Home Business Insights & Advice How to find the best CFD broker

How to find the best CFD broker

by John Saunders
27th Aug 21 11:52 am

As a form of trading, and increasingly popular amongst investors, contracts for difference (CFD) have many benefits as an addition to your investment portfolio. However, this form of trading can be complicated, and involves leverage, so is favoured amongst experienced traders. As part of an effective CFD trading strategy, finding the best CFD broker or platform is vital, in order to take full advantage of the key features of this trading style.

Contracts for difference explained

Before finding the best CFD trading platform, firstly you should what CFDs are and how they work. Skilling CFD trading platform defines these financial derivatives as offering traders and investors an opportunity to speculate on the price movement of the assets, without owning the underlying asset itself.

Unlike traditional trading, the trader enters into an agreement with the broker, with all profits or losses calculated from the price of opening the contract, to that of exiting it. These contracts, sometimes known as units, can be bought in a range of financial instruments and mirror that of the fundamental market. You can purchase as many units as you like, participating in markets across the globe, and due to the fact that there is no ownership of the asset involved, traders can buy and sell CFDs on both a rising or falling market.

There is no physical place where CFDs are traded, like that of the New York or London Stock Exchange, but instead a network of CFD brokers organise the supply and demand of the market, mirroring the prices of the underlying assets. As an investor, you can trade CFDs on an online CFD trading platform.

What makes a good CFD broker?

Just like with any investment, before parting with your capital, you should research the financial markets and instruments that you are interested in, as well as the CFD trading platform you wish to use. There are some features that you should look for when doing this, to ensure it is the best broker for you.

First all, the CFD trading platform should have good ratios of leverage, which enables a trader to have greater exposure to the market with less initial capital. For example, a leverage ratio of 100:1 could mean that an investment of £1,000 in an asset would be worth the value of £100,000. The exposure that you gain from using leveraged trading does come with its risks, as any losses incurred are also magnified as well as the profits. It is important to include risk management in your strategy, and to remember that the trading leverage can vary across different CFD brokers, platforms, as well as between the various markets and financial instruments.

As risk management is important to implement, the best CFD platform will have readily available trading tools that you can take advantage of. These tools can help you manage the risks, losses and level of profit, by setting certain limits on your trading position, for example. A good CFD broker should also have plenty of information and data to use towards your technical and fundamental analysis, such as an economic calendar, indicators and data charts.

If you’re new to CFDs or trading in general, then you should look for a trading platform that offers a free demo account. This takes out the risk of using your own capital, but can help increase your confidence and knowledge of the market, as well as providing the opportunity to try and test your trading strategy. The demo account reflects that of the real markets, and is a great place to start before moving on to using real money.

Finally, the best CFD platform will allow you to access global markets all from one trading environment. With this access, you can easily diversify your portfolio and also open a CFD to hedge your losses when you actually own the underlying asset, and expect a decline in price. The most experience traders will use this to their advantage to have a range of trading strategies for different markets and assets in their portfolio.

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