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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.
Top CFD Platforms in Russia
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.
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.
8 best CFD trading platforms / brokers
For a second topic in our “trading platforms” series, after Top stock trading apps , let’s look into CFD trading platforms. One of the types of online trading, contract for difference ( CFD ) is a contract that enables one of the parties, seller or buyer, to obtain profit from asset price fluctuation.
8 top CFD trading platforms
“Where do I start?” – is a frequent question from inquisitive minds. CFD trading platforms is the apt option to start, a computer software as a gateway to a trading service, where one can buy/sell financial assets. Such platform typically provides various trading types, including CFDs, for transactions between traders directly, or via intermediary/broker/agent, allowing to trade remotely from anywhere. CFD trading may involve stocks, currencies, commodities, shares, etc., and is always performed in pairs (USD to EUR, Shell to Exxon). We’ve selected seven best CFD trading platforms based on usability, friendliness towards novices, reasonable commissions and other factors.
Account minimum: $200 | Max.leverage 1:30 | Avg.CFD margin: 30%
#1 social trading platform by eToro Group Limited, founded in 2007 in Cyprus (with offices in England and Israel). Positioned as innovative web platform for trading, eToro stands out from other CFD trading platforms due to social trading possibilities, a.k.a. mirror trading or copy trading – meaning that users may simply follow the actions of trusted brokers and do the same investments. This made it quite popular in 140 countries, having reached over 3 million accounts.
- Social trading + investment platform, 2 in 1
- CopyTrader feature – copy trades and deals
- CopyFunds feature – copy markets (asset groups following trading strategies) and copy top trader funds
- Ability to view transactions of any member for the whole period
- Stop loss – set a minimum amount of money on account
- 24/7 market hours
- eToro Economic Calendar – to see events that may impact trades
- Trading Academy – page with webinars, courses, blog
Note, that you can withdraw as little as $50, though a minimum withdrawal fee is $5. There is also a $10 inactivity fee, if you have not logged into account for 12 months. eToro complies with multiple regulations and bodies, takes the issue of cybersecurity seriously and is helpful to customers 24/5. In terms of contracts for difference, check out how CFDs on eToro work . Also, be aware of $25 wit hdrawal fee on every deal.
Pros: Quick account opening Reasonable fees and commissions User-friendly interface, multiple languages
Cons: High non-trading commissions Less trading assets in comparison to other platforms Inactivity fee
Account minimum: $100 | Max.leverage 1:300 | Avg.CFD margin: 3.33%
Plus500UK Ltd, represented in and oriented on UK, European, Asia-Pacific, South African markets, and accordingly regulated by British, Australian, Cyprian authorities. Although not available in Canada and the USA, Plus500 is a highly popular trading platform (over 5M downloads from the Play Store). Account deposit is at $100 minimum for debit/credit cards, $500 for bank transfers. CFDs for trading include stocks, forex, indices, commodities, and even cryptocurrencies. S&P500, Euro/Pound, Euro/Dollar, gold, oil… you got it.
- Negative balance protection (guaranteed stop loss)
- 2-step authentication
- Price and real-time market alerts
- Cryptocurrency CFDs – IOTA, Bitcoin, Litecoin, Ethereum
- Free demo account without limitations
- Economic calendar with relevant and real-time events
- Risk management settings – e.g. limits to close at certain profit/loss, trailing stop
- 24/7 online support
What makes Plus500 one of the most attractive CFD trading platforms is a zero fee (yes, zero) for multiple actions, i.e. deposits, forex quotes, open/close trades, live CFD prices. What users pay is a spread for opening a position (bid). Additional fees may incur for overnight trading, stop order, account inactivity. Also, note that when logging into account on two devices, one of those will be disconnected.
Pros: Keeping customer costs in real bank account Simple workflow, quick sign up online Multiple languages, round-the-clock support
Cons: No MT4 connectivity Inactivity $10 fee after 3 months Numerous customer complaints about scams
Account minimum: $20 | Max.leverage 1:200 | Avg.CFD margin: N/A
Capital.com was founded in 2020 with the idea to launch a trading app standing out of competition. The result was a massive trading platform, utilizing AI (SmartFeed) among many technical tools. SmartFeed technology carefully tracks traders activities and behavior to help identify trends, good deals, etc. In addition to encrypting the user data, Capital partners with RBS and Raiffeisen, one of the biggest banks, to store client funds.
- Markets: 2000 shares, 21 indices, 29 cryptocurrencies, 135 Forex pairs
- No fees for deposits, withdrawals, real-time quotes, opening/closing trades and more
- Web and mobile trading application
- Over 70 technical indicators, plus charts, price alerts, etc.
With zero commission for a variety of trades, Capital.com clearly makes one of the leading CFD platforms currently. It also goes the extra mile in explaining and educating about intricacies of contract-for-difference trading. You’ll find guides on leverage, long and short positions, profiting from rising and falling markets, hedging, etc.
Pros: $20 account minimum fund Advanced AI technology at work 24/7 withdrawal policy
Cons: Unclear average CFD margins High leverage ratio could lead to big loss
Account minimum: $250 | Max.leverage 1:200 | Avg.CFD margin: 5%
A proprietary, and primarily a web platform (with desktop and mobile applications too), supporting MT4, ProRealTime and L2 Dealer. The charts are quite advanced and flexible, e.g. with the option to set alerts on a specific indicator, and there are 22 indicators in total. Minimum deposit for live accounts is $250, while we can use a demo account first, requiring no amount at all. Sum up all these factors and we have IG as another contender for a best Fx and CFD trading platform.
