CFD trading is skyrocketing in popularity among new traders. Because you only open trading contracts rather than buying the underlying assets, it has some big benefits. These include low barriers to entry and extremely flexible trading options available. But, don’t jump in too quickly. Here are a few things you MUST know before you start CFD trading.
A CFD is a “Contract for Differences” that you open with another trader. Essentially, the buyer agrees to pay the difference in the price of an asset between the opening and closing of a contract. Thus, you can speculate on the price of an underlying asset (e.g. a stock, bond, crypto, commodity) without ever owning it.
This has a number of benefits. First, is the lower cost compared to buying the asset. Fees like stamp duty are exempt from CFDs, and it’s easier to get started with limited start-up capital. CFD trades are typically faster and easier to execute and can often be traded 24/7.
CFD trading also makes it trivially easy to go either long or short on an asset. So, you can bet on the price going down just as easily as betting on the price going up. This allows for more flexibility for those who like trading for high stakes in volatile markets, such as the live Forex market.
To have success in trading, it’s vital to choose a great CFD platform. Not all of them equip you with everything you need to make consistently profitable trades. Here are the most important qualities to look out for:
- Convenient: the platform should give you easy access to all of the assets and markets you engage with on a regular basis. It should also provide you with all the trading tools you need in a convenient manner.
- Understandable: the interface should present your relevant trading information in a way that’s intuitive and easily understandable. This is important because trading is all about effectively processing data in real-time and making good decisions quickly and consistently.
- Reliable: one bad trade or mistake in trading can cost you weeks or even months of profits. So, the platform should provide automated features and limits to help you minimize risks.
If a CFD platform has all of these traits, then you can simply go ahead and register an account there. Here are some of the best on the market that we recommend you to try.
Here are 5 of the top CFD trading platforms that tick all of the boxes above:
Capital.com is a solid all-around CFD platform where you can trade stocks, crypto, stablecoins, commodities, Forex, and more. The platform has excellent market research and educational content for users.
eToro is one of the most popular and well-marketed trading platforms globally. It has a wide selection of currencies, stock indices, stocks, crypto, and commodities to trade with CFDs. It’s well regulated by the top UK and Australian regulators and has reasonable fees.
IG is a platform that’s been around since the 1970s. It has a huge range (almost 20,000) of tradable asset pairs. There are also good educational resources too. This platform has slightly higher than average fees and a minimum deposit of £250.
XTB is another well-regulated platform with headquarters in Warsaw and London. It was founded in 2002 and has a good track record. Fees are reasonable, starting at $1.50 and, there’s a good selection of tradable assets.
Interactive Brokers was also founded in the 70s. It claims to have some of the tightest spreads in the industry, which are important for profitable CFD trading. The commissions are tiny, starting from $0.
Forex.com is another platform known for tight spreads and fast order execution. There are also $0 commissions and over 9,500 CFD stocks.
CFDs are an extremely flexible and exciting way to trade. There are many CFD trading platforms available that give you the tools you need to build a great trading system. Use the guidelines above to get started. Just remember, CFD trading is particularly risky, so be prudent and use all the support tools available on your chosen platform.