A CFD or contract for difference is an agreement that is created between a buyer and a broker. It is a by-product. Contracts for difference are increasingly indispensable for irregular or regular traders. CFDs offer up to 20x leverage and are particularly attractive due to their exposure potential. However, the platform you choose to trade CFDs from the vast array of CFD trading platforms is significantly more essential than you may believe.
This guide will help you choose the best CFD trading platforms that is suitable for you and your goals. We have prepared the list of best CFD trading platforms for our readers after doing extensive research. This will help our readers to choose the best platform that fulfills their requirements.
What is CFD?
A CFD or contract for difference is an agreement that is created between a buyer and a broker. It is a by-product. As with all physical assets, CFD buyers charge or collect the difference between the CFD price at the time the CFD is sold and the price at which the position is taken.
A higher price at the point of sale than at the time of purchase means that the buyer has a capital gain from CFDs. Otherwise, the buyer has lost capital. Contracts for difference are a way of speculating about the rise or fall of an underlying asset in financial markets. This is not like other physical assets that you own and only guess about increasing.
CFDs are financial instruments that can have multiple bases, including:
- stock index
What is CFD trading?
CFD trading is similar to trading an asset or underlying asset. However, as we have seen, you are not trading a physical asset, but a contract that faithfully reproduces the short sale of a replica asset.
How does CFD trading work?
CFDs have several technical aspects. First, when you buy the value of a borrowed stock, you are buying an underlying asset, not a CFD. In other words, if you want to profit from CFDs, you need to use leverage.
These types of contracts utilize leverage. These effects allow you to invest more than you have. It is a purchase or investment through a loan. For example, buying €50 of Boeing stock with a leverage of 5 will expose you to €250. This allows you to bet more than you have, with higher profit expectations and greater chances of losing of course.
It should be remembered that even an experienced trader can lose money with leverage as these tools have a high risk of a sudden loss of capital. CFD is a complex tool and has limitations. Therefore, you should be aware of these risks and understand how CFDs work before investing to avoid unpleasant surprises.
What can I trade with my CFD account?
Although CFDs are now more accessible, it is important to understand the different types of assets that can be traded with CFDs. In fact, like many derivatives, you can find contracts for difference.
Yes, CFDs on currency pairs look very classic to us. So, here you can, for example, sign a contract in the EUR/USD pair using a highly leveraged CFD. You will find x30 leverage against the EUR/USD pair on eToro, which is a risky but still interesting exceptional exposure.
Yes, you know you can bet on stock indices as well. So obviously the main difference from stocks is that you bet on CFDs even with leverage of 1. Otherwise, you will have maximum leverage (usually x10) for various stock indices such as CAC 40 or China50.
We will be here with a great classic. These are the most common CFDs used by various irregular traders. So, you can usually buy and sell certain types of securities with maximum leverage of X5 or x10.
Petroleum, gold, palladium, and many commodities can be traded through CFDs. We stick to the classics here, except that this type of investment is widely used by professional traders via futures rather than CFDs. Although CFDs are based on speculation with no expiry, there remains a quick nuance between the two: futures themselves are precisely futures contracts. In other words, you bet on an asset at a specific price later.
Finally, look for options to bet on cryptocurrencies using CFDs. On the other hand, fewer platforms offer greater leverage since the increase in recent years. However, it is always possible to find some brokers that offer leveraged CFDs for cryptocurrencies.
Best CFD Trading Platforms 2022
Although most brokers offer CFD accounts, not all are created equal. User experience, platform accessibility, commissions, or related costs, either way, can quickly become meager. Here we present the top 9 best CFD trading platforms of 2022.
Best CFD Trading Platforms Reviewed
eToro has established itself as one of the world’s leading trading companies. With a valuation of over $800 million in 2018, the broker is a must for anyone looking to trade CFDs. eToro remains a trading site accessible to everyone. You can find many assets such as cryptocurrencies, currency pairs, commodities, or stocks and indices. eToro is the world’s leading social trading provider. In other words, thanks to this feature called CopyTrading, you can copy the CFD positions of the best traders on the platform.
eToro is a modern trading platform founded primarily in 2017 and regulated by the Cyprus Stock Exchange Commission (CySEC). Thanks to its modern interface and powerful and fast platform, both beginners and freelancers are constantly looking for exciting business opportunities. A must-have item that has some innovations and remains in the minds of many accessible accounts, opens quickly, and is useful for getting started with trading and CFDs.
Capital.com is a great alternative level CFD. A very young online broker, established in 2016, this newcomer has nearly 300,000 clients in more than 50 countries. The platform remains accessible and easy to master. Low spreads and low costs maximize profits, especially when opening many positions and preferring short positions.
It can be found in this modern fintech logic of adding value through innovative processes and architectures based on innovative technologies. Here we find a fairly well-crafted artificial intelligence, a special and modern UX that enables accessible technical analysis, as well as an easy way to deal with CFDs.