- Access to thousands of 24-hour share CFD markets
- Split charts – view the same positions on multiple timeframes at the same time
- Operational in 16 countries
- Under FTSE 250 regulation
- Automated trading options and “smart settings” (save deals and values)
- Risk protection – to avoid negative equity, partial or full closing of positions
- Cryptocurrency trading – Bitcoin, Ether, Litecoin, Ripple
- Works on Chrome, Safari, Mozilla, Edge, IE (IG recommends Chrome)
On the web, IG is streaming news from Reuters and offers frequent research materials via Economic Calendar. Additionally, there is IG Community portal, where traders can discuss nuances among themselves or with IG staff. The platform allows social trading , a.k.a. mirror trading, however it isn’t an autonomous social trading platform.
Pros: Simple account signup, fast verification Qualitative trading platforms and tools Helpful and reliable customer service
Cons: Not supporting MT5 Social trading only partial Inactivity fee
Account minimum: $0 | Max.leverage 1:500 | Avg.CFD margin: 4%
A global top-tier trading entity with 40+ years on market, IB Group now provides powerful trading software platform, TWS (Trader Workstation). It’s a place where investors can trade stocks, options, futures, bonds and funds on 125 markets within single account. Interactive Brokers is an online trading place with HQ in Connecticut, USA. Products include web portal (IBKR WebTrader), desktop app, mobile platform (IBKR Mobile for iOS and Android devices), IBot, API. There is “zero” minimum deposit policy to start off trading, although no account activity may lead to certain fee.
- Universal account – view/trade multiple assets, trade CFDs in one window
- Reports – including real-time trade alerts, margin information, cost analysis, etc.
- Smart Routing technology to calculate a CFD reference price (the exchange-quote price for a specific share)
- Transparent quotes – IB charges an honest commission on spreads and price movement, without requotes
- FX Trader – with streaming quotes, indicators, volumes, pending trades, etc.
- IBot – a personal helper for quick information on stocks, account balance, etc.
- Portfolio Analyst – reporting and management tool with 200+ benchmarks
- Offline installer of TWS software
Over 60 order types are accessible in TWS, from basic to complex algorithms for CFD trading. Commissions are lower than other platforms offer – depending on the index, starting rates are within 0.005% – 0.01% range. The platform also has risk management and monitoring tools for assets, and offers coherent real-time data for active traders to be able to react quickly.
Pros: Powerful and all-round trading software Excellent for market and portfolio analysis Low fees, transparent commissions
Cons: TWS will be difficult and time-consuming to start with Small or inactive accounts may get maintenance fee Regional restrictions in CFD trading
Account minimum: $250 | Max.leverage 1:10 | Avg.CFD margin: 3.33%
A leading European trading company, X-Trade Brokers, or just XTB, established in Poland in 2002. Beside CFD, FX, ETF, and own xStation 5 platform, it also has access to conventional MT4, and it is available as a web service, mobile app and desktop app. With $250 initial account deposit customers get access to 1,500 global markets. Nice bright design, fast speeds, excellent 24/7 support service, API and all the rest defines XTB as the cutting-edge service for professional traders and brokers.
- XStation 5 for desktop, tablet, mobile (Android) and smartwatch
- Trading calculator feature – to preview potential profits and losses
- Stop loss guarantee / negative balance protection
- Free market comments from brokers in audio format
- Equity screening to discover trading opportunities
- Advanced technical indicators, e.g. Fibonacci Retracement
- Stock CFDs (1,500 equities) and ETF CFDs (60 units)
- Leverage on CFDs up to 1:10
- Live performance stats
- Free mobile alerts
With vast number of investment products, indices, commodities, etc. available to trade or invest in, they seem to have it all, however XTB seems to be lacking in spread betting. Demo or live account, immediately after signing up, you will get a phone call to help and guide along the way.
Lots of functions are simple drag-and-drop, there’s a lot of analytical tools, screeners, heatmaps and indicators. Also, constant news feed and daily technical analysis and expert op-eds. Popular E UR/USD spread as of Q2 2020 was 0.00007 pips. There’s also a round turn commission of 0.16%.
Pros: Free educational materials online Multiple interface languages Customer support via email, chat, phone
Cons: XTB was fined in 2020 for asymmetric price slippage Unavailable in many countries Basic order types only
Account minimum: $1 | Max.leverage 1:50 | Avg.CFD margin: 10%
Founded in 1997, Oanda is one of the best CFD trading platforms both for advance and casual users. It offers trading tools for European, Asian and African countries, Canada and Australia. Oanda is available in web, desktop, mobile versions, as well as provides an API (for purposes of real-time trading, automation, etc.). Demo accounts without any limits, plus educational videos, webinars, Q&A sessions.
- 80 indicators
- Connectivity to MetaTrader4, NinjaTrader, MotiveWave, MultiCharts
- MT4 open order indicator – to analyze market trends
- Historical spreads – min/max/avg spread data for set periods
- Price signals – set price up/down limits, or as simple moving average
- Trading performance portal – visualizations of profits, losses, risk/reward ratio, etc.
