Go to XTB
|Excellent 24-hour customer service. More than 3000 instruments to trade. Regulated broker.(*) Warning: Your capital is at risk. 80% of retail CFD accounts lose money.|
CFD Trading: Trade over 3,000 CFDs on currencies, indices, stocks, commodities and cryptocurrencies at this internationally regulated broker with over 15 years of experience.Demo Account: Yes
Minimum Deposit: 0 €/$
Trading Platforms: xStation5, iOS App, Android App.
Execution: Market Maker / STP
Regulation: FCA, CNMV and IFSC
Web Page: https:/www.xtb.com
Go to Pepperstone
|Very low spreads on over 1,200 instruments. 24/7 support, fast execution and no requotes.(*) Warning: Between 74-89 % of retail investor accounts lose money when trading CFDs.|
CFD Trading: More than 800 instruments through CFDs on Forex, indices, stocks, cryptocurrencies, energies and commodities. Professional trading platforms and your money protected with an FCA regulated broker.Demo Account: Yes
Minimum Deposit: 200 €/$
Trading Platforms: MetaTrader 4, MetaTrader 5, cTrader, TradingView.
Execution: STP / NDD
Regulation: FCA, ASIC, CySEC, BaFin, DFSA, CMA and SCB
Web Page: https://www.pepperstone.com
Go to eToro
|Buy stocks without commission. Automatically copy the best investors with the eToro CopyTrader tool.(*) Warning: 77% of retail CFD accounts lose money.
CFD Trading: With eToro you can trade CFDs manually on currencies, commodities, indices, stocks and cryptocurrencies or use the CopyTrader tool to follow other successful traders and copy their trades.Demo Account: Yes, unlimited
Minimum Deposit: 200 $
Trading Platforms: WebTrader, iOS App, Android App.
Execution: Market Maker
Regulation: FCA, CySEC and ASIC
Web Page: https://www.etoro.com
Go to XM Group
|Bonus of $30 without deposit and bonuses of up to $5,000 per deposit. Trade Forex with ultra-low spreads.(*) Clients registered with XM Group's EU-regulated entity do not have access to the bonds.|
CFD Trading: More than 1,000 contracts for difference (CFDs) on Forex, stock indices, commodities, shares, gold, oil,... and free training and daily market analysis service.Demo Account: Yes, unlimited
Minimum Deposit: 5 $
Trading Platforms: MetaTrader 4, MetaTrader 5.
Execution: Market Maker
Regulation: CySEC, FSC and ASIC
Web Page: https://www.xm.com
Go to IC Markets
|True ECN account with ultra-low spreads and ultra-fast execution designed for scalping and automated trading systems.|
CFD Trading: Over 1,700 CFDs on Forex currency pairs, indices, commodities, US and Australian equities, bonds, cryptocurrencies and futures. Professional trading platforms.Demo Account: Yes
Minimum Deposit: 200 $
Trading Platforms: MetaTrader 4, MetaTrader 5, cTrader.
Regulation: ASIC, CySEC and FSA
Web Page: https://www.icmarkets.com
Go to AvaTrade
|One of the most regulated brokers worldwide (in 9 different jurisdictions).|
CFD Trading: Buy or sell more than 1,250 derivatives via CFDs (on currency pairs, cryptos, stocks, indices,...) with several platforms available for manual or automated trading.Demo Account: Yes
Minimum Deposit: 100 €/$
Trading Platforms: WebTrader, MetaTrader 4, MetaTrader 5, iOS App, Android App.
Execution: Market Maker
Regulation: Central Bank of Ireland, ASIC, BVI, FSCA and FSA
Web Page: www.avatrade.com
Go to Plus500
|Broker with more than 23 million registered customers since its inception and a Trust Pilot Score of 4.2 out of 5.(*) Warning: 86% of retail CFD accounts lose money.|
CFD Trading: One of the largest CFD platforms in the world by number of clients, with which you can trade a wide range of cryptocurrencies, indices, currencies, commodities, stocks, options and ETFs.Demo Account: Yes, unlimited
Minimum Deposit: 100 €/$
Trading Platforms: WebTrader, iOS App, Android App.
