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Best 5 CFD Brokers Compared for 2019

Last Updated: 30. July 2019
Best 5 CFD Brokers Compared for 2019
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What are CFD Brokers?

A Contract for difference (CFD) asset is a financial derivative instrument that allows trading of financial instruments by speculating on the price movements without actually owning the underlying asset. An investor buys or sells units of the given asset, and intends to profit based on the price movement. The contract is usually between a trader and a broker and it is an agreement to pay out on the difference in the buy and sell prices.

CFD brokers act as intermediary between the market and the traders. These brokers will provide traders with the trading platform, technical analysis tools and the right execution speeds for fast trading. A CFD broker will also define the contract terms, the trading assets (stocks, indices, and commodities) as well as the margin requirements.

One factor that makes CFD trading to standout is the fact that these contracts have no expiry date, and that you can take advantage of both bullish and bearish markets as it’s possible to go long (buy) or short (sell).

In this article, we have done the legwork for you. We will not just provide you with the best CFD brokers in the market; we will also help you understand how to choose the best CFD brokers, the crucial role played by these intermediaries as well as help you to understand CFDs in details.

Note: CFDs give traders the ability to amplify their gains by taking advantage of the leverage provided. However, it is worthy noting that leverage is a double-edged sword, allowing you to earn above average gains while at the same time could end up blowing your trading account.

What are the pros and cons of CFD brokers?

Pros:

  • The higher leverages provided by most brokers exposes you to higher profits
  • Their systems make it possible for you to benefit from both rising and falling markets by going long or short on a trade
  • Their near-instant order execution speeds minimize instances boost profitability
  • Most maintain lower trading fees and charges compared to shares and stock market brokers
  • Most are licensed and regulated by several global financial regulatory agencies

Cons:

  • The high leverages and fast trading speeds availed here encourage overtrading
  • Most haven’t put in place adequate risk management structures
  • Some don’t pay attention to trader education or training

Role of CFD Brokers

Over the years, CFD brokers have developed extensively. Brokers have adopted innovative technological solutions in their bid to remain competitive. The services rendered have also expanded from rendering traditional CFD brokerage services to providing quality research, trader education and developing software solutions to endear traders to their services. The following are some of the roles played by CFD brokers:

I. Interfacing traders to the CFD market

The primary duty of CFD brokers is to provide traders access to buy or sell CFD instruments. This is done by granting traders access to the market while the broker act as agents. Market makers do not immediately route the trades to the global market. They actually execute the CFD trades in-house. That way, they are able to accommodate low volume retail CFD traders with limited trading capital.

II. Simplification of CFD trading

Many years ago, CFD trading was exclusively for hedge funds and firms with huge capital. Several documentations and processes are involved. Today, the process has been simplified by the advent of CFD brokers. These brokers have built websites, mobile apps, etc and have adopted technological approach to simplify CFD trading. Trading capital requirements has reduced drastically to a few dollars. Nowadays, you can easily open an account with a broker in another continent and commence CFD trading, all within a few minutes.

III. Trading on Margin

CFD is traded on margin which makes it more accessible and affordable to traders with low capital. This means that CFD traders can open trades with funds much more than the amount they deposited. The brokers make this possible by automatically lending funds to the traders according to the leverage offered.

IV. Provision of Trading Tools

Brokers know that they need clients to succeed, so they try to provide the tools needed by these CFD traders in order to keep them. This is fast becoming a standard as brokers try to outdo themselves. Different brokers provide trading tools to aid their clients.

Several brokerages operate news columns and market analyses pages. They also provide charts, market news, strategies and webinars. The overall aim is to keep CFD traders in the network and provide them the tools they need to succeed.

V. Trader Education

In order to succeed in the business of CFD trading, comprehensive trader education is required. Many brokers understand this, so they have taken time to create training videos, eBooks and training courses. Some have gone as far as launching a trading academy with learning progress, quizzes and student levels. The category levels are beginner: intermediate and professional. Many brokers, like ‘24option’ organize monthly webinars as part of their continuous trader education policy.

