Best CFD Trading Brokers in November 2024

Written by Emmanuel Ifeanyi

Emmanuel Ifeanyi

Emmanuel Ifeanyi Ekwomadu is a financial content writer specialised in Forex, Stock and Crypto trading. He is the person behind most of the brokers reviews that you will find on BestBrokers.com

, | Updated: November 6, 2024

The right choice of a CFD broker can make trading on margin a seamless process. The trouble is hundreds of online brokers offer this derivative instrument, so choosing one can be a nightmare. BestBrokers.com is here to ease this process and make it as smooth as butter. Below you can find the 7 highest rated CFD trading brokers that we selected based on several ranking factors including: TrustPilot score, regulation, trading fees, the number of assets you can trade as CFDs, leverage options, deposit methods and withdrawal speed.

1Fusion Markets

Rating: 4.9 ⭐

74-89% of retail CFD accounts lose money

Top Rated

2FP Markets

Rating: 4.8 ⭐

73.85% of retail investor accounts lose money

3Pepperstone

Rating: 4.7 ⭐

75.5% of retail investor accounts lose money

4AvaTrade

Rating: 4.5 ⭐

76% of retail investor accounts lose money

5eToro

Rating: 4.2 ⭐

51% of retail investor accounts lose money

6Oanda

Rating: 4.1 ⭐

72% of retail CFD accounts lose money

7XM Group

Rating: 2.2 ⭐

72.82% of retail investor accounts lose money

We are a team of seasoned reviewers and traders with years of combined experience in derivative trading. This extensive background enables us to spot a shady broker from miles away. BestBrokers.com spares you the headaches of dealing with such businesses by compiling a list of what we consider the most trusted brokers for CFD trading in the industry. We only feature respected brokerages on our site – each of the companies recommended below operates with authorization from a reputable financial regulator.

BestBroker.com has carefully selected each recommended CFD platform, ensuring it meets the industry standards for security, fair and transparent pricing, and investor protection requirements of the toughest financial regulators in the world. We achieve this with the help of our rigorous methodology and exacting attention to the smallest details.

Best CFD Brokers

1. TRADE NOW READ REVIEW

   

   4.8/5
   1. FP Markets

   Min Deposit

   $/£/50 for Standard and Raw MT4/MT5 accounts

   Max Leverage

   1:30 for retail clients from the EU, 1:500 for professional traders and non-EU customers

   Spreads Starting from

   1.0 pip for Standard accounts, 0.0 pips on Raw accounts (minimum spreads also vary based on what asset you trade)

   Other Derivative Products

   Futures CFDs

   Country Restrictions

   New Zealand, Japan, the United States, Belgium, Iraq, Iran, North Korea, Syria

   Regulators

   CySEC and ESMA (EEA), ASIC (Australia), FCA (United Kingdom), BaFin (Germany), UKNF (Poland), CONSOB (Italy), CNMV (Spain)
   CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.70% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

   FP Markets has been providing regulated online trading services since 2005 under the oversight of tier-one financial authorities like CySEC, ASIC, BaFin, and FCA. The company’s commitment to excellence has earned it over forty industry awards, including for best trade execution and most satisfied client base.

   The renowned global brokerage specializes in CFDs, allowing customers to speculate on thousands of financial instruments. These include over 60 fiat currencies, 10,000 stocks, major global indices, metals, energies, agricultural commodities, bonds, and decentralized currencies.

   Retail clients based in the EU or Australia can maintain maximum leverage of 1:30 for less volatile instruments like forex majors. Those who cover the criteria for professional traders can inflate their positions with leverage of up to 1:500 for gold, silver, majors, and minors, 1:200 for indices, 1:100 for most energies and platinum, 1:20 for shares, and 1:2 for cryptos.

   FP Markets ensures outstanding low-latency order execution whose speed averages 40 milliseconds. The brokerage offers competitive spreads that start at zero pips with some of the available account types. Trading at FP Markets is possible via a range of leading platforms, including MT5, MT4, WebTrader, and Iress Trader. DMA and ECN pricing is available, resulting in more transparent prices, deeper liquidity, and full market depth.

