Best CFD Broker

When trading Contracts for difference it is important to choose the right CFD provider. Generally most people look for the best commission rates, reliable trading platform, and widest product range however there are many other aspects of a CFD provider which you should consider.

Here’s checklist of the items to investigate prior to choosing your CFD provider:

1. What markets are CFDs offered on?

Some Contracts for difference providers only offer CFDs over ASX listed stocks others offer CFDs over stocks listed on many global exchanges. You need to work out what CFDs you intend to trade in your trading strategy and choose a provider that is able to offer the CFDs you plan to trade.

2. Can my CFD provider offer more than just CFDs?

Some Banks, Brokers and even CFD providers can offer CFDs but many simply ‘white label’ the offering of a specialist Contract for difference provider to offer CFDs as an additional product next to shares, futures and options. If you trade multiple products you should consider choosing a CFD provided that can service all of your needs at once, however, if you are only likely to trade CFDs, a specialized provider would better suit your needs.

3. What margins and fees do I pay?

All CFD providers have different margin requirements and fees. Generally CFD providers will charge you fees for the following:

- Holding a Position Overnight (financing) 
- Exchange Data 
- Transaction Fees (commission) 
- Trading Platform 
- Negative Account Balances

Many people look at commission charges alone without considering the financing cost that CFD providers charge when holding positions overnight. You should look at all charges holistically and take into account that most CFD providers will not pay you as much interest on your free cash as you would get from a bank.

4. What platform should I use?

Before choosing a provider you should trial a demonstration of the trading platform that they use. There are many types of trading platforms some are very simple and easy to use, whilst others are difficult and complicated. It is important to be aware that some CFD providers charge for their trading platform, in many cases these CFD providers have outsourced their technology and need to pay a third party. It is also very important to ensure that the platform that you use can offer the order types that your trading strategy requires, some platforms do not offer trailing stop-loss orders and others do not offer if-done orders. You should ensure that the platform you chose is suitable for your trading style and can offer you all of the features that you require.

5. What range of CFDs should my provider offer?

Aside from shares CFDs are offered over a variety of different instruments including foreign exchange contracts, commodities and indices. Some CFD providers do not offer CFDs on all of these instruments. You should determine whether these instruments form part of your overall trading strategy before choosing a CFD provider as this may be a determining factor.

6. What is a spread?

The spread is the difference between the bid and the ask price, typically spreads are only applied to index and foreign exchange CFDs. Crossing the spread is much the same as a paying commission, this is how CFD providers makes money from their clients trading activity. Spreads can vary from provider to provider, much like commission there is not one standard spread all providers charge.

7. What margins should I pay?

Each Contract for difference provider offers CFDs on different margin rates, these can be as low as 1 percent or up to 100 percent. The margin you pay will vary depending on the liquidity of the underlying instrument over which the CFD is based. You should be aware that margin can work in your benefit or against you. Should you choose a CFD provider that offers low margin rates you should carefully evaluate as to whether you wish to use the full amount of leverage offered to you by you by the CFD provider. Low margins should not be the determining factor in choosing a CFD provider but rather you should consider the product range offered by the provider.

8. How long has the provider been operating for?

You should ensure that your provider is well established and can offer you the customer service that as a new trader you will require.

Remmber as a new CFD trader it is important to shop around and choose a provider that will best suit your trading style.

One of the common misconceptions in trading the markets using CFDs, is that it’s simple to make money and double your account. Moving on one step from that you find people who get drawn into the marketing hype behind automated CFD Trading systems that promise and impressive path to fast riches. Today we’ll consider some of the pro’s and cons of trading with CFD trading systems.

The Easy Road to Riches or the Fast Track to the Poor house?

Many trading systems being marketed today claim to require little to no effort and a rapidly rising equity curve. Are these impressive figures truly possible? From my personal experience from having traded several forex systems over the years I can highly recommend that it is possible to profit using either a black box trading system or an automated trading robot.

Increased profits without the time commitment

The key to using trading systems is to understand your objectives, find a system that meets your time frames and use outstanding risk management strategies. Whilst placing orders only took 10 minutes per day we found our record keeping and position sizing calculations took the longest, but in my humble opinion was the most critical aspect to our success.

Futures Markets, Options Trading, Foreign Exchange (FX 0r FOREX), Contracts For difference(CFD), Exchange Traded funds (ETF). Name your day trading poison, which financial instrument do you trade, and how do you decide?

Most people come to trading through the recommendation of a friend or colleague or by attending a trading seminar. You will develop a bias depending on your initial exposures and the compelling sales pitch of the presenter.

Firstly there are no right or wrong choices. Even within brokerage houses there is much divided opinion. My brokers, all of which are very experienced differ widely. My broker trades Futures and ETF’s as a surrogate.

His colleagues express differing opinions, one only trades options, another CFD’s and then there is the Forex guy. This is not an accident as the principal has brought together a team of traders with different interests and experience. One thing for sure is they don’t change from one instrument to the other. They have learnt one system and they stick to it.

