Choosing CFD Brokers

A CFD trader must choose a broker according to its special trading needs. The availability of the desired fund methods, the selection of trading platforms and the availability of certain trading assets are important aspects when choosing providers. But what is priority number one is choosing among regulated companies that are able to ensure the safety of the deposited funds. This presentation starts from distinguishing the types of CFD providers and continues with some key tips when you finally must choose a CFD provider.

 

Two types of CFD Providers

There are two types of CFD providers available for online traders:

(i) Market Makers or CFD Agents

(ii) Direct market access providers (DMA)

These two different types of CFD providers offer their clients different features and advantages. There are many reasons why you should or you shouldn’t choose one of these two categories of providers.

Notes:

  • Leveraged trading is allowed on both these types of CFD providers.
  • Traders can maintain real accounts with multiple providers in order to exploit the best trading terms each time they trade.

 

Differences between Market Makers and DMA providers

These two types of CFD providers are characterized by a lot of differences in their trading terms, here are some key points:

(1) Order Execution

Market Makers as the name suggest create a market within a market. When a client places an order they take the exact-sized opposite position in order the trade to be filled. On the other hand DMA brokers fill their client orders using the market’s liquidity and therefore a trade may be filled at several different prices. Market Makers charge re-quotes but DMA brokers don’t. Note that price re-quotes occur when there is no sufficient volume to fill an order.

(2) Asset Index

Market makers are able to cover a wider range of asset classes. The asset index of a Market Maker usually contains 100s of world shares, 100s of Forex pairs, 10s of Indices and 10s of commodities. On the other hand DMA providers offer a considerably smaller range of financial classes and assets.

(3) Cost of Trading

Comparing the trading cost between these two types of CFD providers gets a little bit complex. In general market makers can offer their clients better pricing as they can add volume from other clients too. From the other hand during news releases Market Makers add high re-quotes to the available prices and news-trading becomes very expensive. DMA brokers constitute a better selection for News-Traders.

(4) Trading Platforms

Market makers provide usually a great selection of trading platforms including MT4, web-traders, mobile traders etc. Market Makers never charge their clients fees for using their platforms. On the other hand, DMA providers offer modified versions of trading software that is supplied by 3rd parties. Therefore DMA brokers may charge fees to their clients in order to use this out-sourced software versions. Clients who trade heavily usually pay no such fees.

(5) Company Size

In general Market Makers are larger companies than DMA providers. That means that Market Makers can offer lower margin requirements and better trading terms to their clients. Market Makers are able to offer also bonus promotions to their new customers (welcome bonus, loyalty bonus etc).

 

 

Key Tips When Choosing a CFD Provider

Here are some key tips when choosing a CFD Provider:

(1) Market Makers are better for Beginners and Semi-Advanced Traders

In general if you are a beginner or a semi-advanced trader it is better to choose a Market Maker than a DMA broker. Market Makers offer free education and a practice account which may prove substantially useful for non-experienced traders. In addition Market Makers provide easy-to-use trading platforms for free and a great selection of fund methods.

(2) Safety of Funds is a Top-Priority Issue

When trading online the safety of your funds is priority number one. Before opening an account make sure that your CFD broker is high regulated and based on a reliable county. You may use the broker’s web-site or the live chat service to answer any question or you can use reviews and ratings on the internet. Just make sure that these reviews are really reliable:

» CFD Ratings at FxNros.net

(3) Make sure that your Broker can Cover your Basic Needs

After you have found some CFD brokers that are regulated and can guarantee the safety of your funds then make sure that these brokers offer all the rest that you need. First of all you must make sure that the fund methods available suit you. Second, you must make sure that the assets you want to trade most are also available. The availability of trading platforms is also an important issue. Some CFD providers offer only a web-trader platform some others offer also trading within MetaTrader-4. Finally you may want to trade using a mobile device, therefore make sure that the right app is available from your selected CFD brokers.

(4) Compare Trading Terms and Promotions

After you have chosen 2-3 CFD brokers that can cover all your basic needs then you must compare their trading terms. CFD brokers are not charging trading commissions therefore you just have to compare their spreads. Some brokers may prove too expensive. For example if you trade Forex you shouldn’t accept EURUSD spread more than 2 pips. Moreover you should consider the potential of receiving a welcome bonus if you are a new client. CFD brokers offer high promotions and in some cases you can even withdraw your bonus if you trade it a lot of times.

(5) Rebates and Volume Discounts

If you intend to trade very often (for example intraday) or you intend to trade heavily then you should consider joining a Trading Rebate Plan. Such plans will provide you a discount in the form of cash-back receiving. A rebate means making money from your trading volumes.

» CFD Rebate Plans at Forex-Rebates.com

 

Compare CFD Brokers

Here are some CFD brokers that are regulated and offer segregated client bank accounts. All the following companies are large and have been in the market for at least 5 years.

CFD BROKER

REGULATION / ACCOUNT FOUNDATION

TRADING PLATFORMS

ACCOUNT INFO

VISIT

XM

Trading:

  • Forex
  • Commodities
  • Shares
  • Indices

REGULATED: FSA UK, CySEC, ASIC,

FOUNDATION: 2008

■ Web Trader

■ Mirror-Trader

■ MetaTrader4

SCALPING: YES

$50 minimum deposit

WELCOME BONUS:

40-100%

LEVERAGE:

1:800

WEB-SITE:

 

► XM Web

FXCC

Trading:

  • Forex
  • Gold & Silver
  • Indices

REGULATED: FCA UK

FOUNDATION: 2010

■ MetaTrader4

■ Sirix WebTrader

SCALPING: YES

$100 Minimum Deposit Amount

BONUS:

30-100%

LEVERAGE: 

1:300

WEB-SITE:

 

► FXCC Web

HOTFOREX

Trading:

  • Forex
  • Commodities
  • Shares
  • Indices

REGULATED:

CySEC, MiFID

FOUNDATION: 2007

■ MetaTrader4

■ WebTrader

SCALPING: YES

Free VPS Server for deposits of more than $5,000

$50 Minimum Deposit Amount

WELCOME BONUS:

40-100%

LEVERAGE: 

1:1000

WEB-SITE:

 

► HotForex Web

 

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Choosing CFD Brokers

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