Plus500 is another leading UK CFD trading platforms. All trades are fee-free and Plus500 calculates the narrowest spreads I have ever seen with a CFD Broker.
This broker offers an advanced yet easy-to-use trading platform. It contains nearly 100 technical indicators and various price charts. You can also access the economic calendar and news feed from your CFD trading account. Plus500 has a CFD mobile trading application that allows you to trade CFDs from anywhere. You can also set up price alerts on your mobile device so you don’t miss the opportunity to buy discounted CFDs.
Libertex was founded in 1997. The Libertex platform also allows you to trade CFDs. More than 2 million clients from nearly 30 countries trust this online broker. Unlike other brokers that get paid through margin, Libertex does not calculate margin, but a fixed fee for your assets. Depending on the asset type, these fees are rather interesting.
At the platform level, it will have significant investment opportunities such as stocks, indices, metals, currencies, and commodities. More than 200 products are negotiable without margin. Here you can trade with CFD experts and you can take advice from the experts. You can find nearly 100 stock CFDs, index CFDs, ETFs, as well as over 50 currency pairs. The fact that there are no spreads and that the platform offers the integration of FC Valence and Tottenham’s partner MetaTrader gives us a positive image and, above all, increases our scale.
FXCM is one of the oldest online brokers, FXCM fits a line of trusted and reputable mainstream brokers. It is based in London, we find many CFDs on a modern platform that sticks to the essentials. FXCM was founded in 1999, FXCM is a London-based online brokerage firm compliant with ESMA, a European financial market expert that protects traders from various trading “biases”. This London broker remains a historic player in the market despite having few assets and products.
When MetaTrader 4 is integrated, there are few CFD opportunities. It offers 10 indices and cryptocurrencies, 15 stocks, and some commodities. In short, the London Corridor gets to the point and seems pretty successful for them. It will be implemented, especially since there will be a lot of access to technical analysis and a set of indicators and tools.
AvaTrade was founded in 2006, AvaTrade has established itself as a leading London broker with many advantages and an intuitive and modern platform. It offers access to CFDs and this makes it an ideal player for new traders.
AvaTrade is ForexBrokers.com’s Innovation No. 1 Trading platform with 15 years of experience winning multiple awards like, Best Trading App 2021, or Best Forex Trading App 2020. The platform is exceptionally consistent with many financial instruments, many options. AvaTrade is a leading provider of financial derivatives with a variety of options including regular vanilla options, copy trading, stock trading, and MT4 and MT5 integrations.
AvaTrade offers more options than anywhere else. On this platform CFDs allow you to trade indices, commodities, cryptocurrencies, ETFs, bonds, and more. Similarly, there are other high-end financial products such as vanilla options. Spreads are calculated in currency only. The platform is intuitive and high quality.
XTB continues to be one of the most popular and highly rated brokers on the market. It is primarily a runner with over 17 years of experience, founded in 2004. Here we find a technical runner who has won numerous awards for this team. It offers a vast variety of assets. Over 1,800 CFD stocks, most currency pairs, 20 indices, most commodities, as well as ETFs and, cryptocurrencies.
It also has the xStation 5, a tool for professionals and individuals, and a very powerful platform with advanced customer support. Thanks to the Trading Academy, brokers can help both beginners and experts go through different accounts such as standard, pro, or professional. Here you need to be careful as there are various fees or supplementary costs through CFDs or specific services, which are expensive. It can also be expensive.
FinmaxFX is a new CFD broker launched in 2019. This broker is especially famous for the high leverage it offers to its traders. As FinmaxFX is unlicensed in Europe, it can offer leverage of up to 1:200, which is much higher than other UK brokers. This CFD trading platform offers a wide range of trading instruments covering stocks, currencies, cryptocurrencies, commodities, and bonds. Trading with FinmaxFX takes place on MetaTrader 5, giving you access to many advanced trading tools.
FinmaxFX also offers several useful training and analytics resources including financial news, market reviews, and technical analysis. One downside of this platform is that the spreads aren’t as low as other brokers and deposit and withdrawal fees must also be taken into account.
XM stands out as an alternative broker with a pretty good reputation, it is regulated by CySec and with over 1.5 million clients. It is an all-around runner. It is present in almost every country in the world and provides optimal customer service thanks to its nearly personalized approach. So it will be a very suitable solution for merchants in Africa and the Middle East.
Financial instruments like CFDs will be diverse, and both MT4 and MT5 will be integrated into one modern platform. XM also wants to be transparent and not offer or hide any fees or commissions. In addition, its wide range of products, zero pips initial price margin, 16 trading platforms, and 1000+ indicators make it a real leader, especially in CFDs.
How to start CFD trading?
We are showing the CFD trading process with eToro. A comparative study of the best online brokers shows that this best meets the expectations of clients, especially those just starting. Following are the steps-
Step 1: Open an account with eToro
The first step in the process is to open a trading account. To do this, you need to go here and complete the application form by filling in the information including your name, email address, and phone number.