They all have valid arguments. The futures guy, says why trade a gold mining CFD or stock, just trade the futures contract. The Forex guy says why trade the futures currency contract when you can trade the FX and not pay commission, the futures guy argues back that the spread is too wide on the FX contract.

They are all right. They are each experts in their own field. This is what you need to become, if you are to succeed in day trading.

So back to you.

If you have access, I would strongly recommend that you attend a trading expo, have a look at all the methods, and importantly do not commit to anything at the expo. You need to go home and access the pro’s and con’s of each instrument.

You will also be presented with software, live trading rooms and educational packages and brokers promising you the earth. Take a step back and a few deep breaths, do not allow yourself to be pressured. Remember you have to work with these people for a long time, if you feel uncomfortable with them in a short encounter then move on. Of course you will be offered all kinds of incentives that you can only get at the show.

Don’t fear, you can get that offer anytime. Just call them say you were offered X price at the expo, if they say the offer has expired, tell them that you will only pay the expo price and that you are prepared to do so only for the next 48 hours after witch you will buy another product.

If they won’t budge on price then go elsewhere, they probably weren’t worth working with anyway.

Read trading magazines and if you attend a few seminars find people already using that system and ask their opinion

One of the most important things when starting forex trading is testing various forex trading platforms on the internet to select the the one that can fulfill your needs. If you are planning to use automated trading system, this step is still most important since your system still needs a tool to connect to the market.

A trading platform is software that connects a trader and the forex market by providing basic features such as live price, execute orders, and account management. The other features ranged widely depend on the creator and the purpose; some of them are built solely for certain market, the other cover forex, futures, and CFD markets. Usually, forex trading platforms are given free by the brokers when you use their services. It can be comes in two forms: online platform or a software that you must download and install to your computer. These days, these brokers software has quite complete features; at the very least they are all support basic charting which is the bread and butter of forex market analysis. Due to various circumtances, you can’t always use the one from your broker; for instance: if you utilize Expert Advisor (EA) or forex robot, you must have it run under Meta Trader 4 (MT4), a popular trading platform.

So, what do you need from these forex trading platforms? These are some things that a platform should have:

1. Easy access to your account information as well as orders summary. The important thing is it should display real time value of your account based on your current open position. Example: if you close your position at the current price, your account will get profit/loss by 20 pips.

2. Easy access to the currency pair that you want. It should give you real time valid updates on the currency movement and quick live chart for analysis purpose.

3. Easy to execute orders. When get the right entry/exit price, you won’t have time to click various menu or buttons across the platform interface just to execute an order. The means to execute order has to be accessible by various ways.

4. Quick and accurate to execute order. Some forex trading platforms can’t fulfill these requirements on a steady basis. Usually, the problem is the software won’t execute the order that you have given; it will display the ‘waiting’ status while the market price keep moving and make you lose potential profits. This can be due to connection issues which can also be experienced by a credible broker, but there is also other probability: your account is in a scam brokerage. These brokers are designing their forex trading platforms so it will make it hard for you to have a winning trade or proper risk management. Sometimes it will not execute your stop loss order with various excuses afterwards. If you have experienced this again and again, just withdraw your account and find another broker.

Aside from scam brokerage, there are still many credible forex trading platforms that owned by honest forex brokers; just go with a recommended broker and you will be fine. The interface of the platforms might different for each broker, but as long as it is fulfill the four requirements mentioned above, it should serve you well.

Leverage

Options are contracts that can be traded just like stocks. The reason you should trade options is because of the powerful leverage they offer. To fully understand the leverage we can look at an imaginary stock called XXX

This stock might be trading at a value of $40.00. To buy 100 of XXX it would cost a total of $4000, plus brokerage costs. If the stocks go up $5.00 then we have a profit of $500. So then we look at what options can do

The call option for XXX for the forward month would cost about $300, plus brokerage. Now, options give you the right to buy the stock, but you have no obligation to buy. So when the stock price goes up so does the option price. The option price will rise in accordance with the stock price. Each option has a variable rate by which it can rise, but “at the money” options will rise at the same rate of the stock. So the same $5.00 price rice is applied to the at the money call option. The Call option is now worth $8.00, and can be sold for $800.

So from the above example we see that the same profit can be realized without outlaying a greater amount of money. For the stock, the outlay was $4000, whereas with the options contract the outlay was $300. And then the profit was the same.

Protection

Options can give you protection for your stock. A put option is a contract that allows you to sell your stock at a pre-determined price, within a given time period. It gives you the right, but does not force you to sell the stock. Put options can be thought of as insurance. Insure your stock in the market. It really is a smart idea. It will cost you but then all insurance costs. It is good to have a piece of mind knowing that you stock cannot go below your options price. If you only have one reason to buy options, this should be it.

Stock Recovery

Options can be used to recover losses in the market. There are lots of strategies you can use with options and this strategy is called the stock recovery option strategy. I won’t cover it here in detail, but I will tell you that by using this combinations of options, you can quickly recover any losses you have had in the price of your stock when the market goes bearish.