How to find the best CFD broker

With so many CFD brokers out there offering a myriad of services, how do we separate the best from the lot? The following criteria were used to select the best CFD brokers for 2019:

I. Regulatory status
A regulated broker means a broker that has registered with a government recognized financial institution that controls and oversees its operations. Regulated brokers comply with strict rules as postulated by the regulatory bodies like FCA, CySEC, ASIC, etc. Some of the rules are account segregation, best cyber security practices, large capital base, investor compensation, etc. We will never recommend an unregulated broker.

II. Ease of platform Use
Every broker provides its traders with a software platform that is used for trading CFDs. Our chosen brokers provide software platforms that are intuitive, simple, easy to install and use. There are some trading platforms that have high system configuration requirements and confusing user interface that requires detailed learning. We avoided brokers with such platforms.

III. Provision for Mobile CFD trading
In 2019, mobile phones have become an integral part of our lives. Its use is inexhaustive as new apps come up daily showing its new capabilities. Today, we use it for banking, shopping, business, communication, etc. So, a good CFD broker must cater for traders who wish to trade on the go. This is done by developing mobile optimized websites or even better with mobile apps. Our best CFD brokers all have their trading platforms developed for android and iOS mobile apps.

IV. Trader Education
It has been proved that most CFD traders come into the market with the aim of making quick money. They do not bother to acquire sufficient trader education. Sadly, they end up losing their initial capital. A good broker must provide trader education for its clients. The training includes, platform training, CFD market training and some training on analysis.

V. Market Research
Every successful trader must understand the market, its volatility and be vigilant to identify trading opportunities. A top rated broker should be able to provide market news and daily analysis to its clients. Our best CFD brokers have employed experts who present their analysis and trading advice to traders on a regular basis.

VI. Ease and Affordability of Account Opening
Generally, it only takes a few forms to open an account with a broker. The brokers that made our list allow new clients to open trading accounts within a few minutes. Plus500 requires only a page form to open a new account to start trading. Verification of documents comes later. If you already have a facebook or Google account, it becomes easier as the account opening process in integrated with these accounts.

Best  CFD Trading Providers 2019

There are several brokers across the world that offers CFDs. These brokers offer different asset classes and different instruments. There are many other tools provided to traders via the broker websites and trading platforms. Find below our best 3 CFD brokers for 2019.

1. Plus500

Founded in 2008 with regional offices in UK, Cyprus, Australia and Singapore, Plus500 has become a global broker. Plus500 is publicly traded on the London Stock Exchange (LSE) and it is also part of the UK FTSE 250 index. The brand is regulated by the FCA in the UK, CySEC in Cyprus, ASIC in Australia and MAS in Singapore. The broker provides its services to residents of over 50 countries. Some of the CFDs available are:

  • Indices like UK 100, IBX, ATX, WIG20, and SPI200.
  • Commodities like gold, silver, sugar, and natural gas.
  • Cryptocurrencies such as Bitcoin, Ethereum, Litecoin, and monero.
  • Shares like Paypal, Tesla, Coca cola, Nestle, intel, etc.
  • ETFs like SPY, QQQ, GDX, FAZ, XME, etc.

Only two account types are available on Plus500; the standard and professional accounts. To open an account, fill the online form, upload your verification documents, make a deposit (minimum of $100), and choose a CFD to trade.

The Plus500 trading platform is user friendly and web based. It also has a windows version and mobile version. The platform provides traders with live quotes of CFDs, charts and tools for analysis and risk management.  Trades can easily be opened, managed and closed at will.

Plus500 do not charge commissions. Every trading fee is built into the spread. A maximum leverage of 1:30 is offered to retail traders from the ESMA region while professionals can trade with a maximum leverage of 1:300. Global retail traders are offered a maximum leverage of 1:150.