Execution: Market Maker
Regulation: FCA, CySEC, ASIC, FSCA, DFSA and FSA
Web Page: https://www.plus500.com
Go to IQ Option
|$1 minimum investment. Powerful and intuitive trading platform. Fast withdrawals.(*) Warning: Your capital might be at risk.|
CFD Trading: You can trade from as little as $1 and choose the leverage on each trade. Over 240 contracts for difference (CFDs) to trade long or short.Demo Account: Yes, unlimited
Minimum Deposit: 50 €/$
Trading Platforms: Proprietary Platform, iOS App, Android App.
Execution: Market Maker
Web Page: https://www.iqoption.com
Go to Exness
|Low spreads as low as 0.0 pips. No swaps on most instruments. Instant withdrawals.|
CFD Trading: You can trade over 200 CFDs on Forex currencies, stocks and stock indices, cryptocurrencies, metals and energies with this regulated broker founded in 2008.Demo Account: Yes
Minimum Deposit: 10 $
Trading Platforms: MetaTrader 4, MetaTrader 5.
Execution: Market Maker / ECN
Regulation: FCA, CySEC, FSCA, FSC, CBCS, FSA and SDL
Web Page: https://www.exness.com
Go to Eightcap
CFD Trading: International and regulated broker with which you can trade CFDs on more than 200 financial instruments such as commodities, indices, stocks, FX currencies and cryptocurrencies.Demo Account: Yes
Minimum Deposit: 100 $
Trading Platforms: MetaTrader 4, MetaTrader 5, TradingView.
Execution: STP / ECN
Regulation: ASIC and SCB
Web Page: https://www.eightcap.com
Go to Axi
CFD Trading: Axi is a regulated broker offering access to more than 130 contracts for difference (CFDs) on commodities, indices, oil, precious metals and other financial assets.Demo Account: Yes
Minimum Deposit: 0 €/$
Trading Platforms: MetaTrader 4.
Execution: STP / ECN
Regulation: FCA, ASIC, FSA and DFSA
Web Page: https://www.axi.com
Go to FP Markets
CFD Trading: Regulated broker with which you can trade, long or short, CFDs (or contracts for difference) on more than 10,000 stocks, currencies, indices, gold, oil, silver,...Demo Account: Yes
Minimum Deposit: 100 €/$
Trading Platforms: MetaTrader 4, MetaTrader 5, cTrader, IRESS.
Regulation: ASIC, CySEC and FSP
Web Page: https://www.fpmarkets.com
Go to OANDA
CFD Trading: Broker with more than 25 years of experience that offers CFDs on indices, stocks, Forex currencies, commodities, oil, gold, silver,... and incorporates in its platforms numerous market analysis tools.Demo Account: Yes, unlimited
Minimum Deposit: 0 $
Trading Platforms: MetaTrader 4, MetaTrader 5.
Execution: Non Dealing Desk
Regulation: FCA, ASIC, NFA, IIROC, BVI FSC
Web Page: https://www.oanda.com
What is a CFD Broker?
A CFD broker is a company that executes the operations of buying or selling financial instruments that its clients request. These financial instruments can be company shares, currencies, cryptos, stock market indices, raw materials, energies, precious metals,… The CFD broker acts as an intermediary between its clients and the market by finding a seller when its client gives a buy order or a buyer when its client gives a sell order.
CFDs have become one of the most popular trading instruments today and therefore there are many brokers offering these services. Until a few years ago, when an individual investor wanted to trade in the financial markets, he could only turn to large banks or certain financial institutions that offered a very limited number of investment products and high commissions. With the advance of new technologies, online brokers have emerged and revolutionised the online investment and trading sector, allowing anyone to trade at any time and from anywhere in the world with their computer or mobile device (phone or tablet). And with much more competitive commissions than those offered by traditional banks.
