CFDs – The Best Brokers in Comparison
All major CFD brokers in comparison here at Broker-Review.co.uk, the great test portal for online brokers. Using the comparison tables and the test reports, traders can quickly get an overview of the providers. Sorting according your criteria will help you quickly find the right broker.
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Interesting: Forex and CFD trading are usually offered by the same brokers.
CFD Brokers – Ranking
|Ranking||Broker||Regulator||Max Leverage||Spread||Assets||Min. |
|1.||MiFID||400:1||1,0 Pips||ca. 200||£250|
|2.||CySec||400:1||1,2 Pips||ca. 110||£100|
|3.||FCA||400:1||0,7 Pips||ca. 100||£100|
|4.||FCA||200:1||0,8 Pips||ca. 75||£215|
|6.||CySec||200:1||3,0 Pips||ca. 50||£100|
|7.||FCA||400:1||0,8 Pips||ca. 125||£200|
|8.||CySec||200:1||3,0 Pips||ca. 50||£100|
|9.||CySec||294:1||2,0 Pips||ca. 2000||£100|
|10.||CySec||400:1||1,8 Pips||ca. 100||£250|
|11.||BaFin||200:1||0,5 Pips||ca. 80||£4.000|
|12.||CySec||400:1||3,0 Pips||ca. 100||£100|
Immer 100% des Trades
|500:1||0,1 Pips||ca. 320||£250|
|15.||BaFin||40:1||0,2 Pips||ca. 1 Mio.||£2.000|
|16.||CySec||400:1||3,0 Pips||ca. 70||£200|
What is CFD Trading?
CFD trading is by no means a new trend. Already since the beginning of the nineties, the differential transactions have established themselves mainly in England. Also in the German-speaking area, there are many CFD brokers now and, of course, more and more German traders. All important underlying assets such as stocks, commodities, currencies and indices
Background and Characteristics of the CFDs
CFDs (Contracts for Difference) differ fundamentally from traditional financial products. In the case of securities trading or the trading of commodities traders acquire real assets. These tangible assets are, for example, stored in a bank or a depot. Of course, credit institutions charge fees for storage. This is not the case with CFD Trading. When trading with CFDs, the traders buy only difference contracts or they only speculate on the price development of certain products. This saves the dealer, of course, the fees from a deposit account or from a bank account. The Contracts for Difference are among the most popular financial instruments of today and offer the traders many advantages. The trade is very simple and flexible.The traders can trade the differential contacts on different off-exchange trading platforms, which are provided by the so-called brokers, at almost any time.
Another advantage compared to traditional financial instruments: In the case of CFD, traders can not only rely on rising (long go), but also on falling courses (short walking). Thanks to the leverage available, the returns and, of course, the losses in terms of capital employed are much higher than in traditional trading in equities, funds or ETFs. As a result, traders can also move very large sums with a relatively small capital inflow. Unfortunately, many inexperienced traders and newcomers underestimate the high risk of a leverage.
Legal Aspects of CFDs
In CFD trading different assets are traded and the traders participate in the price changes. The real rates of various underlying assets, such as stocks or commodities, are mapped by CFDs 1:1. Through broker trading platforms, traders can trade the CFDs in real-time and with just a few mouse clicks. The operation of the differential contracts is relatively simple and can be learned in a short time. For this reason, CFD trading is also particularly suitable for beginners. Although CFDs are derived directly from the prices of the reference markets, the differential contracts are off-exchange products. From the legal side, the contract is between the broker and the trader. The existing rights and obligations are therefore essentially limited to the correct payment of share price developments. There is therefore no obligation to buy or sell. In general, each broker can completely customize his CFDs. There is no uniform definition or standardized contract specification. Traders who hold CFDs on shares are not entitled to vote and are not entitled to dividends against the respective company.
