If you decided to try your luck as an online CFD trader, the first trial awaiting you is choosing the best CFD companies for trading.
These companies allows you to predict the future of an asset or commodity being traded.
By reading this guide, you discover
- The definition of a CFD agreement,
- The difference between CFD and Forex trading
- How to find reliable CFD companies
- CFD tools
- The amount of money you can invest and withdraw
On one hand, CFD companies are a well-known online trading tool; on the other hand, most traders end up losing all their investments, and everyone gets warned before entering.
So, how to choose the best CFD companies that suit your trading style the best?
What is a CFD?
CFD stands for Contract for Differences.
In other words, a CFD is an agreement, a contract, between the investor and the seller.
With a CFD, you don’t take possession of anything physical like a stock or a currency.
CFD traders speculate on the opening and closing prices of an asset.
Advantages of CFD trading include:
- You can make short or long-term investments.
- You only commit a deposit.
- CFDs are less expensive since you don’t possess anything physical.
- Day traders like the ease of lower cost of CFD trading since you don’t buy or sell
CFD vs Forex
Contract for Differences (CFDs) cover a wider range of assets. Forex trading, on the other hand, just covers currency.
Choosing the Best CFD Companies: What to Look At
Why do you think online CFD trading is banned in the USA and Hong Kong? If you say it’s to protect authorized exchanges monopoly, it’s just a part of the truth.
The other part is that there is so much fraud in this industry that it turned out easier for the authorities to ban it than to sort the sheep from the goats. This uneasy job is now yours.
How does one tell decent CFD companies from potentially fraudulent ones?
- Registration in your country. If the platform works in your jurisdiction legally, it has to provide a support phone, an address, and a way to sue it legally if fraud is detected.
- Regulating authorities. The more regulators watch over the platform, the less is the chance of fraud. A Big Brother is a good idea if it’s not you being watched.
- Information. A decent platform does not promise success immediately. On the contrary, it warns that most traders end up broke. If otherwise, your paranoia is not a paranoia.
- Coherency. Demo accounts should work approximately the same way as actual ones (see reviews), and real trading (see the rivals to check whether rates of assets deviate on this particular platform).
- Withdrawal issues. If any extra requirements apply, or unreasonable delays or refusals have been reported and confirmed, avoid this platform.
Cool with the Tool
What tools does the platform provide? It’s important, as in the perfect world, you will be able to access all the tools you need without leaving your browser page… or mobile app.
So, the first requirement is a mobile app. Having it on your smartphone or tablet will enable you to access your account anytime and receive notifications about any events – from price changes to margin calls.
A crucial tool is real-time notifications about important events both on exchanges and in the real world. Any trading platform is supposed to provide it, as CFD trading lies on real assets and their value.
Switching between Bloomberg, Twitter, and your trading platform can cost you seconds. You will have to install several displays, making your room similar to a Wall Street office or even a NASA mission control center. Looks great, but doesn’t it make more sense to find an informative broker?
Watch the assets. Traditional physical assets (oil, gold, wheat, other material values) can be accompanied by currencies (Forex in the house) and even cryptocurrencies. If you feel aware of these markets, you will probably prefer to have them as your tools.
Related Reading: How to Make Money on Steemit gives you more information about the cryptocurrency market.
Leverage is one of the most powerful yet risky tools. Are you ready to set your leverages manually? If yes, choose the platform that supports it. But consider all the risks before you do.
If your language is different from English, you may prefer to have the interface of the platform in your native language (yes, the English vocabulary is used by traders, but having it explained with no need to launch Google Translate is still great).
What’s the minimum and the maximum deposit the platform works with? Of course, no one wants to bother with just cents, so the minimum is always a bit more expensive than the proverbial cup of coffee. Still, there are brokers that work with $0 minimum deposits, while others set the minimum depending on the traders’ citizenship.
As for fees, they differ from broker to broker. Some of them offer low fees for Forex trading, but high ones for CFD based on physical commodities. Some do vice versa, and there are lots of options in between. Choose the assets you’re operating with – and then choose the broker that offers the best fees, other things being equal. You should also watch for the inactivity fee. If it applies, you have to pay a certain sum from your account if you have not been trading for some period (usually a calendar month).
Of course, you should watch for fraud that shows when withdrawals are extremely delayed, or accounts are suspended when they start making significant profits. But even a decent platform may differ in terms of withdrawal. There are some parameters you should take a look at before making your choice:
- Withdrawal fee. It rarely applies. If it does, it must result in faster withdrawal and more transfer options. If not, it’s a reason to consider other platforms.
- Electronic wallets support. It’s a great option, and it seems strange that some platforms don’t support it at all. Even with those that do, though, you should check whether it supports the particular electronic wallet you are using.
- Credit/debit card support. Unlike e-wallets, it’s a transparent way of getting your money that tax services should be okay with. Nevertheless, many brokers don’t offer this method, leaving you with regular bank transfers as the only way.
- Supported currency. If your currency is not supported, you will have to pay a commission fee for conversion. It looks especially cynical if you’re in it for Forex trading.
If you plan to get any money back from it, you should look at withdrawal options as well as learn as much as you can about withdrawal practice with the particular platform you are considering.
CFD Companies: FAQ
What Does a CFD Do?
A Contract for Difference allows you to make an investment on whether the price of a commodity will rise or fall.
Are CFDs Difficult?
CFD companies help you with your investment. You can make a short investment. Also, CFDs are usually less expensive than other types of trading.
Don’t Choose CFD Companies Poorly!
Of course, poorly choosing the platform will not make you get old and die in seconds as if you didn’t figure out the true Holy Grail. Still, to risk getting some premature gray hairs on your head is no good too. To avoid that, give some of your time and do some research before choosing the right platform. Good luck!
If you consider this guide to choosing CFD companies useful, share it with your friends on Facebook and Twitter. Some of them can help you with their experience, others will benefit from reading. You can also leave a comment here to make this reading richer. We’ll truly appreciate it!
Authors: Janice Wald and a Contributing Author
Note: The purpose of this guide is to explain how to choose the best CFD companies in the event you want to become a CFD trader. We are not recommending CFD trading or any speculative venture involving money.
Janice Wald is the founder of MostlyBlogging.com. She is an ebook author, blogger, blogging coach, blogging judge, freelance writer, and speaker. She was nominated as the 2021 and 2019 Best Internet Marketer by the Infinity Blog Awards and in 2017 as the Most Informative Blogger by the London Bloggers Bash. She’s been featured on Small Business Trends, the Huffington Post, and Lifehack.
This post was made possible by the support of our readers.