Step 2- Verify the identity
Here you need to verify your identity. Gambling is still subject to French regulations and minors are not allowed to join. This means that you will need to submit your CRF or passport to confirm your registration. The process can take at least several hours, such as a day, to complete registration.
Step 3- Credit to your account
Of course, you can use the demo account used by 100% of traders. It always makes sense to have this type of account for reasons x and y. If you want to go directly to the financial market with a real account, you need to deposit money into your account. You can deposit the funds via bank transfer, wire transfer, e-wallets, and debit/credit cards.
Step 4- Choose an asset to invest
Yes, the classic way is to choose an asset to bet on CFDs come later. The range of possible assets is wide. You can choose from cryptocurrencies, stocks, forex, indices, and commodities.
Step 5- Start trading CFDs
Now that your account has been opened, verified, and funded, you can take a position and start trading CFDs. It is important to understand the difference between an asset and its CFD on the platform. To trade an asset, you must enter leverage of 1. All assets can be traded in CFDs or physical form if no leverage is used. To select an asset, you can use the search bar at the top of your account home page or use the “Markets” tab on the left.
Strategies with CFD trading
CFD trading is still complex but attractive. Now let’s take a look at the different trading strategies possible using a CFD account.
CFD and Day trading
Intraday trading is the prerogative of intraday traders. Positions are opened and closed several times daily to take advantage of fluctuations in wealth. Intraday trading remains complex throughout the day, so I don’t recommend it for CFDs. The purpose of this type of trading is not to use leverage to take advantage of greater exposure, but rather to use negative volatility to capitalize on volatility. Operational quality will be the main revenue stream here.
CFD and Scalping
Here we have more confidence when opening and closing repeat positions. Scalping consists of constant open and close positions. The basic idea is no longer qualitative, but quantitative. Of course, the quality of the technical analysis or the robots and automation used will help you maximize your profits.
CFD and swing trading
This is arguably one of the most rational ways of acting for a layperson. We will fill fewer positions here, and our positions will last longer (from a few days to a month). The main idea of swing trading is to capitalize on the volatility of an asset for more than a week, yielding greater returns than very short-term positions.
CFD Accounts and hedging
I won’t go into details here, but it’s important to understand that hedging is closely related to efficient trading. That said, your idea here is to systematically protect yourself to limit and prevent losses. The general concept is to take two opposing positions for a given asset. Whether short or long, hedging with futures or CFDs is still unavoidable for those who want to trade profitable and long term. Therefore, position protection is essential, especially for leveraged products such as CFDs.
Advantages of CFD trading platforms
CFDs remain a financial instrument with significant advantages. Let’s take a look at the main advantages of CFD trading platforms.
CFD accounts provide leverage
As we have already seen, the benefit of CFD action is that it can provide you with more exposure without betting as much as betting on unleveraged assets. So, the main advantage is that these financial instruments offer a paper-based opportunity to return 2x to 20x greater than unleveraged positions.
A short sale is also possible
The interesting thing about CFDs is their versatility. Many financial instruments do not allow short positions, CFD accounts offer this option. In other words, you can open both long and short positions. It’s very interesting, for example, when everything tells you that this or that asset will lose points.
You can access multiple assets with one CFD account
Unlike barrier options, futures, or warrants, CFDs offer many assets, including stocks, cryptocurrencies, and commodities. So you can buy and sell almost anything you can think of. There is a real advantage to traders who are always looking for an asset to specialize in.
The ability to start with little capital
Investing through CFDs also allows you to invest a certain amount in many financial markets without having to invest a lot of money. This is mainly due to the existence of leverage.
Investing in CFDs with a relatively low initial capital can be an option of choice given the leverage these products can provide. However, this is the point new investors should properly grapple with leverage. Therefore, it is recommended to start with relatively low leverage CFD trading platforms. Even for inexperienced investors, it is necessary to familiarize yourself with short-term trading techniques as it is an effective method of trading CFDs.
eToro is still an easy-to-trade trading platform for beginners, easy to design trades, and highly relevant when it comes to the assets offered. These are all aspects that make eToro a leading provider of CFD trading platforms. We recommend our readers to use eToro.
Frequently Asked Questions
What is CFD?
This is a contract between you and an online broker for the underlying asset. These types of contracts allow you to sell or buy assets but also benefit from leverage.
Is it risky to invest in CFD?
Yes, so you should familiarize yourself with the product, understand how it works with a demo account, and work with leverage gradually.
Which CFD broker is best?
eToro is kept very simple. Unless it’s a platform primarily used by professional traders, a beginner trading platform is still a reference for its simplicity and easy accessibility.
Is CFD a beginner’s product?
Yes, investing in CFDs is entirely possible if you are a beginner. CFDs are suitable for any investor profile. However, you need to be careful with leverage.
Can you make more money with CFDs than with more traditional physical assets?
Yes, especially when it comes to leverage. But be careful, the more you win, the faster you lose.