Extra Income

There is a strategy to use with options over stocks that will produce you a regular income. The covered call strategy is used to get monthly income from stocks that you already own. Even if you don’t own stocks, you can use this strategy with options to create a regular income. It is used by lots of people to supplement there existing income and can be a true wealth building tool.

Mix and Match

Options, when used in conjunction with CFD’s, stocks, futures, and forex give you a powerful way of creating income and capitol growth. You can mix and match these tools to get the best outcome for your trade. You must however, understand how each of these work to be able to fully utilize them.

Education in all of these areas is necessary before you begin trading. To ignore the rules and trade options or any of these tools will cost you a lot of money and wasted time.

The bottom line is trading like any form of high performing investment has a higher risk factor which matches its higher returns. If you want safety buy bonds or deposit your savings in a bank for next to no interest. Although the recent history of banking might call that strategy into question!

Your biggest risk lies in not having sufficient knowledge about your chosen investment field. It might be OK to buy a blue chip stock and then forget about it, but day trading is a hands on, in the moment activity which takes your entire attention for short periods of time.

One difference with day trading is that you control the level of risk. You decide how much you wish to invest, and how much you are prepared to lose should the trade go against you.

Most people who invest in stocks in a traditional way wouldn’t consider day trading because its too risky, but they are prepared to hold stocks even when the market falls. They just fool themselves that they haven’t taken a loss. The only difference is that they haven’t realised that loss yet. They hope that the market will come back.

But history has shown some so called very sound stocks can go all the way out the back door.

If you are prepared to study the field of day trading, when the time comes to actually take a trade you can do so from a position of being able to analyse, access and calculate the probabilities.

In trading the term mark to market means that your account shows in real time exactly how much you are winning or losing. So there is no excuse for a day trading to let a position become a big loser.

Unless, the other big risk we haven’t mentioned yet comes into play. That is you, your emotions, your beliefs, your personality and your ability to cope under pressure.

One of the riskiest things you can ever do is not know your risk. If you take a trade, your risk is the difference between where you entered the market and where your stop loss is placed plus any brokerage and tax.

This means you need to know the exact point value of any commodity or currency you are trading, if you don’t then you can’t calculate your risk. If you can’t make this calculation then you certainly shouldn’t be trading.

PS If you do not know what a stop loss is, then do not trade until you not only clearly know what it is, but you will always use them.

Contracts for Difference, commonly known as CFDs are an investment tool that is currently surging in the UK and European markets. It is an investment tool that reflects market performance of an index or share. It is a kind of buyer-seller agreement whereby they are to exchange the difference in the standing value of a commodity, currency, share or an index and the value of it at the end of the contract.

How do we know who pays who? Once the difference results to a positive amount, the seller will be the one to pay the buyer. If otherwise happens, the buyer will be losing his money, and the seller will be the one to gain. This easy and uncomplicated way of investing attracts many dealers to invest as well as companies to serve as CFD brokers.

CFDs are leveraged derivative products. They allow dealers to participate in the trading without needing to purchase and own an asset. They are also traded on a margin basis which only requires investors to use a small amount of money to take part in the trading. It takes advantage of the short-term stock market movements. It includes overlay high leverage benefits, hedging of portfolios, and ability to access global markets by just one trading account. CFD brokers apply low-commission rates and acquire gains from short selling.

Anyone that is 18 years of age and above can participate in trading CFDs as long as they have the ability as well as the capacity to invest. Most of the time, clients aiming to hedge their share portfolio and interested with short, and medium and long term investments seek advice from CFD brokers. Also, traders who are interested with CFDs are those who are intraday traders and Swing traders.

However, just like any other investment tools, CFDs also offer risk which would usually cause you to lose money more than what you had invested. So it is necessary for investors to know what they are getting into, risks involved and its sheer nature. Also, brokers of CFDs play crucial roles in the outcome of your investment, so it is essential that investors should choose the best and most effective CFD brokers. Although each investor has own requirements for brokers, they can start comparing and evaluating brokers with the basic information.

CFD broker has a low-margin requirement allowing more investments. Low commissions are also necessary since it will result to cheaper trading, existence of any other fees so as to make sure that you will certainly gain in the trade, stability and reputation of the company as well as costumer support, since it will help you forecast your potential investment with them. For those who are just starting out, better try out a demo account so that you can evaluate and test their platform offering.

Some of the known and highly recommended CFD brokers are IG Markets, InterTrader, Capital Spreads, City Index, TD Waterhouse and Spread Co.

Every investment allows you to earn money as well as loss it. The performance of every investment would depend on several factors like the market it is in, the investor, the dealers as well as the kind and nature of investment. Although choosing the best CFD brokers will put you in an advantage, it is still essential that you assess your personal goals and capabilities for you to know how equip and ready you are to face such challenges and demands of investing in CFDs.