The best CFD brokers 2020 can get lost in the long list of providers. So before you join a platform, you need to understand what a CFD broker is, how they make money, and what to compare when weighing up your options. We’ll also cover regulation, payment methods and reviews of some of the largest, top CFD trading brokers.
Top CFD Brokers
What Is A CFD?
CFDs, often traded on leverage, are an over the counter (OTC) instrument, meaning you never own the underlying asset. Instead, profits are made from movements in price from when you enter and close a trade.
See here for further guidance on trading CFDs, including strategies.
How Do CFD Brokers Work?
CFD brokers facilitate the trading process through an online platform. Users sign up for an account, deposit funds, trade CFD products and then withdraw any profits. Account types differ, as does the quality of platforms, the fees charged, and customer service.
The products available also vary. However at the biggest brokers, you can expect to trade online CFD products in:
Types Of CFD Brokers
CFD brokers can be split into two categories:
- Market makers – Brokerages purchase significant positions from liquidity providers which they then sell to individuals. They match selling assets to traders with buy orders and vice versa. Market makers often accept lesser deposits as they can cover liquidity deficits.
- Direct Market Access (DMA) brokers – DMA brokerages let users go straight to liquidity providers. The most common type is an Electronic Communication Network (ECN) broker. Upon entering a position, your trade heads straight to the ECN, passing through the broker without any intervention. The downside is that users need more capital as DMA providers don’t cover liquidity gaps.
Note there are also advisory brokers, who give guidance and recommend trades. However, following a crackdown from legislators, the list of regulated CFD advisory firms has shrunk. This article will concentrate on non-advisory CFD brokers.
Types Of Accounts
The top CFD brokers offer different accounts. Some are best for beginners while others are geared towards advanced traders:
- Micro Account – Best for beginners, minimum deposits start at just $50.
- Mini Account – Good for beginners and up, minimum deposits start at $500.
- Standard Account – The most popular type of account requiring an average minimum investment of $1,000. This type of account will also come with higher leverage options.
- VIP Account – Mostly used by institutional investors, you’ll need $20,000 to open a VIP account. However, leverage and customer support will trump other accounts.
How Do CFD Brokers Make Money?
When you’re doing a comparison of CFD brokers, you need to consider costs. But to do that, you first need to understand how they make money.
Spreads & Commissions
Most platforms will make money through spreads. This is the difference between the quoted buy and sell prices, and real market prices.
It’s essentially a mark-up for the broker’s services. Fees also come in the form of commissions which take a percentage of each trade. The good news is that to stay competitive, many of the best CFD brokers are waiving commission fees.
Financing & Hedging
CFD brokers make money through financing. When clients trade using margin or leverage, they essentially borrow funds from the brokerage to increase their position size. Most firms factor in a fee for these financing services.
CFD brokers may also make money through hedging. To do this, they aim to offset potential losses by matching a complementary trade in a different market. So if the trader wins, for example, they have offset their liability.
Note some brokerages also charge deposit and withdrawal fees.
CFD Broker Reviews
The best CFD trading brokers will have positive customer reviews. Of course, it’s important to note that rankings will vary depending on what you’re seeking. The best broker for beginners may not suit the advanced needs of an experienced trader.
To compare the top CFD providers you also need to factor in where you live. The best DMA brokers in the UK, for example, will be different from those in New Zealand or Nigeria.
|Alpari||Yes||From $/£/€ 5||Yes||Yes|
|CMC Markets||Yes||£ 0||Yes||No|
|eToro||Yes||$200 ($50 in US)||Yes||No|
|Fusion Markets||Yes||No Minimum||Yes||No|
|Hantec Markets||Yes||No minimum||Yes||No|
|InstaForex||Yes||€1 to €1000 (Account choice dependent)||Yes||No|
|JP Markets||Yes||No minimum||Yes||Yes|
|Pepperstone||Yes||£200 / $200||Yes||No|
|Skilling.com||Yes||100 £/€/$ or 1000 NOK, SEK||No||No|
|ZuluTrade||Yes||$1 to $300 (Broker choice dependent)||Yes||No|
US-based Interactive Brokers receives particularly positive reviews for its CFD offering. Promising competitive spreads and commissions, plus generous financing and margin requirements, it’s a sensible choice for clients focussed on pricing and costs. Their platform also has a straightforward margin calculator.
