Best CFD Brokers

This post is also available in Spanish: brokers de cfds

Broker	Key Features	Open Account
Plus500	Regulations: CySEC, FCA y ASIC Min. Deposit: 100 € / $ Trading Platforms: WebTrader + iOS App + Android App
XTB	Regulations: FCA, CNMV, IFSC Min. Deposit: 0 € / $ Trading Platforms: WebTrader + iOS App + Android App
XM Group	Regulations: CySEC, IFSC y ASIC Min. Deposit: 5 € / $ Trading Platforms: MetaTrader 4 + MetaTrader 5
eToro	Regulations: CySEC, FCA y ASIC Min. Deposit: 200 $ Trading Platforms: WebTrader + iOS App + Android App
IQ Option	Regulations: CySEC Min. Deposit: 10 € / $ Trading Platforms: WebTrader + iOS App + Android App
FP Markets	Regulations: CySEC y ASIC Min. Deposit: 100 € / $ Trading Platforms: MetaTrader 4 + MetaTrader 5 + IRESS
IC Markets	Regulations: CySEC, ASIC y FSA Min. Deposit: 200 € / $ Trading Platforms: MetaTrader 4 + MetaTrader 5 + cTrader
AvaTrade	Regulations: Central Bank of Ireland, FSCA, ASIC, BVI y FSA Min. Deposit: 100 € / $ Trading Platforms: WebTrader + MetaTrader 4 + MetaTrader 5 + iOS App + Android App
Pepperstone	Regulations: CySEC, FCA, ASIC, DFSA, CMA y SCB Min. Deposit: 100 € / $ Trading Platforms: MetaTrader 4 + MetaTrader 5 + cTrader
FXPrimus	Regulations: CySEC, FSCA y VFSC Min. Deposit: 100 € / $ Trading Platforms: MetaTrader 4
FBS	Regulations: CySEC y IFSC Min. Deposit: 1 € / $ Trading Platforms: MetaTrader 4 + MetaTrader 5 + iOS App + Android App
Tickmill	Regulations: CySEC, FCA y FSA Min. Deposit: 25 € / $ Trading Platforms: MetaTrader 4
Libertex	Regulations: CySEC Min. Deposit: 100 € / $ Trading Platforms: WebTrader + MetaTrader 4 + iOS App + Android App
ThinkMarkets	Regulations: ASIC y FCA Min. Deposit: 250 € / $ Trading Platforms: MetaTrader 4
Markets	Regulations: CySEC Min. Deposit: 100 € / $ Trading Platforms: WebTrader + MetaTrader 4 + MetaTrader 5 + iOS App + Android App
ETX Capital	Regulations: FCA Min. Deposit: 0 € / $ Trading Platforms: WebTrader + MetaTrader 4 + iOS App + Android App

CFDs or Contracts for Difference are financial instruments whose value replicates the performance of a financial asset. By trading CFDs you can trade upwards and downwards on different types of assets: equities, currency pairs, cryptocurrency, commodities, stock indices and others.

With CFDs, a great opportunity has opened up for all those who are not professionals in the sector or do not have large amounts of capital, but who can use their knowledge and skills to make a profit by focusing on increases or decreases according to their market forecasts.

To do so, simply access a trading platform, with a CFD broker and open a demo account without depositing.

In this article we will highlight the main advantages of CFDs, the differences with stocks, the financial products they allow you to trade on and the best CFD trading platforms with free demos.

How to choose a CFD Broker

Products and services offered

Dealing with a CFD Broker offering a variety of products and services is important. Many tend to engage in currency related services and ignore all other core and essential assets such as commodities, stock indices and cryptocurrencies. Choose a Broker who can provide you with all the services you need in one trading platform.

The reputation

Always make sure that the Broker is reliable by doing some research on their reputation. Search online for other clients’ opinions and read Broker reviews; this will help you to ascertain if their reputation is genuine. If they have an excellent rating, you can be sure you can count on them. However, you should be careful and avoid scams, there are sites that rank the most reliable  CFD Brokers.

