Firstrade — Best broker for day traders with $0 trades on stocks, options & ETFs
  • TC2000 Brokerage — Day Trade U.S. & Canada From Charts
  • Interactive Brokers — Most powerful global trading platform & great margin rates

Best Day Trading Platforms Summary

The best software for day traders to develop systematic backtesting & forecasting models make MetaStock a great choice. TradingView is the number one platform for day trading Stocks, Forex & Cryptocurrency whilst socially sharing trading ideas. Firstrade has a great $0 commission platform for Options & Stock trading.

1. MetaStock — Best Forecasting & System Backtesting

Best for powerful charting & trading system analysis, excellent real-time news with global data coverage.

Price — Software $99 per month Pro’s Cons
Trade Commissions — N/A ★ The Best Charts & Indicators Selection ✘ PC Only
Rating ★★★★★ ★ The Best System Back-testing ✘ No Mobile App
Special Deal — 3 Months for the price of 1 ★ Real-time News from Reuters (Refinitiv Xenith) ✘ No Broker Integration
Open An Account ★ Global Real-time Exchange Data

If you are a trader that needs to experiment to build a system that works like clockwork, giving you an edge in trading then MetaStock is the product for you. You cannot execute trades directly from charts, but the systems back-testing and forecasting are a huge edge in day trading.

The latest release of Metastock XVII (17) has been a big hit with improvements across the board. Huge improvements in scanning, Back-testing, and forecasting making this one of the best offerings on the market. MetaStock is one of the biggest fish in the sea of stock market analysis software. Backed up by the mighty Thomson Reuters you can expect excellent fast global data coverage and broad market coverage including equities, futures, forex, ETF’s and options.

Broker Integration. MetaStock does not natively provide broker integration and the execution of trades from charts and live integrated P&L analysis is limited.

Fundamental Scanning and Screening. Using Refinitiv Xenith you can see a really in-depth analysis of company fundamentals from debt structure to top 10 investors, including level II. Excellent watch lists featuring fundamentals and powerful scanning of the markets gets a perfect 10

Real-time News (Winner) – MetaStock 17 has full Refinativ integration with institutional level news, analysis, and outlook. This is the fastest global news service available on the market including translations into all major languages.

MetaStock in Action

Technical Analysis (Winner) – Forex forecasting based on sentiment is a feature that is absolutely exceptional. Never mind the broadest selection of technical analysis indicators on the market today. MetaStock is the king of technical analysis warranting a perfect 10 out of 10.

Stock Systems and Back Testing (Winner) Another area where MetaStock excels is what they call the “expert advisors”. MetaStock harnesses a huge amount of inbuilt systems that will help you as a beginner or intermediate trader understand and profit from technical analysis patterns and well-researched systems. This is really a key area of advantage. The biggest addition to the MetaStock arsenal is the forecasting functionality which is absolutely fantastic.

2. TradingView — Social Day Trading Stocks, Forex & Cryptocurrency

Best for beginners needing great social integration to learn from other traders and the best ease of use. Includes trading from charts for Europe and Asia.

Price — Software $9.95 per month Pro’s Cons
Trade Commissions — See Broker ★ Social First, Chat, Publish, Follow ✘ No Real-time News
Rating ★★★★★ ★ Easy System Development
Special Deal — None ★ Ease of use, perfect for beginners
Open An Account ★ Global Real-time Exchange Data
★ Trade Cryptocurrency, Forex, Stocks — USA & Globally
★ Great Stock Screening

There is no doubt about it, I love TradingView and use it every single day. I post charts, ideas, and analysis regularly and chat with other traders. Follow me on TradingView. The entire community on TradingView are focused on day trading and the service is first class.

Pricing & Software. You can have TradingView for free, it is a review winner for our Best Free Charting Software Review. However, there are limitations. I would recommend going for the PRO+ at $19 per month or the Premium at $39 per month, the benefits are extensive including priority customer support and unlimited everything. Also, a huge benefit is that the data speed and coverage are mind-blowing, covering literally every stock market on the planet and not just stocks but ETF’s, mutual funds, futures, forex, bonds & cryptocurrencies AT NO EXTRA COST.

