BEST BROKERS FOR CFD trading
What is CFD trading?
A contract for difference (CFD) is a form of derivative trading where investors speculate on price movements. CFD trading enables investors to speculate on the rising or falling prices of fast-moving global financial markets, such as forex, indices, commodities, stocks, and shares or treasuries.
CFDs work the same way as trading other financial instruments.
How does CFD trading work?
After carefully selecting a broker that offers CFD trading and after opening a trading account with them, traders can select any available CFD from within the trading platform. Each broker offers a different number of CFD products in their portfolio. Therefore, traders interested in this particular financial instrument should check which CFDs are available with the broker of choice before signing up. As is the case with any other complex instrument in financial markets, investors can enter long or short positions when they trade CFDs.
As an example, a trader may believe that the price of the underlying asset gold is going to rise. They would then enter a CFD position by going long on the popular XAU/USD (Gold – US Dollar) pair. Depending on their selected leverage level, the profits and losses are magnified.
A share CFD works in the same way. A CFD trader that is looking for trading opportunities may believe that the share price of Apple is going to rise because of recent news. They would then enter into long positions on the stock price of Apple via a contract for difference.
The choice of broker is particularly crucial in CFD trading. Before you open a CFD account, you should compare offers from selected providers. The following top CFD brokers comparison shows you at a glance what costs and fees the individual providers charge. Besides, our broker test provides a clear comparison of important services and unique features.
Today, trading contracts for differences (CFDs) is offered by numerous service providers. CFD traders can use "difference contract transactions" to trade indices such as the Dow Jones, cryptocurrencies such as Bitcoin or commodities and currency pairs with leverage. Trading of selected equities is also possible with CFDs. Unlike exchange trading, CFD trading does not involve orders being settled via an exchange as in Forex trading, for example. Instead, the investor trades directly with his CFD broker.
The differences in prices and services between the various providers are considerable. Use our extensive test to find the best CFD broker for you!
Important: Trading CFDs can be attractive for investors because high profits are possible in a relatively short period. The other side of the coin: CFDs can also quickly lead to high losses. CFDs are complex financial products that should only be utilised by experienced traders. Knowing and understanding the high risk of these leverage products is essential because they can lead up to the total loss of the invested capital. Please ensure in advance that you fully understand all the risks involved in CFD trading and seek independent advice if necessary.
When trading CFDs, the spread (bid-ask spread) is the first step to profit. Our broker test and fee comparison highlight that spreads vary widely depending on the broker and the underlying. To find the right provider, you should know in advance which underlying assets you would like to trade and to what extent there are differences in the spreads between the suitable providers. The tighter the spread, the better.
By using the lever, CFD traders can earn disproportionately from the price movement of the underlying securities. These underlyings can, for example, be stock indices such as the DAX, cryptocurrencies such as the Bitcoin or from the development of currency pairs such as the Euro-Dollar. When choosing a broker, also take a look at the possible leverage offered by the individual brokers!
Transaction costs are usually only incurred when trading equity CFDs and ETF CFDs. For these underlying securities, the exact market spread is mapped, and the respective stock exchanges charge a fee for this. However, for CFDs on indices or commodities, the transaction costs are regularly already included in the spread.
CFD trading is not the same as using an instrument for long-term investments. Instead, it is about the short-term exploitation of price movements. If CFDs are held overnight, financing costs are incurred. In the case of a long position, the financing costs are borne by the broker; in the case of a short position, the trader receives interest.
The price of a CFD changes rapidly (every second). A CFD trader must, therefore, always stay on the ball to be able to react promptly to price and market changes. Even in the short time between order placement and execution, the underlying assets may fluctuate. If the CFD broker cannot execute the order at the desired price, the trader receives a request notification from the broker. In the case of a requote, a new course is offered to the trader. As a trader, you should, therefore, attach importance to a mature trading platform. One of the best-known CFD trading platform solutions is the trading software MetaTrader.
Retail investors should also take a look at the domicile of the broker. Regulation of the broker depends on the domicile of the company.
Use the CFD Broker Comparison to get a first overview of the offers and conditions of the providers! We hope that this broker test will help you to find the right CFD provider for you.
What are the benefits of CFD trading?
When speculating with CFDs, investors can go either short (sell) or long (buy), meaning they can make a bid on an either rising or falling market price of a financial instrument.