Customer support

There will always be a time when you will need support from the Broker; therefore, you will need to ensure the quality of customer service by contacting customer support even before opening your account. Some of the support services may include a phone call, email or chat.
The best support service is the live chat option as it offers a real-time response. Make sure you choose a Broker who has a good reputation for customer support.

Commissions and spreads

When choosing a Broker, you should be aware of the transaction costs you will be subject to. Every time you trade, you will be asked to pay a spread or commission. Therefore, a wise choice is to look for a Broker with cheaper rates. However, for security reasons, you may need to sacrifice the low transaction costs for a more reliable CFD Broker. It is important to get a good balance between these two factors.

Trading Platforms

Some of the best CFD Brokers offer proprietary trading platforms that are easy to use and full of advanced tools to make this activity faster.
Before choosing a Broker please check which trading platforms they provide. A good broker will do their best to offer you the latest developments in the market, offering their traders easy-to-use charting tools to facilitate trading and all the relevant information you may need to trade correctly. You can also find brokers with MetaTrader 4 or brokers with MetaTrader 5.

Training Tools and Services

The best brokers care about their clients and do everything to help them achieve success. This will include a variety of learning materials, including: articles, courses, video lessons, market analysis, dictionaries, manuals, trading webinars and so on. Their task is to provide you with as much material as possible and your task is to absorb everything to the maximum. If you feel skeptical about the importance of training in trading, it is very likely that you will end up losing everything you have invested

The best CFD Brokers

In this article we have reported the fundamental points for the choice of the CFD Broker that suits your needs. Now you can draw your own conclusions and understand which one will be the most suitable. Each Broker has some positive and some negative aspects, depending on your trading style and type of investment, you will need to choose the best CFD Broker for you.

To help you make the right choice, with the help of experts in the field, we have prepared a comparison table of the best CFD Brokers. Each of the indicated brokers offers a free demo account without constraints, the advice is to try personal services and trading platform through the demo account and make the deposit when you are sure of your choice.

CFD: meaning

CFD is an acronym that stands for Contracts for Difference. In fact, they are standardised contracts and are very practical because of this feature, so much so that they can be negotiated with a single click of the mouse.

To trade CFDs you do not need to fill out forms and sign authorisations as you do when buying shares. In addition, it is just as easy to close investment transactions, with instant closing when you wish.

Therefore, CFDs are very practical and fast investment tools. But how do they work?

Each CFD replicates the performance of a financial asset, such as a share. If you trade a CFD on an Amazon share, for example, you may open a bullish or bearish position depending on your market forecast.

Once you buy a CFD (e.g. Amazon stock CFDs) this is what happens:

• If the Amazon title goes up, those who have negotiated upwards earn;
• If the Amazon stock goes down, those who traded down earn.

In CFD trading you can open Long (bullish) as well as Short (bearish) positions.

• When opening a bullish position, the trader buys contracts of type Longwhich allow him to obtain capital gains in proportion to the increases.
• When opening a bearish position the trader buys contracts of type Shortwhich allow him to obtain capital gains in proportion to the reductions.

Trading platforms

To trade CFDs you need access to a trading platform. The platforms are provided by online CFD brokers and therefore you must first register, i.e. open a trading account with a broker.

In this regard, we strongly recommend that you choose regulated and authorised brokers, as this is the only way you can be sure to trade safely.

A trading platform allows you to place orders to the broker, which can be of various types: opening and closing of buy or sell positions, stop loss, take profit, operational stop, pre-order and pending orders (sell limit, buy limit, buy stop, sell stop).

Advantages of CFD trading

CFD trading has many advantages, which we could summarize in economy (compared to traditional investment), practicality, convenience, speed.

With CFDs you have the opportunity to trade online from your computer, smartphone or tablet, with virtually no bureaucracy. So with CFDs you are not buried by the bureaucracy that a traditional investment requires.

For example, paper securities should not be held, deposited at the bank and negotiable only upon consultation and request. CFDs can be traded with one click and open positions can be closed out even after a few minutes. This way, you can also take advantage of increases of a few minutes and then close the position and make a profit.