Trade Management Score — 8/10 — with TradingView you get full broker integration, you can place trades on charts and it will take care of profit & loss reporting and analysis for you. The only thing it does not cover is Stock Options trading or U.S. Trading.

Fundamental Scanning & Screening — 10/10 — Another perfect 10 for TradingView as they hit the mark on real-time scanning and filtering, and fundamental watchlists also. The list of fundamentals you can scan & filter on is truly huge. Any idea you have based on fundamentals will be covered.

Moving Averages Ribbon — Beautifully Implemented In TradingView

News & Social Community. As soon as you connect to TradingView you realize this is also developed for the community. You can look at community ideas, post your charts and ideas and join limitless numbers of groups covering everything from Bonds to Cryptocurrencies. The news feeds are fully integrated, including Kiplinger, DailyFX, Futures Magazine, FXStreet, and StockTwits. Add that to the social network and you have a great solution. The news service is only second to MetaStock with their Reuters Feeds.

Technical Analysis & Charts. With over 160 different indicators, and unique specialty charts such as LineBreak, Kagi, Heikin Ashi, Point & Figure and Renko, you have everything you will need as an advanced trader. With the Premium membership, you also get Level II insight, fully integrated.

TradingView — Insanely Beautiful Charts, with a massive selection of indicators. This Chart Feature Moon phase and Darvas Boxes

Did I mention the charts are fast and beautiful?

Systems, BackTesting & Automated Trading. Good but not perfect. TradingView has an active community of people developing and selling stock analysis systems and you can create and sell your own with the Premium-level service. Also, there are a huge number of indicators and systems from the community for free. The only things you cannot do is forecast and implement Robotic Trading Automation.

Ease of Use. Within 5 minutes I was using TradingView, no credit card, no installation, no configuring data feeds, it was literally just there.

Top 10 CFD Brokers for 2020 – Best CFD Trading Accounts

The CFD (Contract-for-Difference) space has heated up in recent years, with both casual and more experienced traders now able to speculate on a range of financial products without needing to actually own or store the underlying asset itself.

As such, this makes CFDs ideal for those that want to make seamless investments in a safe, secure and user-friendly eco-system, without the burdens of having to utilize the services of an offline broker.

However, with hundreds of leading CFD brokerage platforms now operating in the market, how do you know which one is best suited for your individual needs? In our comprehensive CFD Brokers guide, we’ll point you in the direction of the very best CFD platforms for 2020 and beyond.

Find in This Article

Best UK CFD brokers

If you’re based in the UK and looking for the best CFD brokers, we would suggest taking a closer look at some of the following platforms.

Ever since the CFD market became available to retail investors the paradigm of trading changed forever. In between thousands of brokers that have emerged over the years, there are some that simply shine between the coals. CryptoRocket is a fully dedicated CFD platform that has become incredibly popular in Europe and Australia.

Even though it started as a cryptocurrency dedicated firm, it has drifted and diversified into other markets. Today the firm offers a broad range of markets like FX, Stocks, Commodities, and of course, cryptocurrency.

If you are interested in trading CFDs, we recommend taking your time to fully review CryptoRocket as a strong option and alternative to traditional brokers. Since the firm does not have its business located in Europe, it does not have to follow rules in terms of leverage and other retail restrictions, allowing traders to operate with much more freedom than with an European broker.

Pros:

    High Leverage – 1:500 No transaction and deposit fees MT4 and WebTrader available Professional and valid customer support services Highly secure trading platform

Cons:

    Limited Deposit Methods Less regulated than other brokers

Launched backed in 2020, Markets.com are an ideal CFD platform if you are still relatively new to online trading. Not only is the Markets.com platform highly favorable to beginners, but traders also have access to a full suite of educational tools. In terms of regulation, Markets.com are licensed by CySEC in Cyprus, ASIC in Australia and the FCSA in South Africa.

CFDs can be traded in a full range of asset classes. This includes commodities (hard metals and energy), currencies, bonds, ETFs, indices and of course, traditional blue-chip stocks.