2. TRADE NOW READ REVIEW

   

   4.9/5
   2. Fusion Markets

   Min Deposit

   $0

   Max Leverage

   1:30 for retail customers, 1:500 for professional accounts

   Spreads Starting from

   0.0 pips; average spread of 0.02 pips for EUR/USD

   Other Derivative Products

   CFDs only

   Country Restrictions

   New Zealand, the USA, Congo, North Korea, Sudan, Somalia, Syria, Myanmar, Yemen, Palestine, Iraq, Afghanistan, Iran, Japan, Ontario, Russia, Spain, Ukraine

   Regulators

   VFSC (Vanuatu), ASIC (Australia)
   Risk Warning: Gleneagle Asset Management Limited (ABN 29 103 162 278) trading as Fusion Markets, is the issuer of the Fusion Markets Products described in this communication. Trading in Fusion Markets Products involves the potential for profit as well as the risk of loss which may vastly exceed the amount of your initial deposit and is not suitable for all investors. You should read all of these Financial Product Service Terms, the Product Disclosure Statement (PDS) and the Financial Services Guide (available on our website) carefully, consider your own financial situation, needs and objectives for investing in these Fusion Markets Products and obtain independent financial advice.

   Fusion Markets is a leading CFD brokerage that targets primarily clients from Australia. It was established in 2017 by a group of forex veterans that share over fifty years of combined experience. The Melbourne-based firm provides a decent variety of CFDs across all asset classes. Here you can find leveraged contracts for dozens of fiat currencies, commodities, equity indices, and shares for fifty of the biggest companies in the US.

   CFD trading is possible via Zero and Classic accounts, neither of which comes with any minimum deposit requirements. Zero Account spreads start at 0 pips, averaging 0.02 pips for major currency pairs like the EUR/USD. Leverage ratios depend on the underlying assets’ volatility, account type, and jurisdiction. Under ASIC regulations, retail traders can use maximum leverage of 1:30 for major forex.

   Professionals and VFSC customers can amplify their positions at maximum rates of 1:500 for currency pairs and metals provided their accounts cover the broker’s equity requirements. Fusion Markets does not offer negative balance protection to professional and VFSC clients. The Aussie-friendly brokerage provides various CFD-compatible platforms, including TradingView, cTrader, MetaTrader 4, MetaTrader 5, and the browser-based WebTrader (MT4).

3. TRADE NOW READ REVIEW

   

   4.5/5
   3. AvaTrade

   Min Deposit

   $100

   Max Leverage

   1:30 (retail), 1:400 (professional)

   Spreads Start from

   0.0 pips

   Other Derivative Products

   Leveraged ETFs, vanilla options, ETNs, futures

   Country Restrictions

   Cuba, the USA, Belgium, Iran, New Zealand, Syria

   Regulators

   ASIC (Australia), FCA (United Kingdom), FRSA (Abu Dhabi), ISA (Israel), FSCA (South Africa), FSA (Japan), CySEC (EEA), CBI (Ireland), FSC (British Virgin Islands), PFSA (Poland)
   CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

   AvaTrade is a reliable online provider of derivative products that boasts a high trust score in the global trading community. This highly rated brokerage holds licenses from tier-one financial regulators like the FCA and ASIC. While testing and researching the broker, we established it offers great copy trading services, extensive educational materials, and competitive spreads that start at zero pips for some instruments.

   Traders have access to a great range of leveraged products, starting with CFDs for various asset classes like forex, commodities, indices, bonds, treasuries, cryptocurrencies, and shares. Other leveraged instruments clients can access include ETFs, ETNs, and futures CFDs. Trading with vanilla options is also possible at AvaTrade.

   Maximum leverage ratios for CFDs vary based on several criteria like account type, region, and asset class. Retail customers who join the FCA, ASIC, and CySEC-regulated versions of the website can benefit from maximum leverage ratios of 1:30 for major fiat pairs, 1:20 for other pairs and leading indices, 1:10 for other commodities, gold, and indices, 1:5 for shares, and 1:2 for cryptocurrencies. Clients who qualify for professional accounts at AvaTrade are exempt from these restrictions and can leverage their positions at maximum ratios of 1:400.