Any CFD broker must comply with current financial market regulations and must also be authorised and licensed by the relevant regulatory bodies. As we will see a little further on, brokers usually offer their services internationally and will generally have several locations around the world. The regulation affecting clients in each country will depend on the supervisory body of the country where the CFD broker is based.
As for the types of CFD brokers we will mainly find the following:
Brokers Dealing Desk
Dealing Desk (DD) brokers are those who have a “money desk”. Within this group we have only one main type which are the Market Maker brokers: They are called market makers because their clients’ trades do not actually go to market but are executed on the broker’s own trading desk. Although the prices of financial instruments are practically the same as those offered by other CFD brokers, the buy or sell trades you request will not go beyond the broker’s trading platform.
Market maker brokers create an internal market for their clients and allow you to buy or sell at any time without having to wait for a reverse transaction to take place. Generally, it is the broker who acts as the counterpart to the transaction, ensuring permanent liquidity and availability even if that transaction results in a profit or loss for you.
Today most CFD brokers (which include many of the most popular ones) are Market Makers and are not necessarily any worse than the other types we will see below but it is important to always choose a reliable, serious and regulated broker.
Non Dealing Desk Brokers
Non Dealing Desk (NDD) brokers are those who do not have a “money desk” and who send trades to the market. Within this group we have 2 main types:
STP brokers send the transactions you request directly to their liquidity providers (which are usually large banks and financial institutions such as Deutsche Bank, Bank of America, Barclays, Goldman Sachs, JP Morgan, CitiBank, HSBC,…). Orders are executed directly and electronically without any manual intervention.
ECN brokers create a network between their clients and liquidity providers (large financial institutions, banks, other brokers,…). As in the case of STPs, the best available spread is achieved at all times but in this case with greater market depth as more participants are interconnected. Nor is there any possibility of a conflict of interest.
In addition to these types of brokers we have mentioned, there is another, more frequent, type of broker:
There are a number of brokers who are both market makers and ECN/STP because they offer some trading accounts in which they act as market makers and others in which they send trades to their liquidity providers. For basic accounts aimed at beginners they usually work as market makers (they allow trading with microlots, the leverage available is higher, some offer fixed spreads,…) and for more advanced accounts aimed at professional traders they operate as ECN or STP brokers.
What are CFDs?
CFDs or contracts for difference are a financial product developed to be able to invest, enjoying all the advantages of buying shares, currencies, raw materials,… but without the need to physically acquire the ownership of those instruments. The investor adheres to a CFD contract at the price in effect when a position is opened and collects a profit or assumes a loss when the position is closed if the price moves in his favour or against him respectively.
CFDs are so-called OTC or “over the counter” derivative instruments because they are not traded on an organised market. CFDs are issued by financial institutions, in this case CFD brokers, who must be legally authorised to do so.
As you may have gathered, this type of contract is more flexible because you do not need to buy the instrument you want to trade as it is only a contract that replicates the price of that instrument. It is as flexible as, not only can we buy and then sell, but it is also possible to sell an asset without owning it and then close the position with a purchase, thus achieving the possibility of making a profit on both upward and downward fluctuations in the price of the instrument.
These financial products are widely used by retail investors with little capital, as well as by short-term traders.
When trading CFDs you will make a profit or loss depending on the difference between the price of a financial asset (a stock, a currency pair, an index, etc.) at the opening of a trade and the price of the same when it is closed; this is not a real market trade, as the asset is not physically bought or sold, but simply a parallel trade, replicating the evolution of the price of the asset on which it is invested. Since it is not necessary to possess the underlying asset, it is a very agile and flexible investment method, ideal for short-term trading.