- Algo Labs site – for users to create own apps
- FXTrade mobile trading platform (Android, iOS)
There are certain considerations about Oanda as well. Accounts do not have protection against negative balance/slippage, average spreads do not reflect fixed time periods, in the EU the platform operates in a “broker” mode. Average CFD margin is 10% (see margin rules for more).
Pros: Ability to open an account for just $1 Wide array of currency pairs, asset classes API, mobile trading and more sophisticated tools
Cons: Might be difficult for beginners Accounts with no slippage protection No CFDs for cryptocurrencies
Account minimum: $5,000 | Max.leverage 1:100 | Avg.CFD margin: 1%
A Swiss online bank, Dukascopy Bank , provides web and mobile trading services, including CFD, foreign exchange, etc., banking services, technological solutions. It is under the regulation of Swiss supervisory body FINMA . Desktop trading platform, titled JForex 3, contains hundreds of indicators, news feed, historical testing. Through it or MT4 traders can implement automated and algorithmic strategies. Both demo and live accounts, although CFD trading is available only for regular live accounts. The minimum deposit for account is probably the highest among all CFD trading platforms – $5,000.
- Markets: oil, gas, copper, 5 soft commodities, 18 indices, 2 bonds, liquid stock CFDs
- 24 trading hours for most instruments
- Equal prices and trading rights for all clients (marketplace model)
- Funding by credit card, deposits in 23 currencies
- Deposit protection by a bank up to 100,000 CHF
- MetaTrader 4 accounts support, 1:100 default leverage
- Swiss Forex marketplace – SWFX – a proprietary service by Dukascopy
- Fix API – to integrate, get real-time data and notifications, submit orders, etc.
- Help – wiki, tutorials, webinars, seminars
CFD prices are in correlation with SWFX marketplace price technology, and every client may impact a price by own bids and offers. Commissions are clearly defined, yet to calculate average spreads, one has to study daily/monthly/quarterly SWFX performance data. There are also additional account management fees, volume commissions, outgoing transfers fees, withdrawal fees, etc.
Pros: JForex proprietary platform by a real Swiss bank Extensive research and analytic materials Good customer support 24/6
Cons: Large initial deposit High commissions for low deposit traders
|CFD trading platforms: Main features|
|Demo account||Min.deposit||Min.fee||Total pairs||Max.leverage||Mobile app||API|
As a bottom line, we are compelled to say that the choice of CFD platform depends on factors, such as broker expertise level, personal or business investment requirements, user interface preferences, markets and commission rates. That’s why there are more trading platforms beyond our list above, that are popular too. For instance, Poems by Phillip Capital is in demand in Asia-Pacific region, Muslim countries seem to prefer Orex by ADSS Securities. eToro fits well for beginners, while City Index and LCG Trader are favored by skillful investors.
Financial pundits predict further increase of CFD transactions in 2020. CFD has its pros (access to global markets, lower margin rates, reasonable commissions and fees) and cons (high leverage, big risks of losing money), and therefore require a great deal of knowledge, trading experience and persistence.
P.S. Honorable mentions: AMarkets, City Index, LCG Trader, Orex, Poems, SaxoTrader, FxPro.
P.S.#2. You can trade CFD through Metatrader 4, Metatrader 5. Read a comparison of MT4 vs MT5.
What is CFD?
CFD is an intricate financial instrument, which is quite popular in countries like the UK, Austria, Switzerland, France, Germany, Russia, Singapore, Norway, etc., although not allowed in the USA, India. Its has compelling benefits, e.g. being a derivative tool – so no ownership of assets is required; huge leverage rates – allowing to operate with costs much higher than initial deposit; less strict limitations for trading. Overall, there’s a lot to learn if you want to start trading differences.
In trading, a contract for difference (CFD) is an agreement between a seller and a buyer on the asset value difference between the time of opening and closing a position. It offers traders an opportunity to profit from price fluctuations without owning an underlying asset.
How does CFD work?
Consider two positive scenarios to see how contract for difference works.
- Leverage 1:1
- You buy a Tesla CFD contract for $180
- After 2 months , the contract is worth $240
- You close the deal with a profit of $60
- Leverage 1:10
- You buy an AMD CFD contract for $28
- After 4 days , the contract is worth $34
- You close the deal with a profit of $60
Leverage in trading may increase profit substantially, however do not forget it also has the opposite effect – a risk of losing the investment, if forecast is incorrect. In the worst-case scenario, you might even end up with a negative balance.
It is good though, due to competition, most brokers/platforms provide protection against negative balance. We recommend to apply a leverage of 1:10 maximum, as well as always have additional funds on a balance sheet, so that your contract does not close automatically before stock/contract growth.
What is a CFD trading platform?
CFD trading platforms are computer programs such as AMarkets (SaaS model), that serve as a trading platform. They provide access to various trading types, to conduct transactions between traders directly or via an intermediary. CFD trading may involve stocks, currencies, commodities, shares, etc., and is always performed in pairs (USD to EUR, Shell to Exxon).