Contracts for difference are financial instruments that can be traded on margin. Traders can use leverage to control a rather large amount of money with only a relatively small investment. Contracts for difference are also a very popular hedging tool to offset any potential loss in value of a physical investment. Investors holding certain shares may, for example, benefit from the falling price of a stock they own in the short term when initiating a CFD trade.
Since CFDs are mainly used for speculation and hedging purposes, the application areas are similar to those of futures, options and turbo certificates. Difference contracts have both advantages and disadvantages compared to these alternative financial instruments.
Compared to options and warrants, the simple pricing of CFDs is a significant advantage. The price of an option is influenced not only by the price performance of the underlying asset but also by market volatility and the remaining term of the option.
Thus, a call option can lose value even though the price of the underlying asset rises. This is possible if volatility falls significantly over the same period or if the loss in fair value has a significant impact. In trading CFDs, this potential risk factor is eliminated.
Lastly, CFDs are tax efficient because they do not require any stamp duty, which is especially beneficial for traders located in the UK.
Are there any disadvantages when trading CFDs?
Even though spread betting, CFD trading and trading leveraged products can be very beneficial, tax efficient, and simple, traders should always be very cautious and heed risk warnings before they start trading on margin. The CFD market has gained significant popularity but margin trading contains high risks to the investors’ money and retail investor accounts as losses can exceed initial deposits. CFDs are very complex instruments and are therefore not suitable for everyone.
Best forex and CFD brokers that offer CFD trading on their trading platforms
As always, a trader should make sure that the forex broker of choice is properly licensed and regulated. The best brokers are typically those that are registered with strong regulators and industry watchdogs, such as the FCA (Financial Conduct Authority) in the United Kingdom, the ASIC (Australian Securities and Investments Commission) of Australia, or the CySEC (Cyprus Securities and Exchange Commission) of Cyprus.
Our top 7 CFD trading broker picks:
- Pepperstone:
Pepperstone was founded in 2010 and is an Australia headquartered Forex and CFD broker. The firm is licesnsed and regulated with both the Australian Securities and Investments Commission (ASIC) as well as the British Financial Conduct Authority (FCA). Client funds are held securely in segregated trust accounts with top-tier banks. The broker doesn’t cover the widest range of markets; however, it does offer excellent trading conditions. For example, Pepperstone offers ultra-low spreads, starting from 0.0 on Forex pairs with commission charges as low as USD 3.50 per traded lot on the popular AUD/USD currency pair.
Available markets include Forex, commodities and metals as well as CFDs on stocks, indexes, cryptos and the US dollar currency index (USDX).
Available CFDs in detail:
-Index CFDs: Commission-free trading on 14 of the most important stock exchanges of the world. Index CFDs were originally designed for institutional traders and give retail traders access to completely new markets. Investors can take advantage of the opportunities offered by global equity markets and index CFDs are available to all Pepperstone clients without any dealing desk intervention or commission charges.
-Equity CFDs: Pepperstone is one of only a few brokers offering post-market (after-hours) trading on equity CFDs. Clients can buy and sell CFDs from more than 60 top companies in the USA. When trading share CFDs, traders have access to a wide range of industries, companies and markets so they can make potential profits from various events and price movements.
-Crypto CFDs: There are five derivative cryptocurrency products on offer - Bitcoin, Bitcoin Cash, Ethereum, Dash and Litecoin. Trading these digital assets as CFDs is commission free at Pepperstone.
-USDX CFD: The USDX is regarded worldwide as a benchmark for the value of the US dollar and is the most frequently traded currency index. The USDX has its strongest weighting in the most common currencies, such as the euro, the yen and the pound sterling, with the basket of currencies against which the US dollar is denominated consisting of six currencies.
- AxiTrader:
AxiTrader was founded in 2007 and is an Australia headquartered foreign exchange and CFD broker. The broker is licensed and regulated with both the Australian Securities and Investments Commission (ASIC) as well as the British Financial Conduct Authority (FCA). Client funds are held securely in segregated trust accounts with top-tier banks. Similar to Pepperstone, AxiTrader doesn't cover the broadest range of markets but offers solid trading conditions. Ultra-low spreads, starting from 0.0 on Forex pairs with commission charges from USD 3.50 per traded lot and maximum leverage up to 400:1.
Available markets include Forex, commodities and metals as well as CFDs on indices, bullion, metals, commodities, oil and Bitcoin.