In addition, thanks to the leverage, the investor is only required to provide a small amount of collateral while the effect of trading with a much larger amount can be obtained (Example: with a 1:30 leverage you will only need to provide 50 Euros as collateral and you can get the benefits of trading the market with 1,500 Euros. In other words, your capital is multiplied by 30 and your position in the market will be larger).
As we will discuss below, these instruments have a number of advantages but it is also important that you understand the risks involved in CFDs (especially the risks arising from financial leverage) and that you learn to minimise them by using instruments such as stop loss.
Advantages of CFDs
CFDs are a financial (derivative) product that allows individual traders to access trades and markets previously reserved for professional managers. Thanks to the leverage, you do not need a large amount of capital to trade any asset.
We have the possibility to select a size of each operation adapted to our capital levels.
They allow a very active management of trading operations, making very short term positions viable. They are ideal for short term investment strategies such as day trading and particularly scalping (opening and closing positions in a matter of minutes or even seconds to take advantage of small price fluctuations).
CFDs are a highly flexible product, allowing us to carry out hedging or other more complex strategies.
It is not necessary to assume ownership of the financial asset. This is especially a plus when trading in the commodity market. It also avoids the custody fee for holding the financial assets in the portfolio.
Contracts for difference are very liquid instruments. They have become a very popular investment instrument in many parts of the world such as South Africa, United Kingdom, Australia, Poland, Abu Dhabi, Kuwait, Saudi Arabia, Dubai, Germany, France, New Zealand, Brazil,… it has even burst into Asian countries such as Malaysia, Singapore, Thailand, Vietnam, Taiwan, Japan, China and India.
They allow you to buy and sell in a matter of seconds. As well as the possibility of establishing automatic stop loss orders. Even take profit orders.
Starting to trade CFDs does not require you to have a large amount of capital. You will need to open an account with a CFD broker who will act as an intermediary for the trades you make. Most brokers today require minimum accessible initial deposits to open a trading account (most allow you to open an account with $100 or even less).
Many CFD brokers also offer welcome promotions such as no deposit bonuses (typically $30 for example) where when you open a trading account you have a balance available to trade with so you can try out the broker’s services before depositing your own money. Others offer deposit bonuses that add to the jump you make and even multiply it by 2 for example in cases of bonuses of 100% of your initial deposit. These types of bonuses depend on the trading policy of each CFD broker and are not available in all countries according to regulatory standards.
With CFDs, the investor can open a buy position (called “going long”) and then close the position by selling. If the price of the security he is buying increases between opening the position and closing it he will make a profit and if it has decreased he will assume a loss.
The investor can also open a sell position (called “going short”) and close the position later with a buy if he believes that the value he is trading will decline in price. In this case he will make a profit if the price has fallen between opening the position (sell) and closing it (buy) or he will assume a loss if it has not
Leverage can be a double-edged sword. The trader must properly manage money and risk management. What in principle can be an advantage, also presents a high risk if not used properly. The losses we may have are a function of the total trade, not the margin deposited.
Due to leverage, some financial authorities have classified CFDs as high risk products. There is no guaranteed return and the investor may lose the entire amount invested or even incur a debt to the broker (retail investor accounts often incorporate negative balance protection measures to avoid this). Investing in CFDs is not suitable for all investors so make sure you fully understand the risks before investing in this product.
The need for daily interest payments to maintain leverage (swap fee) means that medium- and long-term trading performance suffers. CFDs are not suitable products for long-term investment.
CFDs are OTC (Over The Counter) products. They are not quoted on an official market and therefore are a contract between the CFD broker and the client. It is therefore very important to only work with reliable brokers who are duly authorized and regulated to trade this type of product.
As an investor you have no rights over the stock, currency, raw materials,… in which you are investing. Remember that with CFDs you are not investing in the real market but in a contract for difference over a certain value.
How do I trade CFDs?
To start trading CFDs you need the following:
1- Open an account with a CFD broker: Most of these types of financial transactions are entirely online. It is possible to open an account with one of these intermediaries in a matter of minutes by accessing their website. From here, the broker will guide you through the process and provide you with all the necessary tools.