4. TRADE NOW READ REVIEW

   

   4.1/5
   4. OANDA

   Min Deposit

   $0 for Standard accounts; $20,000 for Premium accounts

   Max Leverage

   1:50 for US retail customers, 1:30 for Australia and the EU, 1:200 for other regions; 1:100 for professional traders from Australia and the EU

   Spreads Starting from

   1.4 pips on average for spread-only pricing model; 0.0 pips for core pricing model plus a $5 commission per side for 100,000 traded units

   Other Derivative Products

   Spread betting

   Country Restrictions

   Nigeria, Cuba, Myanmar, Yemen, Syria, North Korea, Congo, Albania, Libya, Iraq, Iran

   Regulators

   CFTC and NFA (United States), IIROC (Canada), FCA (United Kingdom), MAS (Singapore), ASIC (Australia), MFSA (Malta), FSC (British Virgin Islands), IFFA (Japan)
   CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78.3% of retail investor accounts lose money when trading CFDs with OANDA Europe Markets Ltd. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

   OANDA has been providing speculative products to traders worldwide since 2001. The well-established brokerage has the authorization to operate across multiple regions like Australia, Japan, Canada, the US, and Europe. Clients have access to an extensive range of financial instruments and assets, including CFDs for forex, soft commodities, indices, bonds, and metals.

   Derivatives like futures and options are not available at OANDA for the time being but spread betting is. Customers must open sub-accounts for spread betting and reside in Ireland or the UK to take advantage of this derivative strategy. OANDA is a global operation, so the maximum leverage rates it offers to clients vary from one country to another.

   US retail customers face leverage restrictions of up to 1:50, while those from Europe and Australia can leverage their trades at rates of up to 1:30. Clients residing in other regions can access considerably higher leverage ratios of up to 1:200.

   The trusted CFD broker provides high degrees of client protection, but the measures in place depend on one’s region. Clients from the EU will benefit from negative balance protection. Those who reside in Asia-Pacific countries can protect themselves from market gapping by using guaranteed stop-loss orders (GSLOs). OANDA does not charge premiums if the GSLOs fail to trigger.

5. TRADE NOW READ REVIEW

   

   4.2/5
   5. eToro

   Min Deposit

   $10 for the UK; $1 US; $50 for most European countries, $1,000 for French Polynesia, Isle Of Man, Jersey Island, Kuwait, New Zealand, Reunion Island, $10,000 for Israel, and $200 for all other supported jurisdictions

   Max Leverage

   1:30 on retail accounts, 1:400 on professional accounts

   Spreads Starting from

   1 pip for currencies, 2 pips for commodities, 0.75 pts for indices, 0.09% for stock and ETF CFDs, 0.75% for cryptocurrencies

   Other Derivative Products

   Futures ETFs, ETN futures

   Country Restrictions

   Canada, Pakistan, Albania, Algeria, the Bahamas, China, Crimea, Cuba, Curacao, Egypt, Hong Kong, India, Indonesia, Japan, Kenya, Liberia, Lebanon, Macau, Moldova, Montenegro, Myanmar, New Zealand, Nigeria, Panama, Russia, Saudi Arabia, Serbia, South Africa, Tanzania, Turkey, Ukraine, Venezuela, Zimbabwe, and more

   Regulators

   CySEC (EEA), FCA (United Kingdom), ASIC (Australia), FSAS (Seychelles), NDB (the Netherlands), FINCEN, FINRA, and SIPC (United States)
   CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

   Launched by three entrepreneurs from Tel Aviv, eToro debuted in 2007 under the brand name RetailFX. The company first incorporated contracts for difference into its portfolio in 2013. It presently offers them for a broad range of assets, including crypto and fiat currencies, stocks, indices, energies, and metals.

   CFD trading is available to customers from certain jurisdictions only, including Australia, the UK, and the European Union. Clients based in the United States have no access to this derivative product due to local legislative restrictions. Non-US customers who join eToro face ESMA and ASIC-mandated leverage caps of 1:30 for retail accounts.