Another great advantage is that with CFD trading you can also profit from downward quotations. To do this, you do not have to buy and then resell, but simply open short or “sell” positions.

CFDs are very popular throughout the world and are successful in countries such as South Africa, Australia, Malaysia, Saudi Arabia, United Kingdom, Singapore, United Arab Emirates, Indonesia, New Zealand, Japan, Thailand, Qatar, Taiwan, Brazil, Vietnam, Kuwait, Germany, China, Nigeria, Philippines, Bahrain, India, Kenya, Netherlands, Israel, Senegal, Ireland,…

Further benefits are most appreciable by making a direct comparison between CFDs and Shares, which we present below.

How CFD trading works

We have so far seen how you can trade, what are its advantages and what are the best platforms to trade, but how does trading this instrument work technically?

CFD trading takes place between individual investors and the companies offering this service, i.e. brokerage firms or brokers.

As there are no standard contracts for CFDs, each company can determine its own, while adhering to some common points:

• The contract for difference starts when the user (the investor) opens an upward or downward position on a particular instrument and ends when he closes the position on that instrument
• The investor’s gain or loss will be proportional to the price change between the opening and closing of the position
• As compensation for its service, the broker usually applies a spread, i.e. a differential between the purchase and sale price at opening. He can also add commissions for extra services, overnight (overnight financial service fee) and in some rare cases also a management fee if he offers portfolio management
• Once the market closes daily, a position is reinvested and carried over to the following day
• CFDs are “margining” products, which means that the trader or investor user must always maintain the minimum margin level. In the event that the amount of money deposited on the CFD platform falls below the minimum margin level, the broker will make a margin call in which the trader is asked to quickly cover these margins, which otherwise will lead to the closure of positions by the broker, in order to protect himself.

How much you invest with CFDs: the margin

A very important aspect to understand with regard to CFDs is that of margin. We have already mentioned leverage and margining. Below we provide an example so that you can understand how it works in the best possible way.

First, we distinguish between the two types of margin in CFD trading:

• Initial Margin: This is the amount that the user will actually go to invest for trading, and is given by the following initial margin. It is calculated using the ratio of nominal capital to leverage (e.g. if the nominal capital is $3,000 and leverage 1:30, the initial margin will be $100)
• Maintenance Margin: This is the margin required to keep the position open and is returned when the position is closed.

Let’s take an example. Let’s open a position on 1,000€ of the EUR/USD pair, with leverage of 1:30. The initial margin will be (1,000€/30) or 33.33€. Of these, if the holding margin is 50%, €16.76 will be frozen.

They will be returned when the operation is closed. The margin call is important because the equity (a sort of equity that we will talk about in the course) must always remain far enough away from it so as not to come across the margin call, which is a warning that losses have reached alert levels.

Speaking of margins, it must be said that:

1. Once the position is opened changes in share price will affect the available capital
2. When you decide to close the position, you will receive back the margin amounts, net of profit and loss.

Costs, how much does it cost to trade CFDs?

The question of costs can be included among the benefits because as we have seen in detail, CFD trading requires much less money than traditional investment.

Also with regard to the spread, which is what is due to the broker for his service, these are very small percentages and much smaller than the commissions charged by most banks.

Online CFD brokers instead of earning commissions, they profit from opening positions by applying the spread, so the more positions they open, the more the broker earns.

With CFD trading there is therefore no conflict of interest as the broker does not profit from the trader’s loss but from the quantity of his trades, each of which allows the broker to retain a small percentage that will depend on the type of instrument traded.

Typically, Forex offers the lowest spreads.

Differences between shares and CFDs

Ownership of securities

Unlike with equities, there is no ownership of securities to trade with CFDs, so there are not even the many bureaucratic procedures and costs that characterise a traditional equity investment, such as stamp duty or management costs.

Although CFDs are not securities that you physically take possession of, they can be traded quickly and conveniently for short-term profit only.

Expiry date of CFDs

However, most CFDs do not expire, so you are free to keep your position open for as long as you wish, but you will still incur overnight costs which should be refunded to the broker in exchange for keeping your position overnight (3 nights at weekends).