2- Funding the Account: Naturally, in order to undertake our CFD trading operations, it will be necessary to have funds to leave as initial guarantee (and additional margin). After opening an account with the CFD broker we must deposit a certain amount as initial capital through various means of payment (bank transfer, credit or debit card, electronic purses,…).
3- Manage the trading platform: The broker will make one or more online trading platforms available to us free of charge. The trading platform is the fundamental tool for carrying out our operations. From it we will be able to analyse the markets, control our account, open and close positions, and establish the different orders. In short, take all kinds of decisions and manage our operations.
As an example of a trading platform we have Metatrader 4 which is the most used platform in the sector. It is a tool, developed by MetaQuotes Software Corporation, that allows us to trade in the financial markets through a connection with our CFD broker. There are many brokers who offer MetaTrader 4 or MetaTrader 5 (the new version of MetaTrader) for free, others choose other platforms such as cTrader, Visual Chart, ProRealTime, NinjaTrader,… and many others choose to exclusively develop their own trading platform and trading apps for mobile devices.
4- Demo account: In order to familiarize ourselves with the trading platform, try out new strategies and gain experience it is very common for the broker to offer us a demo account in which we can make trades, in an environment similar to a real account, but without putting our money at risk. This is a kind of simulator with fictitious money with which we can (and should) practice. This tool is very important and useful to learn how to invest and to test the trading platform and the broker’s services.
Leverage when trading online with a CFD Broker
When trading CFDs you do not have to pay the price of the investment in full, but only provide a part of it as a guarantee. This is called using “leverage”.
When trading CFDs, both long and short, what we do is trade as if we were actually buying or selling a certain amount of a certain financial asset (e.g. 100 barrels of crude oil, 200 shares of Apple, etc.). The amount to be invested or volume of the operation can be adapted to our level of capital. The greater the amount, the greater the possible profit or loss.
For example, if the instrument in which we want to invest is quoted at a certain price, let’s take 10 euros as an example, and we want to buy 300 units, the total purchase price would be $3,000. When trading CFDs you don’t have to pay the $3,000. Normally the broker will only ask for a certain percentage as collateral to open the position.
The level of leverage is determined by the amount we have to deliver. In this respect, each CFD broker can offer certain conditions that are allowed by the regulations in force and they usually vary from one instrument to another. It is not the same level of leverage that is offered for trading e.g. stocks or commodities. It may also vary from country to country depending on the regulations imposed by the regulatory bodies in each country.
For example, in Europe, the European Securities and Markets Authority (ESMA) has limited the leverage available to retail clients of EU-based brokers since August 2018. The maximum leverage available varies between 1:30 and 1:2 depending on the volatility of the financial instrument being traded:
1:30 for major currency pairs.
1:20 for secondary currency pairs, gold and major indices.
1:10 for commodities other than gold and for secondary indices.
1:5 for shares and other securities.
1:2 for the crypto-currencies.
For example, a leverage of 1:30 means that for every dollar deposited as collateral we can open a trade worth $30. If in our previous example the trade was $3,000, depositing $100 (3.33%) as initial margin collateral is sufficient.
You will clearly see how our level of capital required to make a trading operation is drastically reduced thanks to the leverage. It offers us the possibility of significant profits with little capital but also entails greater risk if the price does not move in our favour so it is very important to protect ourselves against possible losses.
A protection measure is for example opening small positions by trying to risk only a small part of the available capital in our account on each trade. Another is to always place a stop loss to cut possible losses.
There are also certain mechanisms in place so that if open positions move against us, we do not incur debt with our CFD broker. When the available capital in your trading account falls below a certain risk amount so that you cannot sustain any further losses, your broker will advise you (you will receive a “margin call”). From here we have two options:
– Deposit more amount as margin.
– We will automatically close any transactions that are necessary to bring the available capital back above the required margin.
