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How To Compare The Best Online CFD Brokers

By Jeffrey Cammack Created: April 7th, 2016 Updated: June 8th, 2019

We compare CFD brokers by factors that will affect the overall quality of the trading experience for the trader and according to our review process. The major conditions by which we compare CFD brokers are:

  • Financial regulation and reputation
  • Quality of educational material for beginner traders
  • Trading conditions
  • Platform support

The most reputable CFD brokers will meet all of these standards, and we have listed those below.

Recommended Retail CFD Brokers

Broker Min. Deposit Min. Spread
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What is CFD Trading?

CFD trading, or a Contract for Difference, is where investors don’t take ownership of the asset they are trading. CFDs are derivative products; their value is derived from the underlying asset. The underlying asset can be anything that is commonly traded on a market – be this commodities such as crude oil, corn and gold or equities such as Spotify or Boeing shares or currencies such as Forex and crypto pairs, or even entire indices such as the NASDAQ, JSE or FTSE. So, rather than trading the asset itself, traders instead speculate on the future price of the asset with what is known as a futures contract.

Leverage

The second important thing to understand about CFDs is the leverage involved. CFDs are leveraged products where traders only put up a small percentage of the amount required for the trade, and a third-party liquidity provider will lend the trader the rest.  The money in the trader’s account will then be used as collateral against the loss, but in exchange, the profits for the trader can be much larger. For instance, if you buy 100 USD of a crude oil CFD at 100 USD a barrel and the price of crude goes up by 2 USD you will make 2 USD in profit. But if you borrow 900 USD (to make an even 1000 USD when added to your 100 USD – a 10% margin or 10x leverage) and you buy 1000 USD of crude oil you would make 20 USD – all without spending more than your original 100 USD, a fairly incredible 20% profit in real terms.

Leverage Iceberg

The problem with this is that you can also lose money incredibly quickly. Take the same example above, but this time the price of crude oil falls by 5 USD. Because of your leveraged position (10x in this case) you would lose 50 USD, half of your original investment. In a volatile market (such as Crypto or certain commodities) it is very easy to lose your entire investment.

Additionally, losses apply not just to your investment but to your whole account and, if you are not careful, you can lose large amounts of the trading capital in your account through something called a margin call – this is explained in detail in the FAQs below.

Due to the risk involved in using leverage, retail CFDs are banned or very tightly regulated in much or the world. Since this trading is speculation on the price of an asset or instrument, traders can make money when the price is both rising or falling.  CFD traders will take long positions when the market is bullish, and short positions when the market is bearish.

What is the best platform to trade CFDs?

There are numerous brokers online with varying levels of regulation and reputation but as a result of our study, these are our three favourites.


FXTM

FXTM

Visit FXTM or Read Full FXTM Review

FXTM is an excellent all-around broker and it is especially popular with beginner traders for their educational material and support. Though primarily a Forex broker, FXTM offers competitive spreads on share, commodity, and index CFDs. It also offers instant trade execution and accounts with low minimum deposits – the Shares Account only requires a 100 USD deposit to get started. FXTM are regulated by the FCA, CySec and the South African FSCA and have been widely recognised by their peers. Furthermore, they have excellent training material and 24/7 customer support and are the best in the business.

Pros – Well Regulated, Low Deposits, Spreads from 0.1 pips, over 180 CFDs available, 24/7 customer service, ECN Accounts available

Cons – MT5 only supported by ECN Accounts, CFDs not available with the entry level Cent Account

Visit FXTM or Read Full FXTM Review


Markets.com South Africa

Markets South Africa

Visit Markets or Read Full Markets South Africa Review

Markets.com is one of the best-recognised international Forex brands. In addition to Forex, Markets offers CFDs on equities, commodities, indices, bonds, and ETFs. Cyprus based, and licensed under CySEC and the FSCA in South Africa, Markets has clients from around the world and operates in 15 languages. Markets WebTrader, Markets.com’s proprietary trading platform is a strong substitute for MT4, though Markets.com also supports both of the current MetaTrader platforms. There is a single account available at Markets.com and no commission charged, so all the costs are made through the spread, which is variable and depends on the instrument being traded.

