CFD trading platforms are provided by CFD brokers and let you trade contracts-for-difference on the financial markets with leverage so you can speculate on prices going up as well as down.  We have ranked, compared and reviewed some of the best CFD trading platforms in the UK that are regulated by the FCA.

Best CFD Brokers Compared

Our picks for the best CFD brokers are based on over 7,000 votes in our annual awards, our own experiences testing the accounts as well as an in-depth comparison of the features that make them stand out compared to alternatives.

City Index

City Index CFD Trading

Best for trading signals and post trade analysis

City Index offers one of the best CFD trading platforms in the UK, on a wide range of markets with low costs and is suitable for large traders who want personal service and new traders how need assistance looking for trading ideas.

Markets:

12,000

Minimum Deposit:

£100

Account Types:

CFDs, Spread Betting, Forex

69% of retail investor accounts lose money when trading CFDs with this provider

Interactive Brokers CFD Trading

Best for advanced CFD order execution

IBKR’s CFD trading platform is most appropriate for experienced and sophisticated CFD traders. But it also has lighter versions of it’s platforms for newer traders that may want to stick with one platform as they become more experienced.

Markets:

7,000

Minimum Deposit:

£1

Account Types:

CFDs, Forex, DMA, Investing

60% of retail investor accounts lose money when trading CFDs with this provider

CMC Markets

CMC Markets CFD Trading

Best sentiment trading tools

CMC Markets is an excellent CFD trading platform with good market coverage and very competitive pricing. It’s most suited to short-term CFD traders speculating on the major markets. There are some excellent features like thematic indices, share baskets, a wide range of order types, and the ability to enter, work and move orders direct from the charts.  

Markets:

9,300

Minimum Deposit:

£1

Account Types:

CFDs, Spread Betting, Forex

76% of retail investor accounts lose money when trading CFDs with this provider

Pepperstone

Pepperstone CFD Trading

Best for MT4 & MT5 indicators

Pepperstone offers CFD traders TradingView as well as two platforms cTrader and MT4 (or 5) which are suited to two different types of traders. cTrader for a more traditional look and click trader and MT4 for automated trading strategies. Pepperstone offers one of the best MT4 CFD trading packages and is suitable for those wanting to trade the major markets on tight spreads.

Markets:

1,200

Minimum Deposit:

£1

Account Types:

CFDs, Spread Betting, Forex

74% of retail investor accounts lose money when trading CFDs with this provider

IG CFD Trading

Best CFD liquidity and market range

IG Index (as they were then called) was one of the originators of retail CFD trading and offers access to the widest range of markets with the best liquidity (often better with IG than the underlying exchanges). IG offers one of the best CFD trading platforms around and provides excellent educational guides and market access for every sort of trader.

Markets:

17,000

Minimum Deposit:

£250

Account Types:

CFDs, Spread Betting, Forex, DMA, Investing

73% of retail investor accounts lose money when trading CFDs with this provider

Saxo Markets CFD Trading

Best for DMA CFD trading

Saxo Markets won the “best CFD broker” in our 2022 Awards as it offers the widest range of account types, market access and tradable assets. Saxo Markets is the best CFD trading platform suitable for traders with experience who need access to a wide range of markets and order types.

Markets:

9,000

Minimum Deposit:

£500

Account Types:

CFDs, Forex, DMA, Investing

70% of retail investor accounts lose money when trading CFDs with this provider

Markets.com

Markets.com CFD Trading

Best for US CFD analysis and trading ideas

Markets.com is a good choice for CFD traders, wanting a simple platform with lots of research that can help them come up with trading ideas around the most heavily traded stocks, indices and forex pairs.

Markets:

8,000

Minimum Deposit:

£100

Account Types:

CFDs, Spread Betting, Forex

77% of retail investor accounts lose money when trading CFDs with this provider

Spreadex Financials

Spreadex CFD Trading

Best for small cap CFD trading

Spreadex has been providing trading since 1999, but only recently introduced CFD trading in 2017. The trading platform represents what Spreadex is good at, which is the major markets and customer service. A good choice for those who put more of a focus on customer service than technology.

