- Category: Articles
- Published on Friday, 08 February 2013 20:14
- Written by Super User
- Hits: 12099
When you have become enthousiastic about the possibilities that trading cfd's offer, then the next step is important: choosing a good cfd broker. There are big differences between cfd-brokers and once you have signed up with one of them, you are less likely to another cfd-broker. That is why it is important to get wel informed, so that you can make the right choice and start with the broker that right for you.
Important aspects of choosing a cfd broker
- Which markets and assets can be traded?
- What is the maximum leverage?
- What is the minimum position size?
- CFD trading platform
Which markets and assets can be traded?
Most cfd brokers offer trading in differentindices (like the S&P500, NASDAQ, DAX, NIKKEI, etc.), commodities (gold, oil, wheat, copper, gas, etc.) and the most important forex pairs (EUR/USD, USD/JPY, etc.). There is a number of brokers that offer trading in individual stocks. Often the biggest, worldwide operating multinationals. When choosing a cfd broker it is good to think about what assets you want to trade and choose your broker accordingly.
What is the maximum leverage?
There is a big difference in the maximum leverage that cfd brokers offer. Usually leverage lies somewhere between 10 and 400. The highest leverage is often possible on forex-pairs. The lowest leverage on individual stocks.
What is the minimum position size?
For the not so wealthy traders among us, it is important that the minimum position size is as small as possible. Otherwise trading some assets could be impossible for you due to a too small trading capital. Information about minimum position size can be found on the website of the cfd broker.
There are different trading platforms in use with the different cfd brokers. Some are very extensive with a lot of possibilities. These are however somewhat more complicated for a starting inexperienced cfd trader. Others are more basic and easy to use. It is important to choose a platform that matches your knowledge and experience level and anwsers to your wishes. With most cfd brokers you can open a demo account, which is a very good way to try out the trading platform.
It is important to know where and by what institution the cfd broker is being regulated. It is best when the broker is being regulated by a reliable financial authority like the British FSA or the NFA in the USA. That way you have more security that your money is safe with a reliable broker and that you can go somewhere with complaints or conflicts.
The spread is the difference between the bid and ask price. The cfd-broker defines the spread. This is how the broker makes money. The difference between the bid and ask price is the commission for the broker. Cfd brokers often have different spreads for the different asset categories. For example the spread for individual stocks will usually be higher than the spread on major indices or forex. There are differences between the spreads used by the different cfd brokers. It is worth the effort to compare them, because this is about the cost of trading. Information about spreads can be found on the website of the broker.
First deposit bonus
A number of brokers offer a bonus on the first deposit to welcome new traders. This means that a new customer will get a certain amount of money from the broker, on his trading account, on top of the money of his first deposit. Often this is a percentage of the deposit. The hight of the percentage differs per broker. One rule that must be taken into account is that the bonus comes free (can be transfered off the trading account) after you have done a certain number of trades in combination with a certain volume. The available bonus should not be the most important consideration when choosing a good cfd broker, but it is a nice extra to be taken into account.
It takes time and some effort to find the right cfd-broker. If you don't have the time to check them all out, then we can recommend a few. These are all reliable brokers of high standard, with a proven trackrecord. It are the following brokers:
Markets.com: A cfd broker with a very professional tradingplatform. They offer extensive trading possibilities and very good service and support. A very good broker for the more advanced trader. Markets.com is being regulated by the British FSA.
eToro: A well known broker from the U.K which is regulated by the British FSA. eToro is, with more than 2 million customers, one of the biggest cfd brokers in the world. And that is for a reason. They are strong in the area of "social trading". They maintain an extensive community of traders, where you can make use of. Amongst other things they offer "copy trading". With copy trading you can copy the best performing traders, direct and automatically in your account.
Plus500: A reliable broker which is also regulated by the British Financial Conduct Authority. Plus500 offers a multilingual, easy to understand, tradingplatform. Most types of cfd's can be traded with Plus500: forex, stocks, stockmarket indices, ETF's, commodities and precious metals.
* your capital may be at risk