   Professional traders are outside this limitation, having access to higher leverage maximums of up to 1:400. Customers must meet various requirements to qualify for professional accounts, including having a financial portfolio exceeding $500,000 in value. Derivative products aside, eToro is also renowned for its social trading network that is home to millions of traders from more than 140 jurisdictions.

   The service is available via eToro’s OpenBook platform that enables users to copy the trades of savvy investors. The OpenBook platform is cross-compatible and runs seamlessly on all devices. Mobile users will benefit from dedicated apps available for free at the Apple Store and Google Play.

6. TRADE NOW READ REVIEW

   

   4.7/5
   6. Pepperstone

   Min Deposit

   $0

   Max Leverage

   1:30 (Retail ASIC, CySEC, FCA); 1:500 (Professional); 1:400 (CMA)

   Spreads Start from

   1.0 pips min spread on Standard Account, 0.0 pips min spread on Razor Account

   Other Derivative Products

   Spreads betting, CFDs for Forex, Commodities, Currency Indices, Crypto, Shares, ETFs, Dividends for Indices, Dividends for Shares

   Country Restrictions

   Canada, Japan, New Zealand (retail clients only), South Korea, U.S. Outlying Islands, United States, U.S Virgin Islands, Yemen, and more

   Regulators

   CySEC (Cyprus), ASIC (Australia), DFSA (Dubai), BaFin (Germany), FCA (UK), CMA (Kenya)
   CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.5% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

   When looking for the best CFD broker online, you should always opt for properly regulated brands with competitive pricings. Luckily for you, there is always the option to open an account with Pepperstone and explore over 1,200 CFD instruments across various markets. Not only is Pepperstone a well-experienced brand, but it also holds the stamp of approval of major regulatory bodies like the FCA, CySEC, and ASIC, to name a few.

   Spreads are very competitive, starting from 1.0 pips for Standard account holders. Meanwhile, Razor Accounts can trade numerous instruments with spreads starting from 0.0 pips. To make the trading experience widely accessible and smooth for every type of trader, Pepperstone supports several platforms, including MT4, MT5, and cTrader.

   The maximum leverage retail traders can enjoy differs depending on their jurisdiction, with the typical maximum ratio in Europe and Australia being 1:30 for retail trading accounts. That said, Pepperstone allows traders to apply for professional trading accounts and increase the maximum leverage ratio of up to 1:500.

7. TRADE NOW READ REVIEW

   

   2.2/5
   7. XM

   Min Deposit

   $5

   Max Leverage

   1:30 (CySEC, ASIC); 1:1000 (FSCA, IFSC)

   Spreads Start from

   0.6 pips on Ultra Low Micro and Ultra Low Standard Accounts; 0.0 pips on XM Zero Account

   Other Derivative Products

   Forex, Stocks

   Country Restrictions

   Spain, Portugal, and Belgium (for European entity)

   Regulators

   CySEC (Cyprus), IFSC (Belize), ASIC (Australia), FSCA (South Africa)
   Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

   Without a doubt, XM is one of the best destinations for CFD trading, with 1,300 instruments available on the MT5 platform supported by the broker. As a member of XM, you can pick from a vast variety of account types, with traders from some jurisdictions even having the option to trade with a cent account. Those who wish to trade lower amounts can also try XM’s Ultra Low Micro Account, which has a contract size of only 1,000 units and a minimum trade volume of 0.1 lot (100 units).

   If you wish to get the best trading cost for your CFD trades, you might check the XM Zero Account of this broker. While you will be charged a small commission, you will be able to trade multiple instruments with extremely tight spreads that may start as low as 0.0 pips.

   To ensure a global reach, XM has been licensed by a number of reputable regulators, with CySEC, ASIC, and FSCA being just a few of the authorities monitoring the broker’s operations. Residents of some jurisdictions will be able to make use of negative balance protection, which is an additional security tool for retail traders, ensuring they cannot lose more than the balance available in their trading accounts. Meanwhile, depending on the local regulator, traders can have a different ratio of maximum leverage, with limits ranging anywhere between 1:30 and 1:1000.

Comprehensive Comparison of the Top 7 CFD Trading Brokers

The BestBrokers Approach to CFD Broker Selection

BestBrokers.com implements a holistic approach toward CFD broker assessment and rating. We look at a variety of criteria that help us adequately evaluate both the pitfalls and the benefits of each trading site we review. Our team relies on hands-on experience as we take the time to personally test the services of each broker we recommend.