By far the most popular platforms (a.k.a. brokers) are MetaTrader 4 and MetaTrader 5, check out MT4 vs MT5 comparison by the way. These CFD platforms really have all the necessary functionality, but the list does not end on MetaTrader.
cTrader is a platform for experienced traders, with unconventional tools for trading strategies. With access both to MetaTrader and cTrader, the latter offers customers more favorable terms on fees and commissions.
Some brokers offer personal trading platforms, for example Interactive Brokers with its IB Trader Workstation (TWS). It is designed for active traders and investors who work with several products. It contains all modern algorithms, a library of layouts, modules, assets.
These mentioned CFD broker platforms, along with XTB , Oanda , etc.are among leaders today. Yet, there are dozens of others to explore and choose the most suitable one. Check online tutorials, documentation and reviews for details.
CFD trading strategies
The two most popular trading methods are short- and long-position, and sometimes “intertrading” in-between.
- Long position – purchase amid rising prices on the market. An exchange trading participant buys an asset in anticipation of value growth in the future. With short-term forecasting skills, or monthly/annual forecasts, or through technical analysis, a trader makes profit in the end, even when price fluctuations are insignificant.
- Short position – purchase in a downturn. This strategy is appropriate when, when a trader predicts a decline asset price. Thus, an asset is sold on condition of possible future purchase at the lowest price. If forecast was wrong, and asset price rises, traders would lose an amount equal to deviation between asset value at opening and closing of a transaction. If a forecast turns out to be correct, the bidder makes a profit. Such method makes it possible to bid on the shortest possible intervals, even within a minute.
CFD commissions and fees
Commissions, fees, hidden fees, additional paid services, margins, spreads and more – all this you are going to encounter on trading platforms. Many CFD brokers may offer a choice of appropriate fees for your trading strategy.
Optionally, there may be a guaranteed stop loss (for an additional fee) or other additional services and tools. Account inactivity, in many cases with CFD trading platforms, will be charged too. Therefore, we’d advise to carefully study all fees and commissions before choosing a platform.
Let’s highlight one concrete example of what we may be dealing with. Take XTB “Pro” account, which we chose after consulting with Broker Chooser portal, helping to calculate fees of real CFDs as of 1 week sale. The condition was an asset purchased at $2,000, and 5:1 leverage. At the exit, when buying Apple Stock CFDs the commission is $18.1, when buying Vodafone CFDs – $24.4.
Under “Standard” account, a trader would only pay higher spreads, and no other fees. You can get acquainted in detail with the table of XTB fees and commissions for this particular broker.
How to calculate CFD fees?
There is no single formula for all CFD platforms/brokers, because one may earns on spreads, while another has additional commissions and fees. Many brokers provide their own formulas and even calculators for deducting fees. For example, in AMarkets standard plan no fees, but in Amarkets ECN plan is a 2.5$ commission per 1 lot.
Minimum deposit and withdrawal
In order to start trading CFDs, you first need to open an account with a broker. Typically, you need to place between $0 to $10,000, depending on the broker. In light of competition, the initial deposit has been lowered to $0-250 in most cases.
For deposit, Visa or MasterCard credit card, bank transfer, PayPal, and in some cases cryptocurrency, will do. In general, this process does not differ much from buying a product online, only here you may need to verify your identity.
Withdrawal of funds occurs upon request, often to a credit card or a bank account. The amount, method and timing for withdrawal can also vary from broker to broker, so study their conditions beforehand.
CFD pros & cons
Benefits of CFD trading:
- Higher leverage . Unlike traditional trading, the contract for difference has a higher leverage and is subject to regulation. In some cases, the leverage reaches 1:500 ration, which allows the investor to get more potential profit with less capital, but it is also worth remembering that this could increase the loss. Thus, CFDs are great for a small investor.
- Global market access . Today, all CFD platforms provide access to all major global markets, with round-the-clock activity.
- No shorting rules or borrowing stock . Some markets install rules that prohibit shorting , require traders to borrow the instrument before selling short, or margin requirements for short and long positions. CFD instruments, on the other hand, allow shorting any time without borrowing costs because traders do not own assets.
- No daily trading requirements. Unlike markets requiring a minimum amount of capital for daily trading or limiting daily transactions, CFD market is not bound this way, account holders can conduct day trading as they wish.
- Variety of trading opportunities. Brokers offer CFDs on stocks, indices, currencies and commodity contracts, any of which could be a decent alternative to exchanges.
- Execution without fees. The same types of orders as with traditional trading are offered, including stops, limits and conditional orders, e.g. “One Cancels the Other” and “If Done”. Some CFD platforms offer guaranteed stops that charge a service fee. Brokers earn money through spreads, and many of them do not charge any commissions or fees at all.
- Ability to earn money both via rising or falling prices.
- Weak regulation . CFD industry is not strictly regulated, broker reputation and proficiency is based largely on trust rather than government regulation.
- The risks . CFD trading is volatile and requires close monitoring. There are liquidity and margin risks that need to be maintained. If you cannot cover the cost reduction, a provider may close your position and you will have to cover the loss. Overall, risk of leverage exposes you to greater potential profit, as well as large potential loss. Although stop loss limits are available from many CFD providers, they cannot fully guarantee no loss.
- Spreads and commissions . Spread on entry and exit, basically, eliminates the possibility of profit from small transactions. Spread also reduces winning trades in relation to base price. Some brokers add hidden fees too.