Markets:

10,000

Minimum Deposit:

£1

Account Types:

CFDs, Spread Betting, Forex

69% of retail investor accounts lose money when trading CFDs with this provider

XTB

XTB CFD Trading

Good trading tools

XTB, is a well-established CFD trading platform with some nice added value that is suitable for most traders. There are also some nice close-off features, so you can close all your CFD positions in one go, or if you want to cut your losses, just close the losers, or if you want to lock in profits you can just close your winning trades.

Markets:

2,100

Minimum Deposit:

£1

Account Types:

CFDs, Spread Betting, Forex

77% of retail investor accounts lose money when trading CFDs with this provider

eToro

eToro CFD Trading

Best for controlling your leverage

eToro CFD trading on major indices, forex pairs and stocks. One advantage of trading CFDs with eToro is that you can set your own leverage and reduce the amount of risk you take on per trade. A good option for new traders who want to see what other investors are trading through their social trading feature.

Markets:

2,976

Minimum Deposit:

$10

Account Types:

CFDs, Forex, Investments

77% of retail investor accounts lose money when trading CFDs with this provider

What's in this guide? show

What is a CFD broker?

A CFD broker is a financial services firm that offers contract-for-difference (CFDs) an over-the-counter (OTC) type of trading that enables traders to speculate on the price of underlying financial markets without actually owning the asset by either taking a long (buy) or short (sell) position directly with the broker.

What is a CFD broker’s trading platform?

A CFD trading platform enables traders to buy, sell or short shares, forex pairs, indices, commodities as a CFD (contract for difference) rather than investing in them directly. CFD trading platforms are provided by CFD as a way for their clients to speculate on financial markets.

How does a CFD broker’s trading platform work?

In this interview, we discuss what a CFD (Contract for Difference) broker is, what CFDs are, who CFD brokers are for, what you can trade, what are the main risks, the main benefits, and also, some top trading mistakes and how to avoid them.

Choosing The Best CFD Trading Platform

When choosing a CFD broker, you need to compare more than just costs. Here is an expert ten-step guide to the major points you should consider to help you find the most appropriate CFD broker for your CFD trading.

Spreads & Commissions

How to choose the cheapest CFD broker

Some CFD trading platforms have fixed spreads, no matter how wide the underlying markets, for example, others have variable spreads which they widen and tighter depending on volatility and liquidity. For example, economic indicators like non-farm payrolls can make the market more volatile and widen spreads. Whereas, high market liquidity times like the open and close can mean that spreads are tightened. The general norm though is for brokers to offer spreads slightly wider than the underlying bid/offer to incorporate their commission.

The main things to consider when looking for the cheapest CFD broker are:

  • Cost per trade: When comparing CFD trading brokers, the cost of executing a trade is one of the most important factors. CFD brokers either charge commission for DMA trading, but more frequently for retail traders (private clients), CFD brokers charge by widening the spread. As a trader, you should consider how often you intend to trade, because if you are a frequent trader who is attempting to make lots of profitable trades, a CFD broker that is 10% more expensive will have a significant impact on your overall profit and loss.
  • Inactivity Fees: If you do not intend to be a regular trader then you need to consider if your CFD broker will charge you an inactivity fee. An inactivity fee is simply a fee that brokers will deduct from your account if you do not use it. There are compliance and regulator costs for CFD brokers to keep accounts open, so CFD platforms charge this fee to cover the cost of dormant accounts. Inactivity fees usually start at around £10 per month. Inactivity fees will stop when your account balance reaches zero, at which point, a CFD broker may automatically close your account if it has not been used in a while.
  • Overnight CFD Financing Charges: Overnight financing fees are charged in CFD trading when you hold a position overnight. Because essentially, a CFD broker is lending you money to trade. If you are trading on a 20% margin and want to trade £10,000 worth of shares, you will need to put down a £2,000 deposit as the initial margin. Then the broker will charge interest on the remaining £8,000. Some say these are hidden CFD charges as most traders don’t notice them or even have any idea what they are being charged for. Here’s an explanation of overnight trading fees and charges for CFDs & Spread betting.
  • Frequent CFD trader discounts: CFD traders who execute more frequently can sometimes expect a reduction in commission or spread prices. However, you will need to be doing significant volumes. Commission and spread discounts normally take the form of rebates. A frequent CFD trader rebate is when a CFD broker will refund some of the commission or spread you have paid over a month. CFD brokers tend to pay these in arrears as they are based on the previous month’s trading.