The ranking system we use revolves around multiple aspects of each broker’s operation, including trading costs, regulation, order execution, contract diversity, payments, software, and investor protections. We assign individual scores for each criterion, using five-star ratings for the purpose. The final ranking is an aggregate of all scores, accurately reflecting the overall value and performance of each broker. Here are our areas of interest at a glance.

1. Licensing and Regulation

   Proper licensing and regulation are vital for your investments’ security, so we weigh this area very carefully. Our team inspects who regulates each CFD broker, assigning the highest ratings to the firms licensed by top-tier financial oversight entities like ASIC, the FCA, BaFin, CySEC, and FINMA.

2. Account Types and Minimums

   BestBrokers.com considers whether the trading sites have account minimum requirements and if yes, how much the minimums are. We check the range of available account types to make sure the broker satisfies the needs of both retail and professional traders. Last but not least, the team compiles information about the account registration process itself, prioritizing straightforwardness and ease of verification.

3. Account Fees and Trading Costs

   Our reviewers gather data on the costs associated with trading derivatives at each brokerage, including spreads, overnight holding fees, guaranteed stop-loss fees, inactivity charges, and more. Payment-related costs are another point of interest. Brokers that facilitate free deposits and withdrawals score the highest in this area.

4. Trading Platforms Range

   The type of platform implemented by a CFD broker can significantly affect traders’ overall comfort. We appraise the range of available platforms, testing each one to evaluate its user-friendliness and features. The team members focus on the overall user experience, the customization options, charting tools, timeframes, technical indicators, and more.

5. Mobile Apps and Compatibility

   The brokers that perform well in this area enable their clients to trade derivatives on the move from just about any smartphone or tablet. We download and install each company’s native apps, testing them on multiple mobile devices. This allows us to appraise their overall compatibility and performance and see whether they match the functionalities of the desktop platforms.

6. Asset Classes

   Our team members examine the asset classes available for trading on margin. Brokers that offer more product types earn higher scores than those who only allow you to use leverage for forex pairs, for example. Customers should be able to leverage their positions across all asset categories, including commodities, shares, bonds, and even cryptocurrencies.

7. Trade Execution Speed

   The reviewers study the speed of order execution at each trading site as it can significantly impact your long-term bottom line. They also check how the broker routes your trades for execution. Firms that give you direct access to the interbank market via ECN accounts rather than trading against their clients generally stand out with greater price-feed transparency, fewer requotes, and better spreads.

8. Customer Support Quality

   For this area, we appraise various factors, including average response times, communication channels range, service availability, and supported languages. A prompt, professional, and adequate service earns the brokers the highest marks for this category.

9. Research and Education

   Brokers that provide comprehensive and high-level educational content authored by seasoned analysts achieve the highest marks in this area. The BestBrokers reviewers look for information on market sentiments, free webinars, video tutorials for CFD trading, e-books, glossaries, and online courses.

10. Security and Investor Protection

    Since the losses from leveraged positions can outsize your balance, we also study what forms of investor protection the CFD brokers offer to their retail customers. These commonly include strict leverage restrictions, margin close-outs, negative balance protection, and standardized warnings that caution about the risks of CFD trading.

The Benefits of Trading with CFD Brokers

Despite the risks associated with leverageable derivatives, CFD trading offers numerous benefits for traders who possess the necessary knowledge, skill, and experience to make the right decisions. If you lack these qualities, we recommend you to practice via a demo account or carefully read the BestBrokers.com guide on CFD trading.

1. Margin and Leverage

   Contracts for difference allow you to trade on margin and implement leverage to open large positions with small capital. You only have to cover the margin requirements with your deposits and can borrow the rest from your broker to amplify your position’s size and your potential gains.

2. Absence of Stamp Duties

   There is no need to pay stamp duty when trading with this derivative instrument as CFDs are merely contracts between you and your broker, whereby you agree to swap the difference between the current prices and those in the future. No ownership of the underlying assets is required for the purpose but you may still have to pay capital gains taxes.