Q: How to trade CFDs?
A: To start trading, you need to determine the market, determine the position size and open a deal, monitor your position and adhere to your exit strategy.
Q: What is CFD leverage/trade leverage?
A: Leverage is the corresponding ratio of trader’s funds to the size of broker’s credit. In other words, leverage is a borrowed capital to increase the potential returns.
Q: Is CFD trading safe?
A: Even with financial literacy and a relevant trading strategy, there is always a risk of losing your capital.
Q: Why is CFD banned in the USA?
A: CFDs are derivatives, they are traded OTC (over-the-counter), meaning they are not traded through regulated exchanges. They were also banned in the USA because the majority of traders were constantly losing on CFDs.
Q: How to buy CFDs?
A: Decide which market you want to trade on, click Buy if you think the price will increase in value, select your trade size and choose how many CFDs you want to trade.
Q: What is a CFD margin?
A: Margin is the amount of money required as a “good deposit” to open a position.
Q: How do CFD brokers make money?
A: The first transparent way in which CFD brokers make money is through spreads quoted on each market. Also brokers/platforms charge a commission in form of percentage on the size of a transaction.
Q: What does CFD pairs mean?
A: Pairs trading is the action of buying one instrument and simultaneously selling another. It is called “pairs trading” because you are, essentially, trading a pair of CFDs.
Q: What is a CFD spread?
A: In CFD trading, a spread is the difference between the purchase price and the selling price quoted for an instrument. The buy price quoted will always be higher than the sell price quoted.
Q: What are the best CFD brokers?
A: You can choose a broker/platform from our list in accordance with your trading strategy, fees and other preferences.
Q: Is CFD same as Forex?
A: No. The main difference between CFD trading and Forex trading is that CFD involves different types of contracts than Fx (indices, energy, and metals, etc.) whereas Forex is pure currency trading.
Q: CFD vs stock trading
A: CFD trading mimics share trading with the exception that in a contract for difference, you actually do not own the asset, unlike company shares.
Q: CFD vs options
A: Options deliver a number of benefits to CFDs and might be a part of risk management. Options have a “real world” value beyond that of the CFD, although they are more complicated. So, for experienced traders in certain situations, options may well represent a better reward-to-risk ratio than CFD trading.
Q: CFD vs ETF
A: As a CFD trading alternative, ETFs are better for those seeking a passive investment. Yet, CFD trading allows to access a bigger range of markets using a broker account only.
Best CFD Brokers Comparison
To complete a CFD broker comparison core features need to be analysed including spreads which start at 0.1 pips, commissions which start at $3.50 per 100k traded, the CFD trading platform, range of markets from stocks, currency to crypto and CFD broker leverage which can range from 50:1 to 500:1.
By Justin Grossbard / Updated: Saturday, April 04th, 2020
Regulations and Licenses
Markets and Instruments
Trading Platforms + Tools
Pepperstone is an Australian CFD provider that was founded in Melbourne, 2020
What makes Pepperstone so good?
Pepperstone aims to provide solution traders experience with online trading when it comes to delays in trading execution, excessive wide spreads and poor customer support.
How does Pepperstone achieve these features?
- Best in class technology for low latency. 10 optical fibre connection directly you to servers at Equinix data centres near New York and UK trading exchanges.
- No dealing desk trading for low-cost spreads. This is done through Electronic Communication Networks (ECN), aggregating one of the largest collections tier-1 banks for best spreads and endless market depth through wide source of dark pools for liquidity.
- Award-winning customer service (Investment trends). The customer service team are traders themselves so can relate to your trading issues.
- Choose from the most popular trading platforms for brokers and trader including MetaTrader 4 (MT4) , MetaTrader 5 and cTrader on a wide range of operating systems such as Windows, Mac, Ios and Android operating systems.
- Best in industry leverage of 500:1
- Specialise in FX trading.
- Narrowest spreads using No dealing desk and Electronic Communication Network (ECN) trading
- Low slippage through superior trading execution speeds. Edge infrastructure including fibre optic cables and Equinix servers means blazing-fast execution.
- Commission and Commission free accounts to fit your trading needs
- Award-winning Customer service from the support team that consists of experienced traders
- Huge choice of funding methods with no fees
- Choice of 6 difference social trading tools (ZuluTrade, DupliTrade, MetaTrader4 Signals, RoboX, MyFxBook)
Who is Pepperstone for?
We consider Pepperstone to be one of the best CFD brokers. We recommend the broker for intermediate to expert forex traders who desire super-fast execution with ECN online trading for low spreads.
Established in 2001, easyMarkets are based in Cyprus with local offices in Sydney, Australia.
Whats makes easyMarkets so good?
easyMarkets business philosophy is to be Simple, Honest and Transparent when it comes to CFD trading. These are great values traders should look for when choosing a broker as it means you can trade with confidence.
What makes easyMarkets so distinctive in the online brokerage industry is that they aim to reduce your level of risk when investing. easyMarkets include a number of ‘inclusive’ risk management tools other brokers either charge a premium for or (in most cases) don’t offer.
How does easyMarkets achieve these features?
- Simple or painless trading by designing their platform to be super easy to use.
- Open or transparency by being open about easyMarkets being a market maker. Being a market maker means easyMarkets are able to continue trading and honour their quotes regardless of extreme market volatility.