Pros and Cons of CFD Trading
In a direct comparison to the traditional financial instruments, the differential contracts have many advantages. For this reason, more and more people are moving from the traditional trade to the business with the differential contracts. In the case of CFD trading, high returns are possible even with small capitals, thanks to the leverage. Traders must only deposit a fraction of the traded capital value with their broker. In the case of CFD trading, traders can rely on both rising and falling prices. The difference contracts are therefore not subject to any issuer risk. They are simply considered like normal deposits at the bank. In the event of an emergency, the CFDs take the deposit guarantee. Despite these many advantages, the CFDs also have a few disadvantages. Above all, beginners should deal with these in detail before they start trading. With CFD trading, there is a high risk of loss. This should mainly be considered by newcomers. If there is a margin requirement, losses can, of course, exceed the amount of capital invested. Through various risk management tools, traders can minimize the existing losses. In direct comparison to the exchange trading, spreads are higher for CFD trading. Although monitoring and regulation are also available, it is much weaker than in the exchange trading market. As long-term investments, the difference contracts are limited. Since the traders always deposit only a fraction of the traded value with the broker, they act almost as a credit. If a trader holds a CFD position longer than one day, additional financing costs will be incurred. These depend on the respective underlying and the current interest rate.
How is CFD Trading Done?
Traders wishing to start trading with the CFD need to meet only few requirements. An extensive prior knowledge is also not necessary for the trading with the differential contracts. Of course, already existing basic knowledge of the trading with shares, commodities and other underlying assets is an advantage. This is why the CFD trading is also very popular and suitable for beginners. Generally, the traders need some capital, a computer or a mobile platform and a connection to the Internet. The trading platform is the most important. In order to gain access to this, the traders must choose a broker (provider) first. When the choice is made, the trader must open a commercial account with the broker. In order to be able to start with CFD trading at all, the trader must deposit money into his trade account. The amount of the minimum deposit varies from broker to broker. The same applies to the trading platform.
The Trading Platform Plays the Key Role
In general, a distinction is made between web-based trading platforms and software based trading platforms. Through the platform, the trader has access to various contracts for difference. The number of available stocks, commodities, indices and bonds depends on the trading platform. The CFD trading is always in real time. Traders, however, can not buy CFDs from a broker and sell the derivative contracts to another broker. The positions held must always be solved or dissolved with the respective provider. Depending on which trading platform is used, this offers the trader additional functions. One of the useful features is the demo account. This is especially suitable for beginners who have never traded with CFDs. The test account is free of charge and allows the trader to trade under realistic conditions without having to use real money. Depending on the provider, the demo account is either temporary or even permanently usable. Many of the brokers developed a mobile app for their trading platforms. Thanks to these, the trader can also act with their smartphone or tablet PC while on the road.
How CFD Trading Works On a Practical Example
CFDs (Contracts for Difference) do not belong to the term transactions, which is why they have neither a term nor a maturity. CFDs can thus be held by the trader without any time limit. CFDs of UBS bankers were developed in the English capital, London. The bankers were looking for a way to circumvent the British stamp duty on shares. At that time, this was to be paid for each transaction. Through the CFDs, the banks were able to trade off-exchange. Since the shares of the CFD Trading never changed the owner, the dealers also had no more stamp duty to pay. Difference contracts can be traded on many different underlyings. It does not matter whether commodities, indices, bonds or shares are traded. In the following example, the trading of shares CFDs is explained in detail.
The share of a company is listed on Xetra for 10 euros. The shares are offered by a broker as CFD. The market value on the trading platform corresponds precisely to the price of 10 euros. In addition, the broker requires a margin (collateral) of 10 percent for trading in the difference contract. The trader is now on a rising course (he goes long) and opens a position with a capital input of 1 euro. Once the position of the CFD is opened, the contract value always corresponds to the real share price. If the share price rises by a total of 10 percent, the contract value also rises from 10 to 11 euros. Since the trader has used only 1 euro as equity, he receives a 100% profit in this case. If on the other hand, the price of the share falls by 10 per cent, the contract value of the share falls by 1 euro. In this case, the trader would have lost 100 percent. The leverage effect of the CFD trades will enable traders to receive higher profits, but on the other hand, they will also face higher losses. The size of the respective financial leverage can be derived from the level of the security performance of a broker. It always corresponds to the reciprocal of the margin requirement. With some brokers, the trader can choose a specific financial leverage. With most brokers, the trader has the choice between different leverage.