3. No Expiration Date

   Unlike futures contracts, CFDs have no expiration dates. Traders can maintain their leveraged positions open for prolonged periods as long as they pay the overnight holding fees imposed by the brokers. With contracts for difference, you can liquidate a position whenever you want to realize your profits or limit your losses.

4. Long and Short Positions

   CFDs facilitate greater flexibility since they enable you to trade in both directions, i.e. you can go long or short. This enables you to take advantage of both rising and declining prices. Many adept traders use CFDs to hedge their portfolios over the short term during periods of increased volatility.

Range of Assets Available at CFD Brokers

The trading sites recommended by BestBrokers.com support CFD trading across multiple asset classes, allowing clients to take positions on hundreds of instruments. The main types of underlying assets for CFD trading are forex pairs, stocks, commodities, and indices, although some brokers also allow you to trade cryptocurrencies and bonds on margin.

Forex Pairs

A forex pair consists of two currencies – the price of the first one is quoted against that of the second one. There are three types of leverageable currency pairs – majors (eg. EUR/USD, GBP/USD), minors (eg. AUD/JPY, GBP/EUR), and exotic pairs (eg. EUR/TRY, AUD/MXN).

Stocks

Derivatives like CFDs enable traders to gain greater exposure to the stock market, giving them the chance to speculate on the price fluctuations of stocks without owning any shares in a given company. CFD traders do not hold shares and therefore, are not entitled to voting rights or dividends.

Commodities

The brokers that top our list of recommendations give you the option to trade various commodities through derivative instruments like CFDs. They provide a choice from hard and soft commodities like gold, silver, crude oil, natural gas, sugar, wheat, and more. Another advantage here is that commodity CFDs come with lower capital requirements compared to futures contracts, for example.

Indices

Indices measure how entire groups of shares perform, tracking the biggest companies on different stock exchanges. Popular examples include the FTSE 100, the German Dax, and the S&P 500. They allow traders to gain exposure to a whole economy sector by opening only one trading position.

Bonds

Bonds belong to the category of indebtedness instruments and represent loan notes issued by governmental institutions or corporations for the primary purpose of raising capital. Interest rates, supply, and demand all impact the value of bonds. Perhaps the greatest advantage of trading them with leverage results from the nominal margin requirements. Some of our shortlisted brokers require margins as low as 0.5% per contract.

ETFs

Exchange-traded funds (ETFs) represent baskets of tradable assets, bought and sold through brokers on stock exchanges. They enable traders to gain exposure to various asset classes like bonds, currencies, commodities, and real estate. Leveraging them with CFDs allows you to further amplify your exposure and outsize your potential gains.

Cryptocurrencies

The brokers that come on top of our shortlist give you the chance to tap the exciting crypto market with CFDs for popular decentralized currencies like Bitcoin, Ethereum, Ripple, and Litecoin. However, the maximum leverage you can use is significantly lower due to the higher volatility inherent to crypto assets.

Leverage Restrictions on CFD Positions

When leveraging your positions, you are boosting their size with borrowed capital the brokers lend you in good faith. Adverse market movements can greatly amplify your losses from leveraged positions. Many financial regulators worldwide impose caps on the maximum leverage available to retail clients to protect them from the risks of CFD trading.

The caps are country-specific and do not apply to professional investors. Brokers operating within the EU and the EEA must comply with the leverage maximums introduced by the European Securities and Markets Authority (ESMA) in 2018. The ratios vary across the different asset classes based on their volatility level as follows:

• 1:30 for major currency pairs
• 1:20 for minor and exotic currency pairs, gold, and leading indices like the FTSE 100, SP 500, DJI 30, and NQ 100
• 1:10 for other commodities and small-cap indices
• 1:5 for shares, bonds, and exchange-traded funds
• 1:2 for cryptocurrencies

The higher the volatility of a given asset, the lower the maximum leverage retail traders can access. In March 2021, the Australian financial regulator ASIC strengthened its protections for retail customers by aligning the maximum leverage ratios for Aussies with those imposed by the EU regulators.

