What's the best CFDs broker?

Everyone will agree that it’s hard to get a correct answer to a question like this one. It’s like with almost any product – what is the best car, what is the best computer, which is the tastiest pizza? It depends whom you ask. However, there’s one important difference between these products and CFDs brokers – the fact that you can win or lose money with the brokers. In this sense, you definitely want to know whom you are depositing money with. Also, you want to make sure you are getting the best platform for trading, lowest spreads, longest list of underlying assets etc. While you will munch your pineapple Hawaii pizza in 30 minutes, you will be spending longer time on the trading platform of the Forex broker. While it’s hard to say which one is the best, it is easy to recognize some basic characteristics of those brands that could be seen as the top of the industry. We do not want to speak on behalf of any brand here.

1. Best CFDs Brokers Are Regulated

This one is pretty understandable. If you deposit money on your trading account, you don’t want it to end in some offshore boiler room. In order to build basic trust with the broker, the CFDs trader should scroll down to the bottom of the page to see which authority regulates the work of the said company/brand. If you are in the EU, seeing that the broker is regulated by the Cypriot authority should be enough. UK traders want to see FCA regulation. ASIC is responsible for Australian brokers. If you are from a country that does not have an authority that regulates Forex and CFDs trading, you can still reap benefits from using a regulated broker from another country since on average they are better than offshore brokers without any license.

2. Best CFDs Brokers offer Tightest Spreads

Spread is the cost of trading for direct market access brokers. This means that the broker is the one who provides the liquidity to the trades and they will earn spreads – which are price differences between prices paid by those who buy and received by those who sell. Broker is the intermediary here. Most liquid currency pair CFDs like EURUSD will usually be cited for comparing spreads. Even tighter spreads are possible with ECN brokers which do not provide liquidity, but organize the access to the inter bank liquidity pools for the customers. ECN accounts require higher deposits and are not always suitable for small traders. Spreads here are really low – sometimes 0 pips for EURUSD, but each trade costs a commission which can reach several USD per each side of the trade per lot.

3. Best CFDs Brokers Provide the Widest Range of Markets

While the most popular form of CFDs trading is forex trading – namely CFDs on currency pairs, the global market presents so many opportunities as there are assets. A good broker will provide possibility to trade CFDs not only based on currency pairs, but also on stocks, bonds, ETFs, cryptocurrencies and commodities. In this sense, the more the merrier, since underlying assets that you are not trading do not actually cost you anything. If you are interested in trading non-Forex underlying assets, make sure to compare spreads when comparing brokers since these can vary more than Forex spreads.

4. Best CFDs Brokers Provide a Negative Balance Protection

Negative balance protection will be a must for all brokers offering CFDs in Europe soon. The issue for traders arises from the fact that CFDs are complex derivatives that are often traded on the margin. This means the trader’s money for each trade is the margin that is kept to protect the trade while the trade itself can be several times, or several hundred times larger than the margin. This is what is called a leverage. You place 1$ trade with 1:100 leverage (1% margin) means your trading position is $100. So, if you profit, you profit 100 times more than if you just used your $1 to trade. However, if you lose, your loss is 100x higher too. This can create situation where you lost more than you invested and you owe broker money from the trade. Negative balance protection ensures these situations do not happen since the broker is obliged to close that trade automatically if the loss threatens to be larger than investment.

Other than these things, one should also consider online CFDs broker reviews and experiences of other traders with the broker. But most important thing is to decide what is important for you, and according to that select a broker. Otherwise, you will face tradeoffs in some cases where you will feel you may be missing some good feature. If you know what you need, then it is easy to prioritize.