Leverage has both advantages and risks. You trade with more than you put in, for better or for worse.
CFD Broker Commissions
There are a number of common commissions when trading through a CFD broker that you should be aware of:
The spread is the most common commission rate when trading CFDs. The spread is the difference (“spread” means “spread”) between the price the broker offers us to buy a CFD and the price he offers us if we want to sell it.
When we trade CFDs we will see that the broker offers us two prices on their trading platform:
Bid: The price offered to sell a CFD, either to open a short position (if we believe that the price will go down by selling first to buy later) or to close a long buy position that we have previously opened.
Ask: The price offered to buy a CFD, either to open a long position (if we believe that the price will rise by buying first to sell later) or to close a short sale position that we have previously opened.
The ask price will always be a few points (called pips) higher than the bid price. The difference is the spread and it is the broker’s fee for trading.
Let’s take an example to understand it better:
Suppose you want to trade CFDs on the Forex market, look at the currency pair GBP/USD (British Pound vs. US Dollar). Let’s also assume that you want to go long and buy the pair (which means buying the GBP in exchange for the USD) hoping that the GBP will appreciate against the USD.
At this point we will have two prices, for example these:
Bid (sell the CFD): 1.3050 (this means that each pound is exchanged for $1.3050).
Ask (buy the CFD): 1.3053 (as you can see it is 0.0003 higher).
Our intention is to open a long position by buying the currency pair. If we were to buy and sell immediately, we would incur a loss of 0.0003 per unit of currency purchased (depending on the size of our investment). If we sold and bought immediately (in case of opening a short position), we would have the same result.
Naturally the price will fluctuate, but there will always be a differential between the two prices. Depending on the conditions of our online broker, the spread may remain fixed (fixed spreads) or vary according to market conditions (variable spreads).
As a general rule, the broker will apply the spread as soon as the position is opened. In other words, the operation begins at a loss because, although the price advances in our favour, we must first recover the spread before going into profit.
– Swap or overnight fee
We have previously discussed leverage and the absence of the need to deposit all the funds required for the operation. Well, now it is time to talk about the cost of using this leverage. Swap is nothing more than a cost of financing as CFDs are a leveraged contract.
The money from the transaction, which we do not deposit, is a loan from the broker to us. This loan is subject to the interest rate of the currency involved in the operation. For example, if you open a CFD trade on the Dow Jones 30 index, your trade will be denominated in dollars, because the index is quoted in that currency. Consequently, we will be charged interest on the dollar.
Every day the broker will charge us interest on the funds used in the transactions. This fee for borrowing funds (leverage) is usually settled in the Forex market at 11pm, for this reason it is also known as “overnight fee”.
It may also be called “rollover”. Since it also involves a rollover of open trading operations.
In the Forex market, when we open a position there is not one, but two currencies involved. This has an impact on the swap commission. The currencies are quoted by pairs. One currency must be against another to establish the exchange rate between the two. Therefore, we trade two currencies simultaneously, one bought and one sold.
Each currency pair consists of the base currency (the first currency in the pair) and the counter currency (the second currency). For example, in the euro-pair against the US dollar (EUR/USD) the base currency is the euro and the counter currency is the dollar. Each currency has its own interest rate. In this case the broker will charge us the interest on the currency sold and pay us the interest on the currency bought. The swap is then determined by the difference in the interest rates of the two currencies and may be in the trader’s favour and involves a credit to the account rather than a commission charge.
– Commission on transactions
There are some brokers, usually those offering ECN (Electronic Communication Network) execution accounts, which usually apply a very low or even no spread but charge a fee for each trade depending on the size of the position.
Regulation of CFD Brokers
Due to the great business potential of the financial markets and the great growth of retail clients interested in trading online, in recent years the number of CFD brokers has multiplied. Many of them are reliable, but there are also some who seek to take advantage of their clients and who are more of a scam than an opportunity to make a profit from trading.