The list of CFD products at Interactive Brokers includes stocks and shares found on multiple indices, such as the Dax, plus forex, gold, and cryptocurrencies like Bitcoin. Note Interactive Brokers’ CFDs on stocks pay dividends too.
Interactive Brokers use the Trader Work Station (TWS) platform. Although arguably not the best system, which is often thought to be MetaTrader 4 (MT4), it still contains all the trading tools, symbols, and charts needed.
Interactive Brokers also has permission to offer CFD products in the UK, Germany, and Japan, amongst others. But CFD products are not available to offshore residents from certain countries, including Canada and Hong Kong.
The best CFD brokers provide clients with an easy to use platform. Some will have developed their own bespoke trading platform, others will integrate popular well established platforms.
MetaTrader 4 (MT4) and MetaTrader 5 (MT5) are particularly popular platforms. Many brokers will try and ensure their platform integrates with Metatrader. Some traders use it for analysis, and integrated trading gives them confidence in their broker.
cTrader is a similar platform that is utilised by a range of online cfd brokers.
Most top providers offer systems that are available on both your computer and through a mobile app.
When considering your options, a useful tip is to open a demo account. You can take the platform for a test run first, checking it’s reliable and has all the charts and analysis tools you’ll need.
The best online CFD brokers will offer a range of deposit and withdrawal methods. Most providers facilitate debit and credit card transactions. Bank transfers are also popular, but while secure, they can take several days. Other common payment methods include PayPal and cryptocurrency.
When looking at reviews, it’s worth checking for any deposit and withdrawal fees. Your comparison should also include a check for payment limits. A prime example found at many platforms is a limit on the number of free payments per month, with any additional incurring a charge.
Traders should only use regulated CFD brokers. Regulatory bodies protect users from scams and uphold confidence in the market. Fortunately, the list of regulated platforms in most countries is long.
In the UK, CFD brokers are regulated by the Financial Conduct Authority (FCA), headquartered in London. The protection afforded by the FCA includes caps on leverage and margin trading.
ESMA (European Securities and Markets Authority) is a Pan-European organisation that makes recommendations to national regulators, like the FCA in the UK, or CySec in Cyprus.
As these regulators ‘passport’ their services throughout the EU, they must adhere to the ESMA guidance – so there is almost two level of regulation in the EU right now.
Elsewhere, providers in Dubai are regulated by the Central Bank of the UAE and the Dubai Financial Services Authority.
In Switzerland, CFD brokers fall under the supervision of the Swiss Financial Market Supervisory Authority. You’ll also find many global brokers with negative balance protection, meaning you can’t lose more than your original deposit.
Access to the best CFD brokers in the USA is largely restricted. Fortunately, there are still some platforms that accept US clients. But on the whole, for US citizens it does mean more shopping around is required. Note UK and European investors can still trade CFD assets on US stocks.
The key takeaway is to check a provider is regulated in your jurisdiction before you open an account. See our regulation page for more details.
The best CFD brokers promise attractive leverage options, a user-friendly platform, and a wide range of products. With the list of regulated CFD brokers growing, make sure you do a thorough comparison before you sign up. Finally, remember there is no universal best broker, it will come down to personal preference.
What’s a CFD broker?
A CFD broker enables users to trade CFD products through their online platform.
How do CFD brokers make money?
CFD brokers make money through commissions, including a mark-up on spreads and financing, plus through hedging.
What assets can you trade with a CFD broker?
You can trade almost all assets through a CFD broker, from stocks and shares to forex, ETFs and cryptocurrency.
Should I open a demo CFD trading account or a live account?
A demo account is a fantastic tool for beginners. It allows you to trial a broker while also practicing CFD trading. When you’re comfortable, you can then open a real account.
Can CFD brokers be trusted?
To make sure you are using safe CFD brokers , check they are regulated where you live and read our reviews. This will help keep you away from websites set up to scam hopeful CFD traders.