Pros – Good platform choice, wide range of CFDs, no commission, excellent trading tools

Cons – No telephone support, single account choice, no FCA regulation

Visit Markets or Read Full Markets South Africa Review


FXCM

FXCM Broker Logo

Visit FXCM or Read Full FXCM Review

One of the biggest names in the Forex and CFD businesses, FXCM is a leading well-regulated broker. In comparison with other brokers, FCXM excels in platform choice, quality of educational material, and customer support. Though primarily a Forex broker, FXCM offers a range of CFDs to choose from, including commodities, indices and Forex baskets – though they do not offer equity CFDs. FXCM only offers a single account, but it only requires a minimum deposit of 50 USD and offers a large selection of the trading tools. Spreads are variable but generally tight and FXCM publishes the average spreads on CFDs regularly.  Where FXCM really shines is in the choice of platform: Available are the proprietary Trading Station, MetaTrader 4, Ninja Trader and a whole host of professional and technical platforms for experienced traders.

Pros – Superb platform choice, great educational material, low minimum deposit, well regulated

Cons – No share CFDs, single account choice

Visit FXCM or Read Full FXCM Review


Other Leading CFD Brokers

Broker Min. Deposit Min. Spread
Image Title $100 0.7 Visit
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Image Title $250 1.5 Visit
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How do I start CFD trading?

First, you will need to find a reputable broker and open an account – check out our list above.  Because it is a financial trading account, the broker will require that you submit copies of your government issues identification documents and proof of residence such as a utility bill issued in the past six months. Once your account is set up, you will be able to make a deposit and open your first trade.

Is it gambling?

It can be gambling if you treat it as such, but if you do your research and treat it like any other investment in the financial markets, it is not gambling. It’s important to remember the risk of leverage as your deposit is only a small part of your overall exposure and you can lose substantially more than your deposit if the trade goes against you.

However, it is possible to reduce your potential losses by using a stop order. This means that the trade will automatically be closed if it goes against you by an amount you specify. Higher spreads can be another pitfall as it can ruin any potential profits. So pick which instruments you trade very carefully.

What is short selling with CFDs?

Short selling is when you believe the price of an instrument is going to decrease rather than increase. Instead of buying low and selling high, you sell high and buy low – profiting on the decrease in the underlying instrument’s value. See our article on short-selling for a more detailed breakdown of how this can work and it’s uses in trading.

What is a Margin Call?

Brokers will apply a required margin on any position taken by a trader – this is often 50% of the original margin, or 50% of your original investment, but it varies from broker to broker and instrument to instrument. If the total funds available in your trading account falls below this value the broker will make a margin call – requiring you to add funds to your trading account or close your position, covering any losses from your trading account. Needless to say, this is a very bad thing, and if you are planning on holding a long-term position in a volatile market you should have the required margin foremost in your mind when calculating the funds to hold in your trading account.

Commissions on Trades

In addition to your deposit to open or close a CFD trade, you might have to pay a small commission, which can be as low as 0.1%. That said, most brokers make money through the spread and will charge no commission. You may also have to calculate interest adjustments that are added or subtracted from your trade if you hold the trade overnight.

Is Trading Profits Taxed in South Africa?

Profits are taxable in South Africa as income, even the case if the broker is located outside of South Africa. The South African government never sees this as a tax-free form of income. For more detailed information read our tax article.

Is CFD Trading Allowed in Islam?

Traders can open Halal accounts, which the industry has named Swap Free accounts. Swap Free accounts will stop any interest payments being made either from the broker to you, or you to the broker.

Swap Free accounts are more common than you may think and are widely available with CFD brokers. The usual way to get a swap-free trading account is to complete the regular registration process and ask your account manager to make the changes in your account.

Summary

CFDs are designed to mirror the price of underlying assets so traders can take advantage of the price fluctuation without owning the underlying instrument. Technically a CFD is a financial contract between the trader and broker that allows speculation on price.

CFDs are a flexible and attractive alternative to other financial vehicles and they allow you to take advantage in the fluctuations in value of a huge range of instruments.

Importantly, CFD trading allows traders to make money both when the market is rising or falling. Furthermore, you don’t have to put up the full cost of exposure to the market, and there is no fixed period for your trade. With CFDs, you’re able to trade a multiple of your capital using leverage, but this can be a double-edged sword so make sure you’ve done your research and that you keep a close eye on your trades.

Trading Forex and CFDs is not suitable for all investors and comes with a high risk of losing money rapidly due to leverage. 75-90% of retail investors lose money trading these products. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.