- Honesty about their costs. easyMarkets never adjust trading conditions or quotes even when there is extreme price movement. This means their fixed spreads will remain fixed and no slippage will remain guaranteed.
- ‘easyTrade’ that since launching 2020 allows trading with high leverage, no margin requirements and featuring $0 spreads with the ability to choose the maximum risk and duration of the trade.
- dealCancellation that when activated gives traders a 1 hour period to cancel their order when price direction moves against a trader with only a small fee based on the volatility of the market.
- Free risk management tools backed by guarantees. Guaranteed stop loss (GSLO) and guaranteed negative balance protection to help protect your investments.
- Innovative tools to further protect your investments. These include Deal Cancellation that allows you to cancel within 60 minutes if the price movement is unfavourable, freeze rate and inside viewer that gives greater insight into market sentiment.
- Cost transparency through fixed spreads and no commissions
- Choice of easyMarkets platform or MetaTrader 4 (MT4) which are available on iOS and Android Mobile and Win and Mac platforms
- 200+ markets including the option to buy and sell cryptocurrencies
- Large range of account funding options all which have no fees
Who do we recommend easyMarkets for?
We are big fans of easyMarkets because they offer the best risk management tools of all brokers. Most of these tools are inclusive in your spreads which adds to their appeal. If you are new to trading, a risk-averse trader or trading in a very volatile market then easyMarkets can help you manage your trading risks.
Is an Australian CFD trading broker that commenced in Sydney in 2007
What makes AxiTrader so good?
AxiTrader was founded by traders. therefore they understand exactly what you will want to experience as a trader. In particular, AxiTrader believes these features to be 24-hour customer service, tight spreads and speedy execution with only minimal slippage or as AxiTrader phrase it “integrity, service, execution”.
How does AxiTrader achieve these features?
- Tight spreads and liquidity by sourcing and pooling from multiple destinations in Forex Market. These include top tier banks and smaller banks and brokerages.
- Speedy execution by using servers hosted by Equinix at their NY4 Data Center which is near New York MetaTrader centre.
- 24-hour Customer service throughout the working week commencing 10 pm Sunday and dedicated account manager to help you their trading processes.
- Recognised as award-winning in Customer Service and trustworthiness by AtozForex.com, Investment Trends and UK Forex Awards.
- MetaTrader 4(MT4) trading platform specialist. AxiTrader only offers one platform, this means they can put all their energies into helping you get the best out of the platform.
- NexGen adds on for MetaTrader 4. AxiTrader offer complimentary advanced trading management tools through the MT4 platform.
- MetaTrader expert advisors, scalping and hedging
- MetaTrader 4 Trading signals so you can copy from all the best traders throughout the trading world.
- MetaTrader 4 Multi Account Manager – if you have more than one trading account then you can manage them all from the one trade terminal.
- Free access PsyQuation Premium. This is one of the most advanced data analytics platforms on the market. This program is like a personal trading coach. It works by using algorithms to analyse your trading style and help you improve your trading skills. With this tool, you also get more comprehensive indicators, trade signals, and forecasting.
- Choice of commission account (Pro Account) and non-commission (Standard Account)
- No fees for deposits and withdrawals.
Who do we recommend AxiTrader for
If you are looking for a broker to help you get the most out of the MetaTrader 4 platform then AxiTrader makes a great choice. With MT4 you get a wealth of features than can enhance your trading experience.
4) GO Markets
Go Markets was founded in Sydney in 2006 as a provider of online CFD trading services. It has the distinction of being the first broker in Australia to offer MetaTrader 4.
What makes Go Markets so good?
Go Markets are always striving to provide the best possible trading experience to their clients by proving customer service that is reliable, prices that are transparent, trading execution with low latency and stable platforms.
How does Go Markets achieve this?
- Friendly customer support that is available 24/5. Customer service teams can help with MetaTrader support, general customer support, funding your accounts and opening accounts. Toll-free contact is available along with multilingual support.
- Low latency execution through trading servers based in London
- Transparency through a commission-based pricing structure. The commission is AUD$3 is less than the standard $3.50.
- Choice of MetaTrader 4 and 5 trading CFD trading platforms. These platforms are the most popular platform throughout the world by both broker and traders and are known for their stability and reliability.
- Choice of MetaTrader 4 and MetaTrader 5 trading platforms
- MetaTrader 4 Genesis for professional-level trading tools
- $200 initial deposit for a standard account with no commission
- $500 minimum deposit for “GO Pro” account with industry low commission
- Expert Traders and smart tools such as Autochartist and Trading central for better trading.
- 100:1 leverage default and maximum 500:1 leverage possible
Why we recommend GO Markets
This broker is a great option if using the GO Markets PLUS account. Go Markets have the lowest commission of all brokers and also offer great spreads.
Plus500 was founded in 2008 in Israel with offices in Sydney, Australia, UK, Singapore and Cyprus acting as subsidiaries.
What makes Plus500 so good?
Plus500 commenced trading with its own custom made trading platform from the very start. The Plus500 platform is a well-respected platform compared to others found in our forex capital trading review. It enables traders to trade on movements on a wide range of CFDs.
How do Plus500 achieve this?