Traders Benefit From Low Fees
Compared to other trading instruments, CFDs are not only more easily structured. Costs are also lower in terms of fees than with other financial products. Most brokers charge none or very low costs. The traders only have to pay the financing costs (exclusively for the overnight positions), the spread ( a difference between the purchase and sales price) and also possible, the slippage. Shortly before a purchase or sale, the structure of an underlying asset may change. This could mean that the trader is offered a CFD for 10 euros, but the course will only rise to 10.05 euros a second later. If the trader takes the CFD to the higher course without having seen it, it is called the slippage.
What Can Be Traded With CFD Trading?
Investors who choose CFD Trading can benefit from a huge selection of different trading products. Contracts can be traded not only in one but in many different assets. The most common underlying assets are currencies, commodities, bonds, equities, indices and also futures. This allows traders to participate in completely different markets at the same time and to implement their individual trading strategies. The variety of underlying instruments is another reason for the great popularity of CFD trading. How many individual underlyings can be traded in total depends on the broker’s offer. If a trader is interested in a specific underlying or for a specific trading product, he should check in advance whether the respective broker has it in his offer.With the big brokers, traders have a choice between 1,000 and 1,500 values. This should be something suitable for every taste.
CFDs on Stock Indicess
Indices on equities are specific financial instruments that reflect the real price of an underlying asset of a listed company. The S & P 500 is one of the leading indices. This index covers the price of many well-known companies traded on the world’s largest stock exchange (New York Stock Exchange). If a total price of the various company shares increases, the price of the S & P 500 index also rises. There are also indicators for various stock exchanges around the world, such as the German Dax or the Japanese NIKKEI. In addition, there are also indices that reflect the share price of smaller companies. The range of indices on equities depends on a respective broker. On average traders have the choice between 10 and 20 indices.
CFDs on Shares
The CFD trading on equities is very popular. Therefore, most brokers offer their customers a wide range of different stock CFDs. On average, differential contracts can be traded on around 1,000 individual stocks from almost every country in the world. These include all known stocks of the world’s most important companies, such as Apple, Google and Facebook. The most famous companies in Germany such as Volkswagen, Bayer, Mercedes and BMW are also present.
CFDs on Currency Pairs
The offer of most brokers also includes various underlyings in a form of currency pairs. The most popular pairs, which also play an important role in the Forex trading, can also be traded with many CFD brokers. The number varies a lot from broker to broker. With many well-known brokers, up to 60 currency pairs are available to the traders. EUR / USD and JPY / USD are among the most popular underlyings. Because of the many available currencies, more and more Forex traders deal with the difference contracts.
Contracts on Precious Metals and Raw Materials
In the CFD trading, traders can also trade many of the popular precious metals, such as gold, platinum and silver. In the area of raw materials, the selection of CFDs is also very large. Among other things, differences can be traded on natural gas, petroleum, coffee, sugar, maize and rice. The total number of available underlyings is very different from broker to broker.
Contracts on ETFs and Government Bonds
ETFs are index funds with specific underlying values. These are either bundled according to an industry or a region. One of the most famous ETFs in Germany is MSCI Germany. Traders can even trade differential contracts on European, American or Japanese government bonds. The EUREX is one of the most popular government bonds. Compared to the other underlyings, ETFs and government bonds are not so popular with CFD Trading and are therefore not offered by all brokers.
