Demand for CFD trading continues to soar among professional & retail traders alike, as CFDs represent the ideal instrument for short-term trading & hedging.
Finding the best CFD brokers poses a challenge, with hundreds of available choices. We've researched them thoroughly to assist you in your trading journey.
Top CFD Brokers List
- FXTM, Best all-around broker with high floating leverage and fast execution.
- FP Markets, ECN trading with leverage up to 1:500.
- ActivTrades, .
- AvaTrade, Highly regulated, choice of fixed or floating spreads.
- Eightcap, Competitive pricing + excellent daily videos.
FXTM
In Summary Best all-around broker with high floating leverage and fast executionFXTM opened their forex/CFD brokerage firm in 2011 and are perhaps better known as “ForexTime”. The company is primarily regulated through the Cyprus Securities and Exchange Commission (CySEC), with additional regulation through the Financial Conduct Authority (FCA) UK, the Financial Services Commission (FSC) of the Republic of Mauritius, and by the Financial Sector Conduct Authority (FSCA) of South Africa. An important feature of FXTM is that it can tailor its offerings based on where its dealers are located in the world. This includes a wide range of forex pairs and crosses (including some exotics), gold, silver, natural gas and crude oil, as well as various cryptocurrencies, CFDs on major American stocks, and major equity indices
Pros & Cons
- Excellent commission-based Forex pricing environment and transparency
- Upgraded MT4/MT5 trading platforms plus proprietary mobile trading app
- Quality market research and educational content for beginner traders
- A highly regulated broker with a tier-1 license
- No cryptocurrencies and limited choice of commodities
FP Markets
In Summary ECN trading with leverage up to 1:500The twelve MT4/MT5 add-ons at FP Markets upgrade the core trading platform to a competitive version. It also supports retail account management via the MAM/PAMM infrastructure and offers Autochartist to manual traders and VPS hosting to those with automated trading solutions. Myfxbook AutoTrade caters to social traders. The proprietary Iress trading platform remains location-restricted but is the only one offering access to the 10,000+ CFDs. Traders will benefit from the ECN cost structure of 0.0 pips raw spreads and a commission of $6.00 per round lot. The minimum deposit is $100, and the maximum leverage is 1:500. Additional benefits include an execution speed below 40 milliseconds and a no dealing desk (NDD) execution model. The unregulated FSC-registered unit caters to most international clients.
Pros & Cons
- Choice of trading platforms and auxiliary trading tools
- Very competitive cost structure and excellent asset selection
- Low minimum deposit requirement and leverage of up to 1:500
- Well-regulated and trustworthy
- Availability of Iress geographically restricted
ActivTrades
In SummaryActivTrades offers MT4/MT5, and its proprietary ActivTrader. It also connects social traders with 50M+ peers via TradingView. Equity CFD traders get 700+ assets listed in twelve countries. The average order execution is below 0.004 seconds and the bandwidth to execute 100K orders per second makes it well suited for demanding, high-volume traders. Therefore, I rank ActivTrades among the best CFD brokers.
Traders get a commission-free pricing environment with minimum spreads of 0.5 and average spreads of 1.0 pips. ActivTrades has no minimum deposit requirement, the maximum retail leverage is 1:200, and traders can open an account in EUR, USD, GBP, SEK, or CHF.
Pros & Cons
- Demo Account
- Highly Regulated
- Low Spreads
- No Choice of Trading Accounts
AvaTrade
In Summary Highly regulated, choice of fixed or floating spreadsAvaTrade has an exceptional educational unit in SharpTrader, but traders must carefully consider the subsidiary they decide on. The ASIC, FSCA, BVIFSC, and FSRA provide a competitive trading environment. The minimum deposit of $100 unlocks maximum leverage of 1:500 and provides access to more than well-selected 1,250 CFDs. Traders also have a broad range of trading platform choices, including the core MT4/MT5, together with the proprietary WebTrader, AvaOptions, AvaTradeGO and AvaSocial. Additional copy trading platforms available at AvaTrade are ZuluTrade, MQL5 Signal Service and DupliTrade. The commission-free cost structure is average with minimum spreads of 0.9 pips or 0.13%.
Pros & Cons
- High quality educational offering via AvaAcademy
- Excellent choice of trading platforms catering to various trading needs
- Broad asset selection and cross-asset diversification opportunities
- Well-regulated and trusted broker with oversight from a central bank
- Trading costs competitive but nothing special
Eightcap
In Summary Competitive pricing + excellent daily videosCFD traders get a competitive edge via the cutting-edge Capitalise AI service, available as an MT4 plugin. Eightcap lists over 800 CFDs, making manual trading inefficient. Capitalise AI allows traders to create algorithmic trading solutions in a code-free environment and complements the MT4/MT5 trading platforms. The former is the industry leader for algorithmic trading solutions, and the latter is a leading choice for equity CFD trading.