- Innovation: The Plus500 trading platform has features that are not available in MetaTrader such as Guaranteed Stop Loss Orders.
- High ratings: The Plus500 trading platform is a highly rated CFD trading platform on Google Play and Apple App Store.
- A leader in mobile innovation: the platform is one of the best for mobiles and tablets.
- The platform offers a wide range of CFDs such as shares, ETFs, options, indices and commodities and cryptocurrencies
- Their own trading platform
- A range of Plus500 trading CFDs including cryptocurrency.
- Good range of risk management tools including Guaranteed Stop, Trailing Stops and Close at Profit or Loss.
- Real-time alerts with email, SMS or push notifications. These can be price alerts, price change alerts and traders sentiments alerts.
- Leverage of 300:1
Why we recommend Plus500 Markets
Plus500’s strength is its unique forex trading platform. If you need a platform that works really well on mobile, tablets or small screens then PLUS500 have a great product for you.
‘Your capital is at risk.’
6) IC Markets
IC Markets was founded in 2007 which its headquarters in Sydney.
IC Markets offer what they call ‘True ECN’ trading for all of its account. What this means is you have access to the lowest spreads, fastest trading execution and trading technology for all account types IC Markets offer.
How do IC Markets achieve this?
- Tight Spreads: IC Markets offer Electronic Communication Network (ECN) which means orders are filled at market conditions directly through the liquidity pool, there are none of the requotes one has with dealing desks.
- ECN style pricing for all accounts: Whether you choose a commission or non-commission account you will have access to ECN style pricing.
- Tight Spreads through deep liquidity: IC offer up to 50 different liquidity providers which are made up of tier-1 banks and non-banks such as dark pools. Depth of market means more volume and therefore more aggressive pricing.
- Best trading quality: IC Markets trading technology will find the best price through its liquidity providers regardless of the number of LOTs you trade.
- Low Latency: IC Markets offer average execution speed of under 40ms which means low risk of slippage.
- Trust and Transparent: IC True ECN means no dealing desk, no price manipulations and no restrictions.
- ECN pricing for all accounts
- Choice of the most popular trading platforms on the market. MT4, MT5 and cTrader.
- Advanced trading tools for MT4 such as one-click trading, spread monitor and advanced order types.
- Customer Service team with experience in forex industry which means they can help you with all your trading needs 24/5.
- Expert Traders, scalping, hedging are all available.
- Flexible Leverage of up to 500:1
- Good range of CFDs to trade with.
Why you should choose IC Markets
We consider IC Markets on the best forex brokers. We recommend the broker to intermediate and advanced traders who want access to ECN style trading which means low spreads with fast execution for low spreads.
This broker has headquarters in Melbourne and London It was founded in 2020.
What makes ThinkMarkets so good?
ThinkMarkets goal is to provide quick and easy access to a wide range of markets through their own in-house platform. With this access, they promise tight spreads, fast order execution and great customer service.
How does ThinkMarkets achieve this?
- Low pricing through Electronic Communication Network trading
- Fast order execution through Equinix data centres
- Free of charge dedicated account manager for great customer service
- Multi-lingual customer support available
- Great customer service includes its FX university which consists of training guides, videos and webinars.
- Choice of commission and no commission account
- MetaTrader 4 or their own in-house platform Trade Interceptor
- 24/6 Customer support
- EAs (Automated trading), scalping and hedging
- Leverage of 500:1 for forex and 200:1 for CFDs
- No fees for deposits and withdrawals
- Social trading with MyFXBook
Why we recommend ThinkMarkets
ThinkMarkets are great when it comes to customer services. They offer support 6 days a week while most of our broker reviews on this page only offer customer support 5 days a week. In addition to this, they have good education tools and technical analysis tools.
IG Markets is one of the oldest broking companies (1974) in the Online broking industry. It is based in the UK.
What makes IG Markets so good?
IG Markets specialise in helping you trade across different asset classes. They are particularly known for forex and stock trading. Their objective is to help clients trade CFDs with leverage and learn more about CFDs definition. IG offers good spreads for a market maker with their CFD accounts and likes to give their client choices when trading.
How does IG achieve this?
- Huge range of markets to trade: IG allow you to choose from over 16,000 markets.
- Choice of unique CFDs to trade: In addition to the usual CFDs, the client can choose interest rates, options, ETFs and ETPs, IPOs and bonds.
- Choice of 6 different trading platforms: You can choose the platform that fits your trading needs.
- Low market maker prices by matching their prices to top global banks and exchanges. There is no dealing desk or requoting.
- Option of low prices with Direct Market Access or DMA. With DMA, you have transparency in your trading as you can see prices of other orders on the market. The visibility means you can place your own order as you know the true market price.
- Extensive tools for customer service: IG have a forum which allows the IG community to help each other out when help is needed.
- Competitive market prices
- IG promise not to fill your order worse than what your request (it may still be rejected). Tools like partial fills and points through current can help you your orders when limited liquidity is available.
- Risk management features available such as guaranteed stops and limited risk accounts.
- Choose from their own platforms (L2 Dealer, ProRealTime, MT4, IG Platforms).
- Good trading education tools including an app for mobile (IG Academy)
Why we recommend IG
IG has one of the largest portfolios of all CFD traders. If you are looking for an all in one broker that has no commissions and risk management tools available then IG might be the broker for you.