Current Events and News Affect CFD Trading
In general, it is immensely important that traders follow the market. Current news and announcements influence the courses. In raw materials, the crude oil enjoys a huge popularity. This is mainly due to the fact that this well-known financial instrument can be strongly influenced by political events. These events can also be easily followed by small investors and well speculated. If for example, a new and large petroleum deposit has been discovered, this increases the supply. This usually leads to a case of crude oil price. On the basis of this development, most CFD traders will choose to open a short position (sales position). This example also shows very well why CFD traders must actively monitor the market. If a trader had not been aware of the new oil crisis, he might have opened a long position of crude oil and lost his capital in this case.
What to Consider in CFD trading?
Trade in differential contracts is relatively easy to understand. Nevertheless, there are a few basic things that every trader should know about. The use of large financial leverage is typical for CFD trading. For a long-term success, traders should therefore also know how margin and financial leverage work in practice. From time to time CFD traders are also faced with the funding obligation and the margin call. Therefore, traders should also know these two terms and their potential impact on trade.
Financial leverage is among the most attractive features of the trading with CFDs. The trader needs to use very little equity through the leverage. In contrast to the direct purchase of an underlying, the trader does not have to pay the total price and only deposit a relatively low safety margin. In direct comparison to the possible profit, the level of safety performance is relatively low. This also, unfortunately, leads to the fact that some traders quickly underestimate the existing risk. Beginners and very inexperienced traders should do without the CFD leverage in the beginning. The height of the CFD leverage differs from broker to broker. As a rule, the lever moves between 5 : 1 and 200 : 1. For some brokers, a very high leverage ratio of up to 400 : 1 is possible. The profit in CFD trading also depends directly on the amount of leverage used. The leverage is calculated by referring to the margin. 100 / Margin will give a value known as leverage and calculated as a percentage. The loss in CFD trading can be calculated in the same way.
For example, if a trader wants to invest 10,000 euros in a share price, he can do so with or without leverage. If the trader opts for a direct investment in the respective underlying, then he must invest 10,000 euros from his own pocket. If the trader opts instead for a 10 : 1 leverage, then he has to finance only 100 euros from his own pocket. If the share price then increases by 10 percent, the trader would have earned 1,000 euros in both cases through a sale. In terms of lower equity, the leverage ratio is 100 percent and the leverage is only 10 percent. The CFD leverage offers advantages for the trader but also disadvantages. Traders benefit from lower procurement costs and money deposits. Thanks to the leverage in the above example, you can achieve an equal profit with 100 euros, as with 10,000 euros. The CFD leverage is also associated with a much greater risk of loss. With a stake of only â‚¬ 100, traders can lose â‚¬ 10,000 or even more in the worst case.
CFD Margin and Margin Call
Contracts are leveraged financial products. If a trader trades with a leverage, he is obliged to deposit a margin (collateral) with the broker. Each broker requires such security. The amount of the security depends, on the one hand, on the respective underlying value and, on the other hand, on the capital use. When dealing with indices, most brokers demand a margin of one percent. For raw materials such as gold or silver the margin is at around 3 percent. For the shares CFDs, the security performance is on average 5 percent. If a trader makes a loss on trading, the broker retains the security deposit. Unfortunately, the loss can also be significantly greater due to the leverage. In such a case, the safety performance is no longer sufficient. If the trader has sufficient funds on his account, it is used by the broker. If, however, the dealer does not have sufficient capital, then a margin call comes through the broker.
How the Funding Obligation Works
Through the Margin Call, the broker calls on the trader to make a margin in the form of fresh capital. The amount of this requirement always corresponds to the respective level of the initial margin in the correlation with the current price. Due to the terms and conditions, the broker has the right to either close the trader’s position or reduce it to an appropriate extent if the trader fails to meet his margin requirements. Through the margin requirement a trader, if he acted with a high leverage and wrongly speculated, can lose a lot of money. Through a suitable risk management the traders can also avoid high losses or the margin call, of course. Many brokers provide tools in their trading platforms. One of the most popular risk management tools is Stop Loss. This allows the trader to set a limit for a negative price development. When the limit is reached, the position is automatically sold.