Traders get competitive fees in the commission-based raw spread account, and diversification across multiple sectors, including 180+ cryptocurrency CFDs, is available. Deep liquidity and superior order execution make Eightcap an excellent CFD trading platform.
Pros & Cons
- Low minimum deposit and high leverage of up to 1:500
- Competitive cost structure
- Excellent technology infrastructure and seasoned management team
- Daily research and quality educational content
- Limited leverage in some areas
Best CFD Trading Platform Comparison
| | | | | |
Regulators | CMA, CySEC, FCA, FSC Mauritius, FSCA | ASIC, CMA, CySEC, FSCA | CNMV, CONSOB, FCA, FSC Mauritius, SCB | ASIC, BVI, Central Bank of Ireland, FFAJ, FSCA, KNF, MiFID | ASIC, CySEC, FCA, SCB |
Year Established | 2011 | 2005 | 2001 | 2006 | 2009 |
Execution Type(s) | ECN/STP, Market Maker | ECN/STP | Market Maker | Market Maker | ECN/STP, Market Maker |
Minimum Deposit | |||||
Average Trading Cost EUR/USD | 0.1 pips | 1.2 pips | $10.00 | 0.9 pips | 1.0 pips |
Average Trading Cost GBP/USD | 0.2 pips | 1.4 pips | $14.00 | 1.5 pips | 1.2 pips |
Average Trading Cost Gold | $0.18 | $0.16 | $42.00 | $0.29 | $0.12 |
Trading Platform(s) | MetaTrader 4, MetaTrader 5, Proprietary platform | MetaTrader 4, MetaTrader 5, cTrader, Proprietary platform, Web-based | Other, MetaTrader 4, MetaTrader 5, Proprietary platform, Trading View+ | Other, MetaTrader 4, MetaTrader 5, Proprietary platform, Web-based+ | MetaTrader 4, MetaTrader 5, Trading View |
Islamic Account | |||||
Negative Balance Protection | N/A | ||||
| Visit Website | Visit Website | Visit Website | Visit Website | Visit Website |
What is a CFD?
CFDs became the best trading instrument for professional traders and retail traders alike. First introduced in London in the early 1990s for professional clients and in the late 1990s to retail traders, they offer leveraged trading without owning the underlying asset. CFDs grant trading opportunities in a cost-efficient manner, as transactions do not require settlement of underlying assets. Therefore, it allows retail traders to participate in any market their broker provides.
Several regulators took steps to limit leverage or ban advertising of CFDs amid mounting retail losses related to an absence of understanding. They are an over the counter (OTC) product specifically written for leveraged transactions, but traders must understand the risks involved before using CFDs. CFD brokers are usually market makers who hedge exposure by taking positions in the underlying assets matching their order book. They also profit from client losses, with an average of 75% of retail traders managing loss-making portfolios.
Pros and Cons of CFDs
Pros
A vast universe of instruments to trade including shares, indices, commodities, and currency pairs.
The high degree of leverage available means you have small margin requirements, making CFD trading highly efficient.
You can short CFDs without having to go through the intricacies of traditional short selling.
CFDs are exempt from stamp duty (in the U.K.).
You can deduct your losses from profits for tax purposes (in the U.K.).
Cons
You can lose more than your initial deposit.
When used improperly, leverage can magnify losses so be sure to use solid money and trade management strategies to insulate your account from large losses.
Trading CFDs profitably requires skill and experience. Get to know the intricacies of the instruments you are trading and consider trading with a demo account for some time before risking any real money.
Any positions left open overnight are subject to funding fees.
CFD profits are subject to capital gains tax (in the U.K.).
Types of CFDs
CFDs are available on a huge range of assets including global indices, stocks, currencies, and commodities. Therefore, by trading CFDs you can diversify your positions increasing your market opportunities. Let’s examine the main differences between CFDs and other financial instruments.
CFDs vs. Forex: like Forex, CFDs are OTC (over the counter) products (so there is no central exchange) and if you take a position with a CFD you do not physically own the underlying asset. While currency prices are all driven by geopolitical events (Brexit, Coronavirus), economic data (inflation, GDP, employment) and interest rates (yields), CFDs can differ. The price oscillations of a CFD depend on the underlying instrument. For example, a CFD based on Tesla stock will depend on specific news relative to renewable energy, tweets by Elon Musk, earnings prospects, growth prospects, and the company’s regulatory environment.
CFDs vs. Futures: CFDs and futures are both derivative products, based on an underlying asset. The main differences are the contract size and margin requirements. CFDs allow more flexibility and can be traded with smaller account sizes because of the granularity of their pricing structure and leverage. CFDs are also simpler: while futures have expiry dates, CFDs do not. Also, CFDs do not require physical delivery. Imagine trading WTI Crude Oil futures and forgetting to roll the position over: you would be accountable to take physical delivery of the number of barrels you were trading. This cannot happen when trading CFDs, because you do not physically own any of the underlying asset.