9) FP Markets
First Prudential Markets or FP markets is an Australian based investment broker with offices in Sydney. It was listed on the Australian Securities Exchange in 2007.
What makes FP Markets so good?
FP Markets claim they can give you “The Ultimate Trading Experience”. FP Markets goal is to be a full-service broker which means you can trade a full suite of trading derivatives on the global market. The broker was the first in the world to have exchange-traded Contracts for Difference product in its listing (ASX CFDs).
Not only do FP Markets offer a full suite of products they are also consistently good in all other features a trader should look for when trading such as price, speed, product range, customer support and market analysis.
How do FP Markets achieve this?
- Full suite product range to 10,000+ financial instruments including Equities, Indices, Commodities, Bitcoin and Futures.
- Low cost with Direct Market Access or DMA and ECN style spreads.
- Fast trading speeds through data centres in London (LD5) and New York (NY4) and fibre optics.
- Award-Winning Customer Service with Investment Trends including a personal account manager.
- Market Analysis through daily market reports, research libraries and economic calendars.
- Choice of platforms: MT4, MT5 and IRESS
- FP Markets own custom trading Platform IRESS which offers:
- Transparent pricing through DMA.
- Custom trading alerts and news.
- Advanced charting.
- Complex order types
- Trading on International Markets
- Range of markets such as 50+ currency pairs
- Leverage of 500:1
- low starting deposit of $100 to start trading
Why we recommend FP
If your looking for a broker that allows you to trade on international markets across a range of CFDs then FP might be a good broker for you. The broker does everything consistently well without being the best in anyone.
10) CMC Markets
CMC Markets are a UK online broker that was founded in 1989. It has an office in Sydney.
What makes CMC Markets so good?
CMC Markets goal is to provide you with the ultimate trading experience. The broker achieves this a number of ways such as by offering value for money with its prices and services, its own intuitive trading platform and wide range of trading opportunities.
CMC is known as share traders or stock traders but offers other asset classes also making it a great CFD trading account. With CMC you can access a huge range of ASX stocks and international stocks, in addition, your ability to trade CFDs of other types.
How does CMC achieve this?
- Competitive pricing as a market maker through 100% automatic execution and no dealing desk.
- Their own award-winning platform which includes its own native apps, professional charting and trading tools.
- Guaranteed stop-loss orders to protect your losses for high-risk trades.
- Trading opportunities with access to over 10,000 CFD markets. Making them one of the best CFD brokers.
- A leader in CFD trading: these include share trading such as ASX stocks and contract for difference such as index CFDs.
- The market-leading margin of 0.20%
- Has its own trading platform that is built to meet the needs of its clients.
- Offers MetaTrader 4
- No commissions in spreads.
- Guaranteed Stops for risk management
Who we recommend CMC
CMC are great brokers if you’re looking a CFD trader that offer a large range of CFDs. CMC is a great broker if your into stock exchange trading.
CFDs In 2020 Statistics
Just last year (2020) there was an increase in trading volume of 13.7% when it comes to exchange-traded derivatives. Breaking the trading volume by categories based on FIA figures:
- Energy Trading Rose 13.6% driven by overseas interest from China, India and Russia. In the USA the benchmark WTI Brent Oil trading was actually down. The overall energy sector remains the most popular with 2.54 billion contracts .
- Agricultural Trading Rose 18.7% driven primarily through China with the overall market at 1.77 billion contracts .
- Non-Previous Metals Fell 5.5% which was the only main category to see falls in 2020 and is a total of 1.44 billion contracts .
- Precious Metals Rose 82.5% through increased interest in China, Turkey and India exchanges with 852.3 million contracts.
Below shows the FIA volume data by investment group over the past decade to provide an insight into the popularity of class of contract for difference trading.
The ‘Top 10’ CFD Brokers List
|CFD Broker||CFD Trading Platform||Leverage||CFD Instruments|
|Pepperstone||MT4, MT5, cTrader||500:1||Forex, Index CFDs, Share CFDs, Commodities, Crypto|
|easyMarkets||Web Platform, Vanilla Options Platform, MT4||200:1||CFDs on forex, forwards, crypto, indices, commodities, shares, metals and options|
|AxiTrader||MT4||500:1||Forex, Commodities, Equity CFDs, Bitcoin CFDs|
|GO Markets||MT4, MT5||100:1||Forex, Share CFDs, Indices, Metals, Commodities|
|Plus500||Plus500 Platform||300:1||Forex, Index CFDs, Share CFDs, Commodities, Crypto, EFTs|
|IC Markets||MT4, MT5, cTrader||500:1||Forex, Index CFDs, Share CFDs, Commodities, Crypto, Bonds, Futures|
|ThinkMarkets||MT4, MT5||500:1||Forex, Metals, Share CFDs, Indices, Commodities|
|IG Markets||IG, MT4, L2 Dealer||200:1||Forex, Index CFDs, Share CFDs, Commodities, Crypto, EFTs|
|FP Markets||MT4, MT5, IRESS||500:1||Forex, Equities, Commodities,
|CMC Markets||CMC Platform||500:1||Forex, Index CFDs, Share CFDs, Commodities, Crypto, Treasuries|
Published by Justin Grossbard
Saturday, April 04th, 2020
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