Pros:

  • Plus500 offers multiple CFDs for trading across different asset classes.
  • It is a regulated broker that has been in operation for over a decade.
  • The broker offers very tight spreads and charges no commissions at all.
  • The provided platform is intuitive, easily accessible and available on mobile devices.
  • The trading platform features sms and email notifications based on predetermined price movements, change percentage and other factors as configured by the trader.

Cons:

  • Plus500 services are restricted for traders from several countries.
  • The broker does not provide trader education courses.
  • There are no daily CFD research reports or technical and fundamental analysis.

2. AvaTrade

AvaTrade is a global online broker founded in 2006. It is regulated across several jurisdictions which include Ireland, Japan, South Africa, Canada, Australia and the British Virgin Islands. The broker provides services to over 200,000 clients from about 150 countries across the world.

The CFD offered for trading are commodities, ETFs, Indices, stocks, bonds and cryptocurrencies.  A leverage of up to 1:400 is offered to retail clients across the world but the EU and UK zones are offered a maximum of 1:20.

Different account types are offered based on trader experience and trading capital. The minimum account opening balance is $100. AvaTrade offers innovative platforms on mobile and desktop computers. The popular MT4 is available along with social trading platforms like ZuluTrade and DupliTrade. AvaTradeGO and the MT4 apps are the mobile trading platforms. Other platforms are Ava options and Mac trading.

AvaTrade also provides trader tools like Autochartist, trading calculators and the economic calendar. News, analysis and trading academy is provided via SharpTrader; a new website from AvaTrade.

Pros:

  • AvaTrade is authorized and regulated in 6 jurisdictions across 5 continents.
  • Customer support is available 24/5 in 15 languages.
  • Cutting edge platforms with access to extension tools like Autochartist and other MT4 plugins.
  • AvaTrade offers ‘first deposit bonus’ and ‘refer a friend bonus’ to its clients.
  • SharpTrader supports the trader by providing trader education.

Cons:

  • Demo accounts expire after 21 days.
  • Administrative fees are charged on dormant accounts.

Role of CFD Brokers

Over the years, CFD brokers have developed extensively. Brokers have adopted innovative technological solutions in their bid to remain competitive. The services rendered have also expanded from rendering traditional CFD brokerage services to providing quality research, trader education and developing software solutions to endear traders to their services. The following are some of the roles played by CFD brokers:

  • Interfacing traders to the CFD market

The primary duty of CFD brokers is to provide traders access to buy or sell CFD instruments. This is done by granting traders access to the market while the broker act as agents. Market makers do not immediately route the trades to the global market. They actually execute the CFD trades in-house. That way, they are able to accommodate low volume retail CFD traders with limited trading capital.

  • Simplification of CFD trading

Many years ago, CFD trading was exclusively for hedge funds and firms with huge capital. Several documentations and processes are involved. Today, the process has been simplified by the advent of CFD brokers. These brokers have built websites, mobile apps, etc and have adopted a technological approach to simplify CFD trading. Trading capital requirements has reduced drastically to a few dollars. Nowadays, you can easily open an account with a broker in another continent and commence CFD trading, all within a few minutes.

  • Trading on Margin

CFD is traded on margin which makes it more accessible and affordable to traders with low capital. This means that CFD traders can open trades with funds much more than the amount they deposited. The brokers make this possible by automatically lending funds to the traders according to the leverage offered.

  • Provision of Trading Tools

Brokers know that they need clients to succeed, so they try to provide the tools needed by these CFD traders in order to keep them. This is fast becoming a standard as brokers try to outdo themselves. Different brokers provide trading tools to aid their clients.

Several brokerages operate news columns and market analyses pages. They also provide charts, market news, strategies and webinars. The overall aim is to keep CFD traders in the network and provide them the tools they need to succeed.