Pros:

    Ex cellent trading platform for beginners Full suite of education tools CFDs available in all major asset classes No commission fees for trading – everything included within the spread Good selection of payment methods supported Leverage available No withdrawal fees

Cons:

    Guaranteed stop losses not available with CFDs Spreads on certain CFD products are less competitive

Plus500 are one of the largest and most well-established players in the CFD brokerage space. In fact, the entity are listed on the London Stock Exchange, and the CFD platform is fully regulated by the UK’s FCA. Plus500 have the capacity to facilitate a plethora of CFD products, including but not limited to ETFs, stock indices, currency pairings, shares and even cryptocurrencies.

Trading fees, alongside average PIPs, are ultra-low, which is great for high-frequency traders. On the other hand, a slight drawback with the Plus500 platform is that leverage financing costs are on the high side. If leverage isn’t your thing anyway, then this shouldn’t be an issue. When it comes to user-friendliness, the Plus500 trading website is easy to navigate through on both their online and mobile platforms.

Pros:

    One of the most established CFD brokers in the space – listed on the London Stock Exchange Low trading fees and tight spreads Excellent selection of asset classes listed Regulated by the UK’s FCA Platform layout and design ideal for newbies

Cons:

    Lack of fundamental news analysis Leverage financing fees expensive

80.6% of retail CFD accounts lose money

Best CFD brokers for U.S customers

Due to regulatory uncertainties, access to online CFDs platforms for those based in the U.S. is somewhat limited. However, there are still a good number of well-regarded platforms that allow U.S. citizens to deposit, trade and withdraw funds with ease.

Established back in 1995, VarengoldBank FX are a German-based brokerage firm that among many other financial instruments, facilitate CFD trading. Regulated by BaFin in Germany, U.S. citizens are eligible to join. In terms of the CFD products available at VarenGold, this mainly centres on currencies, commodities and indices.

Pros:

    Regulated by the BaFin in Germany Open to U.S. citizens Established back in 1995 Utilizes Meta Trading 4, which is ideal for first timers Deposit funds via credit/debit cards, PayPal or bank wire

Cons:

    Minimum deposit of $2,500 Limited number of CFD products

An additional well-established CFD broker that is also U.S. friendly is that of OANDA. Launched in 1997, the platform is home a good selection of educational materials, customer support is highly rated and payment channels includes PayPal. The OANDA brokerage platform is ideal for those that like to trade currency-based CFDs, as more than 72 currency pairs are listed.

Pros:

    Platform in operation since 1997 U.S. citizen-friendly More than 72 CFD currency pairings to trade Other CFD products include margin rates, commodities, bonds and indices Authorized and regulated with authorities in the U.S., Canada, Europe, Asia-Pacific, Australia and Japan

Cons:

    Less CFD products in comparison to other leading brokerage platforms.

Launched in 2007, Zulutrade are an online CFD platform that specialize in both social and copy trading features. This subsequently allows non-experienced users to copy the trades of seasoned traders, all within one easy-to-access ecosystem. The useful thing about Zulutrade for those based in the U.S. is that they have integrated their platform with other leading brokerage firms. As such, Zulutrade will ensure that you only place trades with platforms that allow U.S. citizens.

Pros:

    Platform in operation since 1997 Strong focus on social and copy trading – ideal for inexperienced traders Directs U.S. citizens to brokers that allow U.S. traders Zero commissions – fees are represented in the spread Vast majority of major CFD asset classes are supported

Cons:

    Has a reputation for hosting too many unprofitable copy traders.

Best CFD brokers for Australia & New Zealand

If you’re based in either Australia or New Zealand, then we would suggest taking a closer look at Plus500. Not only do Plus500 have ultra-low pips and competitive fees, but the platform is authorized to accept residents from both Australia and New Zealand.

Ever since the CFD market became available to retail investors the paradigm of trading changed forever. In between thousands of brokers that have emerged over the years, there are some that simply shine between the coals. CryptoRocket is a fully dedicated CFD platform that has become incredibly popular in Europe and Australia.

Even though it started as a cryptocurrency dedicated firm, it has drifted and diversified into other markets. Today the firm offers a broad range of markets like FX, Stocks, Commodities, and of course, cryptocurrency.