Available CFDs in detail:
-Index CFDs: Trading on 11 of the most important global stock exchanges. Index CFDs were initially designed for institutional traders and give retail traders access to entirely new markets. Investors can take advantage of the opportunities offered by global equity markets, and index CFDs are available to all AxiTrader clients without any dealing desk intervention or commission charges.
-Commodity CFDs: By trading commodities with AxiTrader, investors do not invest in a physical asset like they would when buying stocks. Instead, trading commodity CFDs allows traders to speculate on the price movement of the underlying physical commodity.
-Gold & Silver CFDs: Precious metals like gold and silver are amongst the oldest and most trusted forms of currency. AxiTrader offers CFD trading of gold and silver on the MT4 platform in the same way as regular Forex currency trading.
-Oil CFD: Axi offers real-time pricing on oil contracts on Brent Crude and West Texas Intermediate (WTI). There is no dealer intervention, no brokerage fees and no commission on AxiTrader's Standard account variant.
-Bitcoin CFD: The only available cryptocurrency that can currently be traded with this broker is Bitcoin. Unlike physical Bitcoin purchases which require a digital wallet and carry a 10% GST fee, Bitcoin CFD trading comes with a tax exemption (Australian residents only).
- ThinkMarkets:
Another top forex broker we found offering a good selection of CFDs is ThinkMarkets. The broker was established in the year 2010, is headquartered in Sydney, Australia, and operates a European satellite office in London, UK. ThinkMarkets allows for a maximum leverage of up to 500:1 and has set a minimum deposit requirement of only $250. They are licensed and regulated by ASIC as well as the FCA and offer tight spreads from 0.1 pips and low commissions of $3.50 per standard lot. Available trading platforms are MetaTrader4 (MT4) as well as their own uniquely designed proprietary platform named Trade Interceptor.
Available markets include currency exchange (FX), indices CFDs, cryptocurrencies CFDs, share CFD, and commodities CFDs.
Available CFDs in detail:
-Index CFDs: Trading on 8 of the most important stock exchanges around the world. Index CFDs were initially designed for institutional traders and give retail traders access to entirely new markets.
-Commodity CFDs: By trading commodities with ThinkMarkets, investors do not invest in a physical asset like they would when buying stocks. Instead, trading commodity CFDs allows traders to speculate on the price movement of the underlying physical commodities, such as Brent and WTI oil and natural gas.
-Gold, Silver & Copper CFDs: Precious metals like gold and silver are amongst the oldest and most trusted forms of currency. On top, copper can be traded with a CFD on ThinkMarkets Trade Interceptor or the MT4 platform.
-Share CFDs: Clients can trade over 100 popular shares in the form of CFDs without paying any commission and leverage up to 10:1.
-Cryptocurrency CFDs: ThinkMarkets offers one of the largest selections of tradable digital assets in the form of CFDs. Cryptocurrencies are quoted both in EUR or USD at ThinkMarkets, allowing clients to speculate on whether their value will increase or decrease in respect to the chosen currency. Among the available CFDs on cryptos are Bitcoin, Ethereum, Ripple's XRP, Litecoin, Monero, MIOTA and many more.
- IC Markets:
IC Markets was founded in the year 2007 and is one of the world's leading ECN Forex and CFD brokers. The company is headquartered in Australia and is licensed and regulated with the Australian Securities and Investments Commission (ASIC) as well as the Seychelles Financial Services Authority (FSA). Client funds are held securely in segregated trust accounts with top-tier banks. International Capital Markets covers a wide range of markets and offers outstanding trading conditions for all types of traders. For example, ICM offers ultra-low spreads, starting from 0.0 on Forex pairs with commission charges as low as USD 3.50 per traded lot on the popular EUR/USD currency pair. Available trading platforms are MT4, MT5 and cTrader.
Available markets include Forex, as well as CFDs on stocks, commodities, metals, global market indices, cryptos and Futures.
Available CFDs in detail:
-Index CFDs: Commission-free trading on 17 of the most important global stock markets. Index CFDs were originally designed for institutional traders and give retail traders access to completely new markets. Investors can take advantage of the opportunities offered by global equity markets and index CFDs are available to all IC Markets clients without any dealing desk intervention or commission charges.
-Equity CFDs: ICM clients can access over 100 large-cap share CFDs across the ASX, NYSE and NASDAQ stock exchanges. When trading stock CFDs, traders have access to a wide range of industries, companies and markets so they can make potential profits from various events and price movements.