CFD Trading Order Types

Before you pick a regulated CFD broker, you must understand what types of orders are available for derivatives and when it is appropriate to use them. Each order type has its distinctive characteristics and serves a unique purpose. In this section, we briefly outline six of the most common order types you can implement when trading contracts for difference.

1. Market Orders are broadly used by traders who seek to open a position immediately at the current available market price. Slippage is possible if your broker’s execution speed is not on par.
2. Stop Orders mandate buying or selling at the market prices provided that the asset reaches a specific value, called the stop price. When this happens, the stop order transitions into a market order and fills at the next available market price.
3. Limit Orders tell the broker to buy or sell at a given price or better. Buy limit orders execute at your chosen limit price or lower, whereas sell limit orders fill at the limit price or above it. Execution is not guaranteed with this type of order.
4. Take Profit Orders are very valuable for active traders as they enable them to lock in their profits if the market moves in their direction. When you put in this type of order, you tell your broker to close your trade on profit when the prices climb to your desired level.
5. Trailing Stop Orders are highly effective for risk management and profit optimization. They share some similarities with regular stop orders but the main difference is they do not place limits on your potential gains. These orders automatically follow the price movements, trailing them upward. When the market moves in your favor, the trade fills and the trailing stop is removed. And vice versa, it creates a stop-loss effect when the market moves in an adverse direction, reducing the traders’ risk.
6. One Cancels the Other Order pairs two conditional orders together (usually stop and limit), instructing the broker to automatically cancel one of them when the other one executes.

Best Platforms for CFD Trading

When looking to trade derivatives like the CFDs, you should keep your eyes peeled for platforms with sufficient educational features, impeccable order execution, and plenty of tools for adequate market analysis. We believe the four platforms listed below meet all of these criteria.

MetaTrader 4 (MT4) provides a wide range of tools for customization and analysis. It supports automated trading, free technical indicators, customizable charts, hedging, and a single-thread strategy tester. It allows CFD traders to open long or short positions on thousands of available markets.

MetaTrader 5 (MT5) is the improved version of its predecessor MT4, and as such, it comes with faster order execution, higher efficiency, and more features, including netting, Depth of Market, and a multi-threaded strategy tester. If you are new to trading, we recommend you go for MT4 as its interface is more straightforward.

cTrader stands out from the crowd with its copy trading feature, allowing you to follow high-performing investors and copy their positions directly to your portfolio. Derivative traders who dabble in contracts for difference will benefit from dynamic leverage that fluctuates based on the risk exposure. Keep in mind the dynamic leverage tiers are unavailable at some CFD brokers that use cTrader.

ProRealTime gives you access to more than a hundred technical indicators and a broad selection of timeframes. It facilitates order placement based on price movements as well as trend lines. The interface is efficient and very intuitive, which makes trading with ProRealTime simpler and far more enjoyable.

Costs Associated with CFD Trading

Trading CFDs is a relatively cost-efficient way to dabble the derivative markets as it comes with nominal commissions, if any. Nonetheless, it is wise to acquaint yourself with the most widespread charges to prevent any unpleasant surprises later on. BestBrokers.com gives you a walkthrough of the most common fees you can anticipate when trading CFDs online.

1. Commission charges are normally in place only when you open leveraged contracts for stocks. They are percentage-based and depend on your position’s full exposure. The percentages revolve around 0.10% with many brokers. Another thing to bear in mind is that opening and closing a position comprise two individual trades, which means you must pay a commission for each side of the trade.
2. Spreads are applicable for currency pairs and commodity CFDs, in which case the cost of your trades is built into the difference between the buy and ask prices at the moment you open a position. The tighter the spread, the greater your gains from successful trades.
3. Overnight holding fees apply at the end of each trading day if you leave your leveraged positions open overnight. The CFD broker will charge you for maintaining your positions until the markets open the next day. The overnight costs may be either positive or negative, based on the direction of your trades.
4. Market data fees are charged when you subscribe to receive price information on financial instruments from your broker. You pay them each month just like you will for most other subscriptions.
5. Guaranteed stop-loss orders will cost you a premium but the exact rates vary based on the broker and market. This type of order allows you to safeguard your positions against slippage and market gapping. The fees do not apply if your stop order fails to trigger.
6. Payment fees apply at some CFD brokers when you top up your balance or withdraw funds from your account. To get ahead on our list, a broker must process clients’ payments quickly and at no additional cost.
7. Currency conversion fees are another thing to watch out for when trading CFDs. Your broker is likely to charge them when you open leveraged contracts in foreign currencies that differ from your account’s base currency.
8. Dormancy fees are applicable to inactive accounts without any trading activity for extended periods, usually twelve months. The broker will start deducting nominal monthly charges from your available balance for maintenance purposes.