If you are interested in trading CFDs, we recommend taking your time to fully review CryptoRocket as a strong option and alternative to traditional brokers. Since the firm does not have its business located in Europe, it does not have to follow rules in terms of leverage and other retail restrictions, allowing traders to operate with much more freedom than with an European broker.

Pros:

    High Leverage – 1:500 No transaction and deposit fees MT4 and WebTrader available Professional and valid customer support services Highly secure trading platform

Cons:

    Not Available in the US Less regulated than other brokers

Pros:

    Highly established – even listed on the London Stock Exchange Huge selection of CFD asset classes Heavily regulated Super low spreads

Best CFD websites for experienced traders

If you are an experienced CFD traders looking to utilize a range of high frequency methods, then the likes of Vantage FX is potentially best suited for your needs. Through the use of an electronic communications network (ECN) and straight through processing (STP), traders not only have their trades executed in an ultra-fast manner, but direct market access is also available.

Pros:

    Suited for highly experienced CFD traders Both ECN and STP supported High leverage levels available Ultra-fast execution times

Cheap CFD brokers

Ever since the CFD market became available to retail investors the paradigm of trading changed forever. In between thousands of brokers that have emerged over the years, there are some that simply shine between the coals. CryptoRocket is a fully dedicated CFD platform that has become incredibly popular in Europe and Australia.

Even though it started as a cryptocurrency dedicated firm, it has drifted and diversified into other markets. Today the firm offers a broad range of markets like FX, Stocks, Commodities, and of course, cryptocurrency.

If you are interested in trading CFDs, we recommend taking your time to fully review CryptoRocket as a strong option and alternative to traditional brokers. Since the firm does not have its business located in Europe, it does not have to follow rules in terms of leverage and other retail restrictions, allowing traders to operate with much more freedom than with an European broker.

Pros:

    High Leverage – 1:500 No transaction and deposit fees MT4 and WebTrader available Professional and valid customer support services Highly secure trading platform

Cons:

    Not Available in the US Less regulated than other brokers

If keeping trading fees to an absolute minimum is your main priority, then we would recommend heading over to Plus500. This highly established and heavily regulated CFD broker has some of the lowest fees in the industry. Not only are CFD trades commission-free, but major asset classes have significantly low spreads.

Pros:

    Zero commission trades Ultra-tight spreads Overnight holding fees competitive

What is a CFD?

A Contract-for-Difference, or simply a CFD, is a financial product that allows investors to speculate on an asset without needing to own or store it. This is especially useful for those that want to invest in hard assets such as Gold, Silver or Uranium, as there is no requirement to actually hold the asset in question.

However, the potentialities of CFDs does not stop at just hard assets. You can invest in virtually all of the same asset classes that you would expect to find on major exchanges. This includes the trading of currencies, commodities, indices, ETFs, interest rates, options, futures and even cryptocurrencies such as Bitcoin.

How does a CFD broker work?

In its most basic form, a CFD broker is a third party platform that facilitates the trading of CFD instruments. Essentially, the CFD broker will enable you to deposit funds, trade and subsequently withdraw your money back out.

Each CFD broker has their own pros and cons, which ranges from fees, user-friendliness, regulatory status, accepted countries, number of asset classes and more.

What difference is there between trading CFDs and buying assets outright?

The fundamental factor that separates CFDs from that of traditional assets is that you do not actually own the underlying asset. For example, when purchasing blue-chip stocks through a conventional broker, you essentially own equity in the company in question. This gives you certain perks, such as the ability to receive company dividends, or the right to vote.

On the other hand, as CFDs merely represent the performance of the underlying asset, there is no ownership and thus, perks that you would otherwise receive by owning the asset are not present.

An additional benefit to investing in CFDs over traditional equity is that you not only have the option of going long, but also short. This means that you can speculate on the asset losing value on the open marketplace, as opposed to making gains.

What kind of CFD brokers are there?

In the vast majority of cases, leading online CFD brokers will utilize the Metatrader 5 (MT5) trading platform. Unlike its MT4 counterpart, the MT5 platform is highly suited for facilitating a range of CFD-backed financial markets.