CFDs vs. Commodities: CFDs trading involves “fewer headaches” than traditional commodity trading. CFD traders need not worry about physical delivery, contract expiry, or lot sizes. As such, when trading CFDs on coffee, crude oil, wheat, copper etc., you only need to focus on your pre-trade analysis, trade execution and trade management. Your trading is much more efficient and much less complex.
CFDs vs. Stocks: With physical stocks you must pay the full value upfront, whereas leverage is available on CFDs. Yet, with CFDs your losses can exceed your initial deposit, while with stocks you can only lose the invested amount. In addition, stocks have limitations on short selling, whereas CFDs allow you to trade either long or short without restrictions. Stock trading is limited to the open hours of the relevant stock exchange, while CFDs can be traded 24/7, subject to your broker’s market hours. Since there is no time-based fee incurred to keep stocks trades open, but there is a cost to holding CFDs overnight, CFDs are more directed towards intraday and swing trading, whereas stocks are more suited for long-term investing.
CFDs vs ETFs: CFDs and ETFs are both speculations on the movement of the underlying instrument. ETFs are quoted on public stock exchanges. They can represent entire sectors, industries, or commodity baskets, and as such can offer internal diversification benefits while maintaining low costs. In addition, with ETFs you must pay the full price of your underlying asset, whereas leverage is available on CFDs. ETFs are not subject to rollover fees, whereas CFDs are. As such, ETFs are best used for longer-term strategies like dollar-cost averaging, asset allocation, and risk-parity; CFDs are best used for short-term directional trading. Many Forex brokers now offer CFDs on more popular ETFs, so traders can perform ETF CFD trading.
CFDs vs Options: options are perhaps a more efficient as they have embedded leverage (1 option typically allows you to control 100 shares of a company) but the benefit might end there. Options have an expiry date and so have something in common with commodity futures, but they are certainly more complex to understand due to the multiple variables that impact their price. Also, options are almost entirely directed at stocks whereas brokers have created CFDs on many different asset classes.
How Does Online CFD Trading Work?
CFDs grant traders exposure to price action without asset ownership. Traders can benefit in either direction in a leveraged transaction, freeing up trading capital and gaining exposure to international markets with a cost-efficient and competitive product, as long as traders use it for short-term trades. CFD traders enjoy unparalleled freedom and diversification opportunities, even from smaller deposits, if proper risk management exists.
Types of CFD Brokers
CFD traders have two distinct choices:
- Market Makers: They work with liquidity providers and match orders from their internal order book. Market Makers may also become the direct counterparty to client positions. Spreads are generally higher in a commission-free trading environment.
- Direct Market Access (DMA) Brokers: Traders have direct access to liquidity providers via ECN and no broker intervention. Active traders get access to raw spreads for a commission. They are ideal for active traders and often come with a volume-based rebate program.
How Do CFD Brokers Make Money?
Trading costs will have the most significant direct impact on your trading strategy and portfolio. The two most significant ones consist of:
- Spreads & Commissions: Spreads are mark-ups and translate into broker profits above market rates. Market makers derive their income primarily from them. Commissions apply at ECN brokers, where traders usually have access to raw spreads.
- Financing & Hedging: Swap rates on leveraged overnight positions is another cost traders must consider. Hedging is another way CFD brokers make money. It is necessary to limit liabilities when clients earn profits, which remain offset by hedged positions in other markets totaling the order book.
The Best CFD Trading Platforms
The MT4, MT5, and cTrader remain among the most deployed trading platforms with full support for automated trading solutions. They are available as a desktop client, a webtrader, and a mobile app. The best CFD brokers additionally deploy proprietary trading platforms or offer upgrades to existing ones to ensure clients have an edge.
What Makes a Good CFD Broker?
While preferences among traders differ, the following deserve consideration:
- Fee Structure: Tight spreads and low commissions with a volume-based rebate system remain the most competitive offer for active traders.
- Products and Markets: Traders should seek a broad asset selection and competitive trading tools to gain a competitive edge. Support for third-party applications is an additional benefit.
- Account Opening: A swift online process with mandatory account verification remains the established industry standard.
- Deposits and Withdrawals: The best CFD Forex brokers offer low-cost and instant third-party non-banking payment processors.
- Web Trading Platform: Proprietary trading platforms offer manual traders an excellent alternative. The best CFD brokers have APIs to allow third-party solutions access.
Final Thoughts
CFDs are a flexible, leveraged, short-term trading instrument. The benefit of CFDs is that traders can trade a vast array of different instruments via CFDs, since brokers nowadays create CFDs on practically all asset classes (stocks, forex, commodities, indices, metals, bonds). However, traders need to have a firm grasp of risk management and money management principles to properly trade CFDs while avoiding margin calls.