-Commodities CFDs: Tight pricing and flexible lot size from 10c per point on 19 commodities (metals, agricultural and energies) as Spot or Futures CFDs.
-Crypto CFDs: There are ten derivative cryptocurrency products on offer - Bitcoin, Ripple's XRP, Bitcoin Cash, Ethereum, Dash, Litecoin, EOS, Emercoin, NameCoin and PeerCoin.
-Futures CFDs: Four global Futures are available to trade. Futures are one of the most popular forms of CFDs.
- VantageFX:
VantageFX is an Australia based true ECN broker that was founded in the year 2007. This Forex and CFD broker is licensed and regulated with the Australian Securities and Investments Commission (ASIC) as well as the FCA and the CIMA. Client funds are held securely in segregated trust accounts with top-tier banks. Vantage FX offers ultra-low spreads, starting from 0.0 on Forex pairs with commission charges as low as USD 3.50 per traded lot on the popular EUR/USD currency pair. Available trading platforms are MT4 and MT5.
Available markets include Forex, as well as CFDs on shares, commodities, indices and crypto.
Available CFDs in detail:
-Index CFDs: Vantage FX clients can access 10 of the most liquid world stock exchanges and a total of 15 index CFDs. Those were originally designed for institutional traders and give retail traders access to completely new markets. All types of investors can experience a true institutional level of indices trading through the broker's transparent pricing model. The Vantage FX fibre optic network, with oneZero™ MT4 Bridge provides Indices traders with one of the best trading solutions.
-Equity CFDs: Vantage FX provides traders with leveraged equity CFDs in some of the largest US, and Hong Kong listed companies. Access is given to over 100 companies such as Amazon, VISA, Google, Tencent, Bank of China and more.
-Commodities CFDs: Clients can trade precious metals, energy and soft commodities, including gold, silver and oil.
-Crypto CFDs: There are six derivative cryptocurrency products on offer - Bitcoin, Ripple's XRP, Bitcoin Cash, Ethereum, Dash and Litecoin.
- easyMarkets:
Initially established in 2001, easyMarkets is yet another Australia based Forex and CFD broker. However, this broker is the only CFDs broker highlighted in this article that applies a market maker broker model where spreads are not variable. Licensed and regulated is easyMarkets by the Australian Securities and Investments Commission (ASIC). Client funds are held securely in segregated trust accounts with top-tier Australian banks. easyMarkets offers fixed spreads, starting from 1.8 pips and no further commission charge. Negative balance protection is also guaranteed at easyMarkets. Available trading platforms are the popular MT4 and the proprietary easyMarkets platform.
Available markets include Forex, as well as CFDs on commodities, indices and crypto.
Available CFDs in detail:
-Index CFDs: easyMarkets clients can access nine of the most liquid world stock exchanges. Indices CFDs were originally designed for institutional traders and give retail traders access to completely new markets. Traders have access to the US, AU, EU, UK and Asian markets.
-Commodities CFDs: Clients can trade energies and soft commodities.
-Metals CFDs: Gold, silver, copper, palladium and platinum are available for CFD trading.
-Crypto CFDs: There are three derivative cryptocurrency products on offer - Bitcoin, Ripple's XRP and Ethereum.
- XM:
The online broker XM launched in 2009 and has since grown to become one of the world's most popular CFD brokers, attracting clients from 196 countries. XM is licensed and regulated by ASIC, FCA and CySEC. The online broker offers low spreads starting from 0.0 pips, over 1,000 trading instruments and a transparent pricing structure. Available trading platforms are the popular MT4 and MT5.
Available markets include Forex, as well as CFDs on commodities, equities, indices and crypto.
Available CFDs in detail:
-Index CFDs: Choose from 18 global Cash and Futures Indices. Index CFDs were originally designed for institutional traders and give retail traders access to completely new markets.
-Stock CFDs: Large selection of shares CFDs across multiple markets.
-Commodities CFDs: Clients can trade many energies and soft commodities.
-Metals CFDs: As one of the most commonly traded CFDs, XM provides access to a total of four metals CFDs: Gold, silver, palladium and platinum are available for CFD trading.
Find The Best CFD Trading Forex Brokers for your needs
To help you find the Forex broker that is best suited to your needs, take a look at our comparison table and ranking of top Forex and CFD trading brokers above. If you require more in-depth information or are looking for more brokers to choose from, check out our detailed individual broker reviews and additional comparison tables.