An alternative trading platform that some leading CFD brokers utilize is that of cTrader. Launched in 2020, some commentators argue that cTrader is best suited for first time traders, not least because it commonly facilitates copy trading features.

What type of CFD trading accounts are there?

While each CFD broker will have their own underlying account types to choose from, in the majority of cases this will consist of either a ‘retail client’ or ‘professional/institutional client’.

Regarding the former, this is essentially best suited for casual traders that like to trade on a part-time basis. Once again, although this will differ from broker-to-broker, retail CFD clients will usually be restricted to ultra-low leverage levels, as well as having negative balance protection safeguards automatically installed.

On the other hand, and as the name suggests, professional/institutional client accounts are suited for highly experienced traders.

By falling in to this investor bracket, you’ll like have the option of obtaining high leverage levels, as well as having the capacity to go into negative balance.

One of the key drawbacks to a professional trading account is that you might not be accustomed to investor compensation schemes that are available in certain countries, such as the UK .

Tips to choosing a CFD broker

In order to assist you in your search for a CFD broker that best suits your individual needs, check out the following 10 tips.

First and foremost, it is crucial that you check what regulatory licenses the CFD broker holds. In most cases, brokers will be authorized to offer their CFD products by regulators in multiple jurisdictions. If the broker is not licensed by a single notable body, then you need to look elsewhere.

You need to spend some time assessing how much you are going to be charged to use the CFD broker. Fees can be somewhat tricky, not least because they cover a range of different factors. In most cases, this will include commission, leverage costs, trading fees and the cost of holding assets over night.

It is also a good idea to conduct some independent research on how well received the CFD broker is by the online community. This can include reviews that are available in the public domain. It is also worth ascertaining when the CFD broker was launched, as those with a longer trading history generally have a better reputation.

While leverage isn’t important to some traders, others view it as a highly important trading mechanism. The amount of leverage you are able to obtain from a CFD broker will depend on a number of factors, however this commonly centres on your geographical location, and whether you are a retail or institutional investor.

If you are a CFD trading beginner and like the sound of social or copy trading features, then spend some time finding out how the CFD broker facilitates this. You need to ensure that the platform is fully transparent on how it generates its performance statistics, insofar that you want to ensure you are actually backing a successful long-term trader, rather than somebody that has experienced a couple of lucky months.

Often overlooked, always spend some time understanding what payment methods the CFD broker supports. You don’t want to go through the rigmarole of opening an account, only to find that your preferred payment channel is not available. Moreover, you should also check what the minimum and maximum deposit amounts are.

  • Educational guides and market information

It gripes us when CFD brokers do not offer their users a comprehensive avenue to research market fundamentals. If possible, choose a broker that has a good offering of key market analysis. If you are a beginner, it’s also worth checking whether the CFD broker offers any useful educational materials.

The spread is the difference between the CFD buying price, against that of the current selling price. In a nutshell, if the spread is high, it generally means that liquidity levels are low, and volatility is high. As such, always choose a CFD broker with tight spreads.

As you depositing your own hard-earned money, you need to ensure that you are using a CFD broker that places security at the top of its priority list. One example of a crucial safeguard is that of two-factor authentication.

This will require you to enter a unique code that is sent to your mobile phone every time you want to perform key account functions, such as logging in, trading or withdrawing funds.

  • Number of CFD asset classes If you like the option of trading of a wide variety of asset classes, then make sure that the CFD broker in question offers a good number of markets. This should generally include currencies, commodities, indices, shares, ETFs and in some cases, cryptocurrencies.

How to use a CFD platform

If you are at the stage where you have selected your preferred broker, registered an account and then subsequently deposited funds, you should ensure that you have a firm grasp of key CFD practices. Take a look at some of these key factors below.

Firstly you need to choose your preferred market. This might be currencies, ETFs or shares, for example.

  • Choose the CFD asset that you want to trade

Once you’ve selected your desired market, you then need to choose the asset that you want to trade. For example, if you opted for blue-chip shares, then this could be Apple or IBM.

  • Determine whether you want go ‘Long’ or ‘Short’

As we noted earlier, one of the key benefits of CFD trading is that you can speculate on the asset going up in value (long), or alternatively, losing value (short).

