Compare CFD Brokers And CFD Providers

	Commission	Real Time Trading	Online	Phone	Go To Site
	0.1%				IG Markets
	0.1%				CMC

CFD brokers or providers are online, using electronic platforms which makes CFD trading mobile, and also makes your trading routine a lot faster. There’s no need to call and talk to a CFD broker, unless of course you have a query, use a full service broker or need help with a particular order.

This is how to select a CFD provider or CFD broker.

One way, of course, is to ask about the experience of other CFD traders if you happen to know some, or met when learning CFD trading from a course or CFD educational provider.

However, with whichever provider you choose, ensure that you consider the following points, to make sure that they are established and that you're happy with what they have to offer. Another way is to try out a demo account with them to test their platform.

CFD Brokers Online: What To Look For

» Their margin requirement

Many CFD providers’ margin requirements are around 10% (usually from 5-20%), thus offering around 10 to 1 leverage. However, some share CFDs require a margin of 20-70% depending on the turnover of a specific CFD.

» Their commission

The commission for CFDs is usually 0.1 to 0.2% of your trade size each way, with a minimum commission of around $10-25, depending on the provider. Note that for some providers, the commission may be negotiable, especially if you a frequent trader. So don’t forget to ask.

» Number of CFDs available to trade and the number of CFDs that are shortable

Generally speaking, a large number of CFDs will be more important if you’re trading systems that are designed to be traded on for example, the top 200 or 300 CFDs, than if they are designed to trade say the top 30 or 100 only.

If your system is designed for a certain number of CFDs to produce your profits, then you’ll need to check the number of CFDs available to trade is adequate, otherwise you may have to go and redesign your system. You can even backtest with the current list of CFDs that are offered by the provider that you are intending to trade with, so that you’re designing a system that you know you can apply in real life.

» What are the order types that are available to be placed?

With many CFD providers, you can place orders at after the market is closed, so that if you’re working in the day, you can place your orders at night, and won't have to watch the prices during the actual trading day if you don't need to. In other words you’re trading a system that is traded on an end of day basis.

Some providers on the other hand will need you to place the trades when the market is open. It all depends on your trading system or strategy.

As well as this, consider if these apply to you:

Do you need to place a limit order or market order in the evenings to enter a CFD position the next morning?

Do you need to place an “if done” stop loss order, attached to your pending order to enter the CFD?

Do you need to place the “if done” stop loss order at a specified price, or at a distance from the entry price?

Are there rules on how far the stop loss order can be placed from the entry price?

If you place guaranteed stops (where if the price gaps through your price, you’ll be guaranteed to exit at your intended price), check the cost of this and whether the guaranteed stops be moved and if so, is there a cost of moving it?

» The interest charged for long overnight held positions, and paid for short positions

Different providers will have different base rates, and it is usually a major bank’s overnight interest rate. The rate charged for long positions will usually be 2-3% above that base rate, and the interest paid for short positions will be 2-3% below.

So there may be some differences here.

» Do their CFD prices exactly mirror the underlying stock price, or is the spread widened

Some providers offer DMA (Direct Market Access) CFDs which means you get the market price, whereas others do not offer DMA CFDs, and so the spread may be widened by a small amount, say 0.05%.

You will have to take this in context of the other costs of trading, as the same provider may have also smaller commissions, whereas another provider who does not widen the spread may have higher commissions. So in summary the costs are commissions + interest + spread widening (if any).

» Any other fees

For example, depending on the country’s CFDs that you’re trading, there may be a monthly fee to access live dynamic prices, though your provider may waive this fee if you trade a certian number of times a month which may be easily met if you are actively trading.

» Is the company reputable and stable?

It’s always a good idea to trade with a provider that is stable and well established.

Because different providers may have different pros and cons, many traders in fact trade with more than one provider.

For example, there may be a provider that has relatively low commissions, have 200 CFDs available, but only a small number of CFD that you can short. So the trader may also use another provider that has a higher commission, but has over 200 shortable CFDs. The reason behind this is that their trading system is much more profitable when able to short the full list of CFDs, even despite the higher commission costs.

» Customer support

You can look for customer support in terms of the helpfulness of the dealers are on the phone.

This is just to make sure that you are happy with their customer service.

CFD dealers: Other differences between them

Note that the precise details of how CFDs are actually filled when a position is entered depends on the market maker themselves. For example, some market makers rely on there being adequate liquidity on the underlying stock for your trade to go through at that price point. Whereas another market maker may add the volume that CFD traders are creating to the underlying market volume, to enhance market liquidity.

Similarly with exits, some providers will exit CFDs at a market weighted price if there is inadequate volume traded at each price point, whereas another provider will exit you at a price point regardless of how many underlying shares are traded at that price.

These details may make a difference to the amount of slippage you may encounter depending on the liquidity of the stocks you are trading. If the market you’re trading is not extremely liquid, this will have more impact than if you’re trading a large market that has little liquidity issues.

Sometimes, not everything you want to know is on their website, though most of the details are usually. If not, you can ask your provider for help or to answer questions.