Best CFD Brokers on the Market
The capital market has experienced a great boost in recent years due to financial engineering. Today, there are a lot of financial instruments to trade on due to this technological advancement. One such instrument is the Contract for Difference (CFD). CFD is a contract which lets you earn by trading on the price movement of a range of assets such as stocks, forex, commodities and cryptocurrencies. You can read more about CFD trading here: https://www.business24-7.ae/cfd-trading
Finding the right CFD broker to trade with is essential to your success in the CFD business. Before we delve into the best options on the market, it’s important that you understand what CFD trading is all about.
What is CFD?
CFD trades take place between two parties: the buyer and the seller. The seller is responsible for paying the buyer the difference between the opening price of an asset and its contract closing price.
No physical exchange of assets occurs. The trade between buyer and seller is purely speculative. Neither party can claim ownership of the financial asset. You can read more about the meaning of CFDs here: https://www.business24-7.ae/cfd-meaning
Is CFD Legal?
In the US, CFD is pretty much illegal. But European brokers work around this by allowing CFD traders to transact on US assets.
How does CFD Trading Work?
Much of the working of CFD trades has been explained in ‘The Ins and Outs of CFD trading’, but to summarise, the process is quite straightforward.
First, as a buyer, you have to make a decision on which underlying financial asset you wish to trade. This could be currency pairs, stock indices, commodities, forex, cryptocurrencies and so many others.
Next, you open a position. This could be a long position (you buy) or a short position (you sell). After this, you set the details of the contract, i.e. amount you’re willing to deposit, leverage and other such relevancies. Leverages only come into play when you want to enter a deal larger than what your account funds can carry. Your broker gives you a loan, leveraged on some form of collateral.
Before the trade is commenced, your CFD broker agrees on the mechanics of your contract, such as opening prices of your position, commission fees and/or potential holding costs.
During the trade, you and your broker monitor your position. If your position closes on a profit, your broker has to pay you. If your position closes on a loss, you’re obligated to pay the trader the difference, which may sometimes go above your stake.
Tips On How To Find a Reliably CFD Broker
Brokers play a huge role in all of your trading strategy. So, before you become enthusiastic and choose just any CFD broker, you need to consider some things:
- Financial Regulation
A lot of CFD brokers promise great kickbacks on deposits and all, but how many really ensure the safety of your funds. Factors like internal fraud may be dangerous for traders if there isn’t a regulation in place guiding the activities of a CFD broker. Consider the regulatory agency of every potential CFD broker. The Financial Conduct Authority (FCA) is the regulatory agency in the UK.
- Trading Costs
CFD trades are composed of a number of costs such as commission fees, spreads and holding costs. Spreads are the difference between a buy price and a sell price. Narrower spreads means you make considerable profit when prices move a little in your favour; and losses are minimal if prices go against you. Holding costs are subject to extension of trading contracts. Commission fees are somewhat mandatory.
- Wide Range of Tradable Assets and Markets
The best CFD brokers put a wide range of markets and asset classes on offer. This gives you more control over your trading choices.
- Great User Interface
Only choose trading platforms that offer good user-based trading software. Trade execution must be speedy; tools must be usable and effective; and the order management system must be easy to understand. Things like poor navigation can create problems for you when trading.
What Are Our Top CFD Brokers
Arguably the most regulated CFD trading platform on the internet, eToro offers over 200 CFDs in every major asset class on the planet. Not only does the website have a great user interface, its trading platform speed and performance is almost incomparable. With eToro you can constantly monitor your trades on its web platform as well as on its mobile app. The platform allows low minimum deposits, although the site recommends nothing lower than $250. Other than that, the platform is open 24 hours a day from Sunday to Friday. You can read the full review of eToro here: https://www.business24-7.ae/etoro-review
Plus 500 does a great job offering a portfolio of over 2000 financial instruments. Plus 500 is owned by Plus 500CY which is a subsidiary company of Plus 500 Ltd., which is listed on the London Stock Exchange. Plus 500 enjoys authorisation form many regulatory agencies, few of which are UK’s Financial Conduct Authority (FCA), the Monetary Authority of Singapore (MAS), and many others. Opening an account is easy; the site allows you to open a demo account to get a feel of the platform. It offers customer support in about 32 languages; and has a round-the-clock online support team. Plus 500‘s online trading platform called the WebTrader is supported by Apple, Android and Windows apps. You can read the full review of Plus500 UAE here: https://www.business24-7.ae/plus500-review
With Avatrade you can trade almost any CFD, cutting across financial assets such as indices, bonds, commodities and even precious metals. The website is regulated by the US Commodity Futures Trading Commission, the US National Futures Association and many more. The trading platform appears on the web, mobile platforms as well as on the Meta Trader 4 (the most used forex platform). Avatrade also offers world-class technical analysis and charting. You can read the full review here: https://www.business24-7.ae/avatrade-review
Like Avatrade, City Index offers a long list of CFD trades on different assets which includes interest rates and options. A UK company, City Index is endorsed by the FCA. It also offers WebTrader and a mobile app. With City Index, there is no minimum account deposit. Premium accounts are available; having one makes you eligible for loyalty rewards, priority service, etc. Minimum trade capacity is 1 CFD.
Notable mentions include the IG Group, FXTM, Ally Invest, EOption, and Interactive Brokers which offers similar CFD trading services as the aforementioned platforms.
Even with the right broker, CFD Trading could still be very tricky. Doing some in-depth research on CFD trading will put you on the right path.