If you want to go long, then you’ll need to ‘buy’ the asset. On the other hand, if you want to go ‘short’, then you will instead need to ‘sell’ the asset.

Regardless of your experience in the CFD trading space, it is crucial that you set-up stop losses. This will automatically close a trade when the value of the asset hits a certain position. Ultimately, this can be the difference between making a small loss, or your balance in its entirety.

Perhaps most importantly, you need to ensure that you understand how much you are risking on each CFD contract. You have the option of determining how much you want to stake for each movement in price, which is referred to as a ‘tick’. Each market will have its own tick value too.

For example, if you want to buy a CFD in Apple, and one tick is represented by $0.01, then every time the share price moves by 1 tick, you profit or loss will be multiplied by $0.01. Continuing on from the same example, if you choose to stake $0.50 per tick, and the share price of Apple increases by 10 ticks, then your profit would be $5.

  • Learning how to perform chart analysis

Although this is an art that takes time and effort to perfect, it is worth spending some time learning how to read charts. Known as technical analysis, many traders rely on chart analysis to predict how the market might move, based on historical trends.

How we rated these CFD brokers

When we went through the evaluation process of rating each broker, we took into account a range of key factors. This included whether or not the broker is regulated and by whom, the fees charged, the number of CFD assets, user-friendliness and reputation, among many other factors.

Ultimately, we decided to break each recommendation down by certain segments, such as the best broker for UK or U.S. citizens, or the best platform for beginners. This way, it allows you make an informed decision as to the best CFD broker for your individual needs.

Conclusion

If you’ve read our guide from start to finish, you should now have a firm understanding as to the many factors that you need to consider when choosing the right CFD broker. Essentially, there is no one-size-fits-all approach, not least because each platform will have their own advantages and disadvantages.

The best approach that you can take is to perform your own research prior to signing up to a new broker. We hope we’ve made this approach more conducive for you, by pointing you in the right direction.

FAQs

This is a complex question to answer, not least because each trading platform with have their own pros and cons. If you are looking to speculate on the price of stocks in the most convenient way possible, then it might be worth using a CFD broker.

If you want to buy stocks online, then there are a range of brokers that can facilitate this for you. If you are instead more interested in speculating on the underlying asset in the most cost effective and efficient manner, then a CFD broker might be more up your street.

The fees charged by conventional stockbrokers will vary from broker-to-broker. However, it is important to remember that traditional stockbrokers will charge a lot more than CFD platforms. The key reason for this is that stockbrokers must be remunerated for their efforts, insofar that they actually purchase the stocks on your behalf.

In effect, you can, however this process is primarily reserved for institutional investors. Unless you fall within this bracket of investor, then you will likely need to use a broker.

Virtually any asset class can be represented in the form of a CFD. Notable examples include currencies, shares, ETFs, indices, interest rates and cryptocurrencies.

If you ‘Go Short’ on a CFD, it means that you are speculating that the value of the underlying asset will go down. If it does, then your trade will result in profit.

Before you start trading with your own money, it is crucial that you gain a firm understanding of how the marketplace works. Even better, some CFD brokers allow you to open up a demo account, which is a great way to get comfortable trading CFDs.

CFD stands for ‘Contract-for-Difference’. However, they are usually just referred to as CFDs.

This depends. If you implement the correct safety procedures, such as installing stop-losses, then CFD risk-levels can be controlled. On the other hand, a failure to set-up stop losses and utilizing leverage can be very high-risk.

In most cases leverage is available when trading CFDs. However, this is usually dependant on your investor status. Institutional investors will most commonly be offered high leverage levels, due to their experience of the marketplace. While retail investors can be offered leverage, this is usually limited to ensure that you do not experience significant losses.

Unfortunately not. As you are speculating on the movement of the underlying share price rather than actually owning the stock, you would not be accustomed to dividend payments. For this you would need to purchase conventional stocks from a broker, rather than a CFD.

Best Binary Options Brokers: 2020 Ranking
  • Binarium
    Binarium

    Best Choice! The leader in our ranking!
    Perfect for beginners!
    Free Demo Acc + Free Trading Education!

  • Binomo
    Binomo

    Good choice for experienced traders!

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