The fact that a broker is regulated is not an absolute guarantee of reliability but it does at least show that it is subject to fairly demanding regulations, that there is a registered company behind it and that the investor will have access to complaint procedures and possibly certain compensation schemes.
A CFD broker not regulated or subject to directives of this type does not become a scam directly but we must be particularly careful as in many cases its activity will not be supervised, we will not have mechanisms to protect our money or a possible arbitration in case of conflict.
Our recommendation is that if you are going to open an account with a CFD broker you should look for a regulated broker that is subject to stringent regulations to ensure investor protection.
To check whether a broker is regulated you can consult the register of the regulatory bodies that supervise it. Generally, brokers are authorised and regulated by the supervisory body of their home country and may also choose to register with bodies in the countries in which they operate. It is common to find that brokers are usually based in financial centres such as London or in countries such as Cyprus that have lower taxation but belong to the European Union.
Among the main regulatory bodies we can find
The UK’s Financial Conduct Authority (FCA) (one of the most demanding in the world).
The National Futures Association (NFA) in the United States
The Financial Sector Conduct Authority (FSCA) of South Africa.
The Cyprus Securities and Exchange Commission (CySEC) in Cyprus (where many of the brokers are registered thanks to its advantageous tax policy and membership of the European Union).
The Australian Securities and Investments Commission (ASIC) in Australia.
How do I choose a CFD broker?
The factors we consider most important in choosing the best CFD broker are as follows:
1- Always check that the broker is regulated
Any serious and professional CFD broker must be regulated, i.e. must be licensed to operate in the financial markets with outside capital. Such a licence is usually issued by the relevant regulatory body in the country in which the broker has its headquarters.
The regulatory body ensures investor protection, security and transparency of operations,… In the end, if this body did not exist nobody would have confidence to invest in the financial markets. It is the one that offers the guarantees and security to investors.
Thus, if the broker we are going to work with is not regulated by one of these bodies, there is the possibility of fraud and we will have no one to turn to in the event of any claim. Therefore, the first thing we must do is check that the broker is properly regulated.
In addition to this, in order to grant the corresponding license, the regulatory body imposes a series of conditions on the broker, such as having a minimum capital that guarantees that it is solvent. These conditions are not included in a public register so that all users can check whether they are regulated and whether there are any incidents with the body (any complaints from users, sanctions by the body, etc.).
A broker who is regulated has little or no capacity to commit fraud or scams, and is constantly monitored.
How do we check if a CFD broker is regulated?
In a first step, we should look at the broker’s website. This will be our first contact and we must make a personal opinion of how it is, what it transmits. The website says a lot about their professionalism and whether it is transparent in showing all the relevant information so that the trader can make a decision when choosing an online broker.
On that website we should check whether it mentions its regulation, who the regulating body is and what licence number it has been assigned in that body.
The second step will be to investigate further and go to the regulator’s website to check that it appears with that licence number and see if there are any incidents or complaints.
If the broker does not inform you on its website about the regulation, we must ask you through the contact means that you have enabled.
2- Consult the opinions of other users on the Internet
The Internet has become a way of judging the products and services we purchase, with online brokers it could not be less. In short, who better to evaluate the services of a CFD broker than the users themselves?
Of course, opinions and complaints must be substantiated. We have no use for someone who simply says that they don’t like the service because of personal issues or when it comes to criticising for the sake of criticising. We must look for positive or negative opinions that are well reasoned and argued.
3- Read the CFD broker’s terms of service
In addition to the fees, there are other aspects of the broker’s way of working that we should bear in mind. These are details such as:
Conditions it imposes when opening an account. For example, the minimum capital to be contributed.
Does it allow scaling or limit any trading strategy that we will use?
How do you manage risk, margin call and forced closure?
Do you offer instantaneous order execution?
What means do you allow us to make deposits and withdrawals from the account?