How to Choose the Right CFD Provider?
CFDs are not traded on the stock exchange. They are traded exclusively through special trading platforms. For this reason, traders who want to start trading first need to choose a suitable provider. In this case the traders have to register themselves. The registration itself is free and takes only a few minutes. Due to the great popularity of the trading of contracts for differences, many brokers have been introduced in recent years. In the meantime, traders with English skills can choose between more than 100 different brokers. The large selection makes it difficult for an inexperienced trader to find a suitable and, above all, reputable broker. Fortunately, there are some important criteria for a broker selection. In any case, the traders should be informed in detail before making the final decision.
What Criteria is the Most Important?
Many CFD brokers advertise heavily to attract new customers. They advertise, among other things, commissions and lure traders with great deposit bonuses. These two factors are not unimportant, but they do not allow traders to draw conclusions about their seriousness. The head office of the respective broker plays a very important role. Serious providers have a head office in the European Union at an established financial center. They are regularly monitored and controlled by a reliable supervisory authority and the funds of the customers are protected by a sufficient deposit protection. These important factors should be considered in any case. In addition, there are also some criteria that also play a role in the selection of the appropriate broker. Many German traders have opted for a broker, whose terms and conditions and risk statements are available in German. In addition, a high degree of transparency of the commissions and spreads, as well as a wide range of different underlying values, is highly regarded by many experienced traders. Many beginners especially appreciate a low minimum deposit and attach great importance to an existing demo account. The processing time of support requests and withdrawals is also very important. Traders, who like to trade on the move, choose a broker with additional mobile trading platforms.
Headquarters and External Representation of the Broker
At which location a broker has its headquarters, can be found quickly on its website. Particularly recommendable are brokers, which are located in Germany, in the UK, in Switzerland, in the Netherlands or in Austria. In addition, it is advantageous if customerâ€™s capital is held with banks that also reside in these countries. A regular check by the well-known supervisory authorities, as for example by the BaFin (Germany) or the FSA (the UK), significantly increases the security. Through the broker’s official website, potential customers receive a lot of important information. In the way, the broker presents itself in the public, serious and not recommended brokers can be clearly distinguished. They simply do not make a professional impression. For example, a broker with a head office in Germany on his official website only presents information in English. Customers should be able to clearly identify which documents they need to provide for disbursements and which payment methods are available to you. A reputable broker also tells his customers how long a payout usually takes and whether there are restrictions.
Low Entry Barriers and Many Basic Values
Low entry barriers are not advantageous for beginners only. A very high minimum deposit keeps most customers away. Furthermore, many newcomers pay attention to whether the broker offers a demo account. With this, traders can extensively test the trading platform without a financial risk. The test account should be supplied with live courses and not limited in time. As a general rule, in the case of CFD trading, the more diversified basis can be traded, the better. In this context, however, it is also important that the commissions and spreads move within a reasonable level. Further advantages are if there are several access possibilities to the trading platform. Many well-known brokers offer their customers a web-based trading platform, a download version and yet a mobile app. This allows traders to trade almost anywhere and always stay up-to-date.
Our CFD Broker Comparison Will Help You Choose
If you are not familiar with the most important criteria for broker selection, then you will have to pay a lot of money. You must visit the websites of the numerous well-known brokers and get a picture of each provider. Before you find a serious and individually suitable broker, many days can pass. With our CFD broker comparison, beginners, advanced and experienced traders will find the optimal CFD broker in a very short time. We have dealt extensively with the well-known brokers and thoroughly examined them. In our broker comparison, all the important criteria is taken into account. Since each trader has different preferences, our comparison can even be adjusted individually according to the criteria you find to be most important. Within a few minutes, an individual suitable provider can be found.