Investor Protections at CFD Brokers

Trading derivative instruments on margin involves a good deal of risk, even more so if you lack sufficient experience and knowledge. Leverage acts as a double-edged sword, having the potential to blow up both your gains and losses. To safeguard retail clients who dabble in derivatives, financial regulators worldwide require brokers to adopt the following protective measures.

1. Margin close-out rules are in place to safeguard traders from going into debt. If your leveraged positions drop abruptly due to important announcements or overall market volatility, the broker will automatically liquidate your trade to prevent any further losses. Under ESMA’s requirements, EU brokers must close out CFDs when traders’ overall balance drops under 50%.
2. The negative balance protection is a safeguard that prevents clients from losing more than the balance they have in their accounts if the markets move abruptly against their positions. The measure helps you manage your risk, while taking advantage of high-volume trades without worrying about slipping into debt.
3. Standardized risk disclaimers will greet you as soon as you open the website of a regulated CFD broker. Their purpose is to warn you about the dangers of leveraged trading and inform you what percentage of retail clients lose money to CFDs with each broker.
4. Derivative experience questionnaires intend to evaluate your overall knowledge of CFD trading. They help the brokerages determine whether potential retail clients are fit for trading on margin.
5. Leverage restrictions apply to retail accounts, limiting the maximum leverage clients can use when opening their positions. The exact ratios differ depending on the volatility of the underlying assets. The UK financial watchdog (FCA) has altogether banned the sales of crypto-asset derivatives to retail clients.

CFD Broker Regulators

If you are wondering how the derivative markets are regulated, the answer is one country at a time. Each jurisdiction has a financial regulator responsible for the oversight of licensed brokerages.

These agencies undertake various tasks, including preserving the financial industry’s integrity, observing for licensees’ prudential soundness, and monitoring for harm to retail traders. The regulatory bodies that supervise our top-ranking CFD brokers include:

• FCA – the Financial Conduct Authority of the UK
• ASIC – the Australian Securities and Investments Commission
• CySEC – the Cyprus Securities and Exchange Commission (CySEC licenses are valid across the EU and the EEA)
• FSCA – the Financial Services Supervisory Authority of South Africa
• FINMA – the Swiss Financial Market Supervisory Authority
• BaFin – the Federal Financial Supervisory Authority of Germany
• FMA – the Financial Markets Authority of New Zealand
• KNF – the Financial Supervision Commission of Poland
• MAS – the Monetary Authority of Singapore

Which Jurisdictions Prohibit CFD Trading?

Some financial regulators are not satisfied with imposing leverage restrictions for retail consumers. They eliminate the risk by altogether banning trading with contracts for difference. If you reside in one of the jurisdictions below, you will be unable to trade CFDs with the brokers we recommend even if they accept clients from your country.

USA – The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have barred local traders from setting up CFD accounts at domestic or offshore brokers under the Dodd-Frank Act. The regulators’ reasoning is that contracts for difference are over-the-counter (OTC) products. As such, they are far more difficult to oversee adequately because the transactions do not go through regulated exchanges.

India – Both offering and trading CFDs are illegal in India at the moment, although locals who set up accounts with brokerages based outside the country do not face prosecution for trading leveraged derivatives.

Belgium – Belgium enforced a blanket ban on binary options and leveraged CFD trading in August 2016, becoming the first country in Europe to do so. The ban came into force after a wave of complaints from local retail consumers.

Brazil – The South American country boasts a highly developed trading market, but opening leveraged CFDs is off-limits for Brazilian investors. The irony lies in the fact the prohibition does not extend to binary options, which can be equally risky or even riskier.

Written by E. Ifeanyi