  • Trader Education

In order to succeed in the business of CFD trading, comprehensive trader education is required. Many brokers understand this, so they have taken time to create training videos, eBooks and training courses. Some have gone as far as launching a trading academy with learning progress, quizzes and student levels. The category levels are beginner: intermediate and professional. Many brokers, like ‘24option’ organize monthly webinars as part of their continuous trader education policy.

Bottom line

The evolution and surge in popularity for the CFD Brokerages have played a key role in eliminating major trading bureaucracies that prevented most small scale investors from accessing different markets. It has introduced the concept of fractional share trading and sped up the time it takes to complete a trade through the development of more technologically advanced trading systems that incorporates numerous premium market analysis tools. These factors plus the ease of account with most CFD brokers, access to high leverages may, and an even larger pool of CFD products is gradually revolutionizing the CFD brokerage industry by drawing in more traders. You nonetheless have to be cautious when deciding on the best brokers by ensuring that you only register with brokerage houses of solid repute. Start by confirming whether they are registered and regulated and the level of technology used by their systems.

FAQs

What is a Contract for difference (CFD)?

A contract for difference (CFD) is an agreement that enables the trader to speculate on rising and falling prices of fast moving global financial instruments like shares, indices, commodities, cryptos and bonds.

Is CFD trading the same as forex?

CFD trading involves different types of contracts which cover a set of markets like indices, energy, metals, cryptos and stock shares but forex offers only currency trading.

How do CFD brokers make money?

They make money through the spread quoted for every instrument. Some brokers also charge a commission per trade. Inactivity fees and withdrawal fees are charged by some brokers.

Do CFD contracts expire?

Cash based CFDs do not expire but future based CFDs have expiry dates which are stated on the contract specifications. So CFDs on shares, indices and ETFs do not have expiry dates but CFDs on commodities, bonds and futures have expiry dates.

How much do I need to trade 1 contract of a CFD on Plus500?

It depends on your country of residence and on the CFD asset group that you wish to trade. On the EU platform of Plus500, you need 5% margin to trade gold, 10% on commodities, 20% on major equities and 50% on cryptocurrencies. So if a Gold position costs $3000 to setup, you would need at least $150 to initiate the trade. But, if you are not from ESMA jurisdiction and on the global site of Plus500, you need a margin of 0.667%. This means that you only need $20 to start the trade.

How do I trade CFDs?

Open and fund an account with a broker such as Plus500 or AvaTrade. Decide which trading instrument to buy or sell. Go to the broker’s trading platform. Select your trade size, add a stop loss if you wish. If you think that the price will increase in value, click ‘buy’. But if you think that the price will fall, click ‘sell’.  Monitor and close your trade at the right time.

How do I become a successful CFD trader?

The key to success with CFD trading is preparation, planning and discipline. Here are some tips:

  • Take time to learn and acquire proper trader education.
  • Find the right platform and reputable broker.
  • Have a trading plan, strategy and focus.
  • Be patient, take it slowly
  • Diversify and be open to new knowledge.

What are the best CFD brokers?

The top three picks for CFD brokers in 2019 are Plus500 and AvaTrade.

How much do CFD traders earn?

Earnings from CFD trading depend on account size, trade size, strategy, risk management, discipline and many other factors. To be realistic, it is possible to fund an account with $5,000 and make around $500 per month. Top CFD traders have thousands of copiers and make additional money from commissions.

 

Can I trade CFDs in the United States?

No. CFD trading is not permitted in the United States.

Views expressed are those of the writers only. Past performance is no guarantee of future results. Trading comes with severe risk. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
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Edith is an investment writer, trader, and personal finance coach specializing in investments advice around the fintech niche. Her fields of expertise include stocks, commodities, forex, indices, bonds, and cryptocurrency investments. She holds a Masters degree in Economics with years of experience as a banker-cum-investment analyst. She is currently the chief editor, learnbonds.com where she specializes in spotting investment opportunities in the emerging financial technology scene and coming up with practical strategies for their exploitation. She also helps her clients identify and take advantage of investment opportunities in the disruptive Fintech world.