How To Compare CFD Brokers Trading Brokers?

There are a number of things to consider if you are looking to pick a new or your first CFD online trading broker.

The first thing, as you can expect, is to look at the prices that they charge: some CFD brokers make their profit by charging commission while others include the costs in the CFD spread. Usually only DMA CFD brokers charge commission but you can see in our table a true comparisons of all costs.

The second important criteria is to look if they are fully regulated by the FCA. This is key as all CFD brokers has to be regulated by the FCA. If you have doubts you can double check this in the FCA register: you will than be able to see if the broker is regulated as UK firm rather than being regulated somewhere else like Cyprus and using the EU to appears as they are. This is very important as only FCA authorised and regulated brokers will be able to offer client funds protection under the FSCS.

The third important element to consider is how good is their online trading platform. Surely you can look at videos on the net but there is only a way to establish how good they are and it is by trying their trading platforms. You can do this by opening a CFD trading demo account: in this case you will be able to prove their functionalities without risking any of your money. In some cases the demo will have some limited functionalities but it will still be good to understand if the trading platform fits your style. We have tried them extensively and provided some feedback and comparison but the trading platform is only good as it fits your style so we suggest you actually go ahead and try some yourself.

What are the most important things to look when comparing a CFD broker?

We have summarised below the main points you need to consider when comparing CFD brokers: 

  • Size of CFD spread
  • Margin available or leverage
  • Markets available to trade
  • CFD broker is regulated
  • Overnight financing rates
  • DMA trading available or not

Let’s take a look in more details to those important online CFD brokers comparison criteria.

Why the size of a CFD broker is some important?

When comparing CFD trading brokers one of the most important thing to consider is what is the actual cost of executing a trade. The smaller the spread is the better it will be for you as this is what effectively you are paying. Normally the spread is a fixed amount per share and in Forex and Index is normally a percentage. For example the spread on Nike may be 0.25% from the actual price and this is basically a commission of 0.25% on the value of the overall trade.

What is DMA and what is the difference with OTC CFD trading?

Normally brokers charge a commission for trading but for CFD trading the commission is already factor in the spread. This is true unless you are trading DMA. DMA is the direct market access and in this case your order will sit directly on the exchange. In this situation you get a clean price and your commission will than be added later on.

What is CFD margin?

CFD trading margin is effectively the deposit that you need to place in your account to put on a trade. It can change from broker to broker and the lower is the margin requirements the higher exposure you can have with the least funds on account.

We have compared CFD trading margin in our CFD comparison table but generally you need to know that the lower the margin the more risk is on the trade. Sometimes your money can be leveraged 500 so if you have £1,000 into your account your real exposure could be around £500,000. Let’s imagine the price moves 10% against you, you will have lost £50,000 which means you own the broker £49k. Most brokers are introducing no negative equity protection tough which is really good as effectively it ensure that you can never lose more than your account balance. In this case the leverage on offer will be reduced.

How many markets you can trade?

Scoring a CFD broker also means looking at the number of markets that they are offering to trade. As you might guess, the more markets are available the better as you will have more flexibility and more opportunity to trade.

Why it is important that the CFD broker is regulated?

It might seem logic but you should never sign up to a broker that is not fully authorised and regulated by the FCA. The reason is that only in this case your funds are covered by the FSCS scheme. Most brokers have client funds segregated but if your broker will go bust the Government will cover your deposit losses only up to a certain point.

Why it is important to check the overnight financing costs?

Some CFD brokers do charge some hidden costs overnight as most traders are not going to notice them or even have any idea they are being charged. We have selected only the brokers that do not use this strategy but it is worth to check every day before starting trading that no other costs have been charged overnight.

What CFD Trading means?

CDF stands for Contract For Difference and it is a leveraged financial product that allows traders to speculate on an asset without owning the underlying asset. So with CFD trading you not actually investing and it is a very high risk speculation where you could potentially lose all your budget very quickly. Having said that if you call the market correctly than you can get a huge return on your investment, much more than by investing in fully paid up physical stock.

Another advantage of CDF trading is that is not liable for stamp duty which currently stands at 0.5% of the value of a trade. This is the reason why lots of short term speculators prefer to use CFDs instead of buying physical stock as the costs are normally lower. This is true tough if a CFD trader is using leverage than the risks are obviously higher. Some brokers can trade CFDs with no leverage so worth taking a good look at the market before picking a CFD broker.

What is the best way to Compare CFD Brokers Trading Platforms?

There are many ways you can compare CFD Brokers Trading Platforms but in our opinion you should start with:

  1. Opening a demo account
  2. Check if the trading platform has a mobile version
  3. Check the added value offered by the trading platform

Why it is important to open a demo account when comparing CFD Brokers Trading Platforms?

The industry is really competitive and many CFD trading brokers tend to offer more or less the same service but there are difference in pricing, margins and market access. Surely there is no one CFD broker that fits all and you need to test their trading platforms to see the one that best works with your trading style. Some traders prefer one platform over another one simply based on the colour scheme of the CFD trading platform.

So if you are just getting started use our CFD trading brokers comparison table to look at what is the best in the industry and than visit the brokers websites and open a demo account. There is zero risk in doing so as you won’t need to deposit any funds or provide any personal information. Normally access to the demo platform is granted almost immediately.

Why a CFD broker should have a mobile trading platform?

It is really important to be able to have the option to close a position on the go. Things can change pretty quickly in a market and being unable to open or close a position while on mobile is a massive limitation for a trader.

Why it is important that a CFD broker will offer the best trading tools?

As mentioned there are very little differences between most CFD trading platform so you should take a good look at what extras they are offering as those can set them apart. In most CFD trading platforms you will find lots of technical analysis, news flow and data but some also offer great client sentiment tools and trading signals that can improve your chances of make a consistent profit overtime.

Where To Find a CFD Trading Broker?

As you can see below we have put together a full comparison table of FCA regulated and UK based CFD brokers: those are brokers that are leading in the industry and have very good CFD trading platforms. In the CFD broker comparison table you will be able to compare some of the key criteria that will instruct your decision such us spreads, costs, commission, margin, leverage, market access. We also have a section where we have a full review of each of the top CFD brokers.

When picking a CFD broker it is easier to start to the ones that you need to avoid so always remember the following three points:

  • Brokers that are not fully authorised and regulated by the FCA – It is as simple as that. If a CFD broker is not fully authorised and regulated by the FCA than they are not allowed to deal in CFD’s for clients and should be avoided.
  • CFD Brokers that are not based in the UK – There are many brokers that are based in Cyprus and the reason is that it is much easier to get regulated there. They then use that regulation to get into the FCA register so that they can show as they are like a UK based CFD broker. It is important to check that a broker main country of business is the UK. If not they it is very likely that they do not have full FCA regulation and the downside is that client funds will not be protected under the FSCS. This means trouble so avoid them.
  • CFD Brokers that are too pushy – if you have a CFD broker that applies high pressure sales tactics than you should stay away. This is a clear sign of dodgy CFD broker and the FCA has been working hard to reduce this pressure. If you have the feeling that your broker come on too strong than is best not to deal with them. Fully regulated CFD brokers should only help to provide access to the markets and shouldn’t pressure client into risky trades.