Results in a short time

It is important to point out that CFDs are instruments designed to achieve results in a short time, buying in a market upwards or downwards, in order to profit from upward or downward changes in a stock. Unlike stocks, CFD positions can be closed after just a few minutes with a simple click of the mouse.

Financial leverage

Another big difference between CFDs and shares is in leverage. CFDs are leveraged instruments, so for each individual transaction, the user will not be exposed for the total amount of the value of the traded shares, but only for a smaller percentage.

Finally, it should be noted that CFDs provide access to a wide range of shares, which is not possible through a normal bank. It is possible to create a portfolio of equity CFDs by choosing components from thousands of shares around the world, listed on all major stock markets (European, Asian and American shares).

For example, a 1:20 leverage of 1:20 allows you to trade in shares worth 1000 USD for just 50 USD.

Margin rates and leverage may vary depending on the broker and type of financial instrument used.

We will discuss this later in the lesson on CFD leverage.

On which markets can I trade CFDs?

In addition to equities, CFDs allow you to trade upwards and downwards on a variety of financial instruments such as currencies, commodities, ETF funds and indices.

Trading CFDs on Forex

CFDs on Forex allow you to trade on the currency market, then open up or down positions on currency pairs such as Euro Dollar, USD/JPY, EUR/GBP and many others.

The advantages of trading Forex with CFDs include the high leverage offered by brokers (around 1:30) and spreads, which are more advantageous than other financial instruments.

A tip: the smaller the spread, i.e. the difference between buying and selling price of the CFD, the cheaper it is to open a position on a financial instrument

Regarding Forex CFD trading it should also be noted that the famous professional trading platform MetaTrader 4 is optimal for this type of financial instrument, although more difficult to use than others.

Cryptocurrency

Cryptocurrency is a new entry in the financial market. They have boomed in recent years and especially with Bitcoin.

With CFDs, by now you will have well understood that you can trade both upwards and downwards, so you can trade both in anticipation of BTC rises and in anticipation of BTC falls.

As the price variations of cryptocurrency are very large, this offers large profit margins. However, there is one flaw: the spread for cryptocurrencies is usually very high and the leverage is very low. In practice, you need much higher capital than other financial instruments and especially than Forex trading.

Commodities

CFDs on commodities allow trading on oil, gold, silver, copper, natural gas and other types, such as food (soy, coffee, sugar, cotton, etc.).

Even for commodities the financial levers offered by brokers are usually very high.

As the prices of some commodities are very volatile, before trading with real funds we recommend a prior study of the raw material you wish to trade.

ETF

CFDs on ETFs have Exchange Traded Funds as their underlying.

These are particular funds whose shares are traded like shares and are characterised by high liquidity and low management costs.

CFDs allow you to trade them upwards and downwards in a simple way and with a good variety of funds.

Stock market indices

CFDs on indices usually refer to the main stock market indices of the stock markets, such as the Dow Jones, NASDAQ, S&P500, FTSE, or the Frankfurt Stock Exchange, but also to Mid Cap type indices, i.e. those enclosing mid-cap stocks.

Brokers also allow trading on other indices, such as the VIX index, the volatility index, and others.

Options

CFDs on options are a novelty that allows you to open positions on Call and Put options on index and other options.

They are a relatively new and recommended financial instrument for those who start trading.

Browser, app and software trading

To trade CFDs you need software that allows you to access the market and place orders upwards and downwards. These software are commonly called CFD trading platforms and are usually offered free of charge by the brokers you sign up with.

It should be noted that CFD trading is possible both with downloadable software and with dedicated apps, as well as with browser access. Compatible systems depend on the software offered by the broker, so below we will specify which operating systems are compatible with the various platforms mentioned.

Those who do not have a lot of experience and prefer an easy-to-use platform will find very satisfactory some very intuitive software, whose features are easily applicable by all users.

Those who have already gained experience with technical analysis applied to trading will find the use of more professional platforms very satisfying, among which the most famous and used is the MetaTrader 4, as well as how to try it for free in demo mode.

CFD FAQ

This post is also available in Spanish: brokers de cfds