The popularity of CFD trading has significantly increased over the past years. This is the very reason why more and more brokerages now decide to provide CFDs as part of their services.
For some individuals, the concept of CFD might seem a bit vague. Simply put, a CFD or Contract for Difference is a tradable contract between a CFD broker and its client, where both sides exchange the difference in the current value of a product and its value at the end of the contract. It is vital to note that investors never actually own the security they are betting on.
Now when the term is more or less clear, we encourage you to read about the distinctive features of CFD brokers, define the best CFD providers and see how they stand out in comparison to ordinary brokers.
Key features of CFD brokers
Perhaps one of the most attractive features that CFD brokers possess is the flexibility. This means that one platform grants an access to all major markets around the globe. Therefore, you can trade a great variety of CFD products during market hours. CFDs present really diversified trading options. Top online CFD trading brokers can offer you currency, commodity, stock, index CFDs, not to tell about treasury CFDs.
Though CFD brokers might look similar to normal brokers, there are some differences worth mentioning. For instance, CFD brokers offer clients much higher leverage than standard brokers. In fact, leverage offered by CFD brokers depends on the underlying asset and margin requirements start as low as 2%. However, they can go up to 19-20%. While comparing CFD and normal brokers, we might say that lower margin requirements in CFD markets mean less capital outlay for investors, which leads to high potential gains. It is important to admit that excessive leverage offered by CFD brokers might be tempting and even if you deal with best CFD brokers we recommend you to watch your step carefully. CFDs are highly-leveraged products and thus present a considerable amount of risk.
Another distinctive feature of CFD brokers is almost full absence of fees associated with order execution. On the contrary to ordinary brokers, most CFD providers do not charge any commission to enter or exit a specific trade. Instead of fees, CFD brokers make money by charging traders the price of the spread. Underlying assets in CFD markets can be volatile and depending on this factor the spread can be either large or small. However, top CFD brokers mostly apply a fixed spread for each product. As for the orders, they are much the same both at CFD and traditional brokers. Such orders include stop-loss orders, limit or “take-profit” orders, contingent orders and some brokers even offer guaranteed stop-loss (for an extra fee).
CFD market is not highly regulated yet, therefore no specific day trading requirements exist. Although a major case for other financial markets, the CFD market does not impose any rules to limit the capital allowed for day trading. Moreover, if you choose CFD as your investment vehicle, you will be able to place day trades without limits. Generally, CFD brokers can provide accounts with minimum deposit requirements as little as $100. However, this amount differs among various brokerages and you will see that in our CFD brokers comparison later on.
The last but not least important aspect to mention about CFD brokers is that whenever you trade CFDs, you are not subjected to short selling rules. This is because CFD market simply does not have them. Some normal brokers would prohibit shorting at particular times and thus require you to borrow the instrument prior to selling or even present different margin requirements for shorting. Since the underlying asset is never actually owned, a chosen instrument can be shorted whenever you prefer to do so. Thereby, either shorting or borrowing costs are entirely eliminated.
What are the best CFD trading brokers?
As we have previously noticed, CFD trading is not thoroughly regulated. Therefore, to find a credible CFD broker is the task of a paramount importance. Fortunately, there are brokers which reputation stands on the pillars of proficiency, financial position and customer satisfaction.
In this article, we would like to draw your attention to such prominent brokers of CFD industry as XM, Plus500 and EasyMarkets. We suggest proceeding now to our CFD trading brokers comparison.
Comparing conditions of the CFD brokers, Forex Bonus Lab came to the conclusion that one of the best CFD choices in 2018 is XM Forex Broker. This broker is regulated by CySEC, FCA, and ASiC as well!
On top of the premium trading conditions and free VPS service, it offers you 30 USD Non-Deposit Bonus as well as 50%+20% deposit bonus, which makes it one of a few legitame brokers that are still offering awesome bonuses!
What is more important, is the maximum leverage of 1:500 that is offered by this CFD broker!
Plus500 definitely wins an honourable place in the CFD market. Their proprietary platform allows unlimited CFD trading on the global scale – the broker operates in more than 50 countries. Customers tend to trust Plus500 as it is regulated by FCA, CySEC and ASiC. Hence, Plus500 is considered to be one of the best CFD brokers available.
Plus500 CFD platform allows you to trade more than 1,600 financial instruments, including Forex, commodities, metals, stocks, ETFs, indices and even Bitcoin. Due to the fact that Plus500 is a reputable CFD broker, it does not charge any extra commissions on trades.
76.4% of retail CFD accounts lose money
It is rather easy to start trading CFDs at Plus500, you just have to open a real account with the minimum deposit requirement of €100 or the equivalent in other currencies.
If you are new to CFD trading, Plus500 offers unlimited and absolutely free demo account. Hence, you are granted a possibility to learn basics of CFD trading by practicing with virtual money.
We have mentioned above that Plus500 provides its own trading platform. Even though this broker does not offer you MT4 or cTrader, their platform is well-designed with different versions available – desktop, WebTrader, iOS and Android versions for smartphones and tablets. The Plus500 platform certainly stands at the technological forefront. It is intuitive, multilingual and simple to use.
As you can see, Plus500 seems to be a five-star choice of the CFD trading broker for you.
Although EasyMarkets is not the best CFD broker as opposed to Plus500, it still deserves a justified second place. Easy-Forex not only has an edge in providing high-quality currency trading but also supplies CFDs for all its clients. EasyMarkets operates in more than 160 countries across the world.
EasyMarkets has a long history with a lot of positive feedback from its customers. Being regulated by CySEC and ASiC, EasyMarkets offers a safe way to trade over 300 financial instruments on their trading platforms. Talking about CFDs in particular, you can trade them on MetaTrader 4 or by using their own web-based platform. On top of that, EasyMarkets provides an incredible experience of trading on the go by the means of their mobile platform. This one of the best mobile platforms we have seen among top online CFD brokers. The only serious flaw of EasyMarkets in comparison to Plus500, is that the number of CFD products seem to be limited for now. However, EasyMarkets is constantly working on expanding their CFDs list.
EasyMarkets does not charge a single penny for order execution, as the only cost of trading CFDs is their tight fixed spreads – 2.5 or 3 pips depending on the account type. Perhaps one of the most amazing features of EasyMarkets is their ultra-low initial investment barrier – just $25 needed as the minimum deposit for opening a real account. Leverage available at this broker is even greater than at Plus500 – up to 1:400.
What makes us feel even more confident about EasyMarkets is that they offer an extra feature to provide you with an exceptional capital protection – segregated accounts.
Similar to Plus500, EasyMarkets allows you to open a demo account. Although this broker has an extensive scope of learning facilities, they are mostly dedicated to Forex trading and not CFD. It is not a big surprise since CFD is not the primary focus of EasyMarkets right now. Nonetheless, EasyMarkets remains one of the best CFD Forex brokers.
If you ever think about trading CFDs, you will not be disappointed. CFDs offer high returns, though it is still significant to have proper risk management. In CFD market, there are a lot of good brokers, though we tend to think that the top CFD trading brokers are Plus500 and EasyMarkets. Be free to join them!