What response time do you offer for withdrawing funds from the account? Usually it takes a few working days and there is usually no commission.
Do you impose a minimum withdrawal requirement? As mentioned above, the broker usually pays the corresponding commissions when the withdrawn funds are transferred. You may therefore impose a minimum for withdrawing funds.
In short, you should read the agreement you sign with the broker before choosing it, if you have any doubts you should ask.
In this aspect we can also evaluate the transparency of the broker if we observe that on its web page it has all the contractual information clearly, so that the user can evaluate whether it is convenient or not.
4- Knowing the financial instruments offered by the CFD broker
When you are a beginner trader it is convenient to choose a broker that allows you to trade a wide range of markets. This is because the novice trader needs to try out different financial instruments (stocks, currencies, stock indices, crypto-currencies, commodities, energies, precious metals,…) and different investment styles before opting for the one he feels most comfortable with.
On the other hand, we have the more experienced traders, those who have defined their investment style and may trade a few assets in which they feel comfortable. For example, there are traders who trade fairly well in the foreign exchange (Forex) market (view here a comparative table of best Forex brokers), others however prefer stocks, indices or commodities. They are like niches or segments of a business.
These traders would be well advised to choose a broker who specialises in the markets they are trading. Mainly because they tend to have lower commissions for these instruments and also tend to offer extra information and services more suited to their needs.
We must bear in mind that the more markets we have, the more trading opportunities we will have. Conversely, the more markets we have, the less in-depth knowledge we will have of that niche. Day traders normally focus on a few assets because it is difficult to cover them all. The longer the time frame of the trade you develop, the more assets you can afford to trade (you will have more time to analyze and make decisions). Although there is no written rule about this. Every trader has their preferences.
In short, the trader should choose the broker that allows him to trade the market (or markets) he feels comfortable with. If at first the trader does not have his market defined, he should choose a broker that allows him a wide range of assets to be tested.
5- Test the customer service
Our CFD broker is our main partner. By this I mean that communication with him must be fluid.
Although most processes are intuitive or automated, sometimes you may need to get answers to some questions and the only way to do this is to establish direct contact with the broker. It is essential to check and evaluate the following aspects regarding the customer service you offer us:
What are the communication channels it offers?
Is customer service available 24 hours a day? If not, what times do you offer? (check if they coincide with our trading day)
Do you offer communication in our language?
Normally, we will have to find out all the questions we have raised in this article when choosing the broker we are going to work with. Communication and customer service play a key role in this.
6- Open a demo account and test the trading platform
In order to familiarize yourself with the trading platform offered by our CFD broker, you should check whether the broker allows you to open a demo account, even if it is for a limited period of time.
The demo account will allow us to test the platform and the broker’s conditions without putting our money at risk. It comes loaded with a certain virtual balance to trade in practically identical conditions to a real account.
We must work on the demo account to become familiar with the platform, it is a mistake to start trading on a live account with an unfamiliar platform.
Through the trading platform the trader analyses, makes decisions and launches orders. We could consider the trading platform the nerve centre of the trading business.
It goes without saying then that it is important to know it well. But what can we ask from a trading platform? Let’s look at some basic questions that will serve as a guide:
Is the platform simple and does not a multitude of windows that we do not use hinder us?
Does it allow a complete analysis according to the indicators and strategy we use?
Do you allow trading with Expert Advisors? (for those who use automatic trading systems)
Are orders launched quickly, easily and with instantaneous execution?
Is it easy to set stop losses and everything related to the management of our position?
Many of us tend to have the false idea that the more complex the platform, the more money it will make. This statement is not true, the money does not come from the platform. What we should demand from the trading platform is that it suits our trading style and allows us to trade in a clean, uncomplicated manner.
Which are the best CFD Brokers?
In the comparison table at the top of this page you can see which ones we consider to be the best CFD brokers, all after having thoroughly tested and analysed numerous online brokers. We hope that the details you see in the table will help you find the right CFD broker for you.