Market Access

Choosing a CFD broker based on what markets can you trade

This means how much access your broker provides. The more the better, as you want flexibility when trading to give you as many opportunities as possible.

The major markets for CFD trading are:

  • Forex
  • Indices
  • Shares
  • Commodities
  • Treasuries

While you can trade more things with Saxo Markets overall, IG has one of the widest choices of markets to trade CFDs on. If you want to trade something unusual, Spreadex will also look at markets on request.

CFD trading platforms ranked by how many markets they offer:

  1. Saxo Markets – 19,000
  2. IG – 17,000
  3. City Index – 12,000
  4. Spreadex – 10,000
  5. CMC Markets – 9,300
  6. Markets.com – 8,000
  7. Capital.com – 3,700
  8. Pepperstone – 178

Margin & Leverage

Choosing a CFD broker based on margin and leverage

CFD trading margin is the deposit you have to have in your account to put on a trade.

For retail clients CFD margin is standard across brokers since ESMA and the FCA introduced caps on what margin is available to retail CFD trading. Current margin rates for retail CFD traders are: 

  • Indices: 20%
  • Major Forex pairs: 3.33%
  • Commodities: 10%
  • UK & US shares: 20%

Professional trader margin rates vary from broker to broker and the lower the margin requirements, the more exposure you can have with the least funds on the account. You can compare professional CFD trading margin in our comparison table, but beware, the lower the margin, the riskier a trade, as you are leveraging your money sometimes up to 500 times.

So, if you have £1,000 on account, you could have £500,000 of exposure. If a price moves 10%, you have lost £50k, meaning that you owe the broker £49k. Many brokers now are introducing no negative equity protection, which means that you can never lose more than your account balance. Of course, this means that the leverage on offer will be reduced.

Regulation & Safety of Funds

Choose an FCA-regulated CFD broker for CFD Trading

Never go with a broker that is not fully authorised and regulated by the FCA or some of your funds are not covered by the FSCS scheme. Most client funds are segregated now, but if your broker goes bust, provided FCA regulation and FSCS contributions are up to date, the Government will cover your deposit losses up to a certain point. You can view more information on the FSCS website here.

Note: we only include CFD trading platforms that are regulated by the FCA in our comparison tables and reviews.

Account Types

Choosing a CFD broker that offers DMA CFDs

There are two types of CFD trading DMA, where you execute your trades directly on the exchange order book or OTC where you are trading on your broker’s bid/offer prices. Whilst technically all CFD trading is OTC (over-the-counter) because you are entering into a contract between the opening and closing difference in price with your broker, DMA CFD trading is when your OTC CFD orders are routed directly to the exchange.

The main advantage of DMA (direct market access) CFD trading is that you get better prices.

For DMA CFD trading your CFD broker will charge a commission after you execute a trade, but for OTC CFD trading, the commission is included in the spread. 

Being able to buy at the bid rather than the offer and sell at the bid rather than the offer can make a big difference to when you enter and exit positions. However, many traders prefer OTC CFD trading where commission is included the spread as it makes calculating P&L and exit points simpler. 

Research & Analysis

Get added value from your CFD broker with trading tools

Most CFD brokers provide some kind of research and analysis on the markets for their customers. But generally, the better the broker, the better the research, tools and analysis. For example, some brokers like IG will provide lots of analysis tools, economic calendars, stock screeners and technical analysis signals. Whereas, others like Plus 500 will only provide a trading platform with no added value. It costs a lot of money to hire analysts and provide data to clients, and some of it (if you know how to use it) can be exceptionally useful.

Some of the best CFD trading platforms for research and technical analysis include:

  1. City Index – best trading signals and post-trade analysis to improve performance
  2. IG
  3. Saxo Markets
  4. CMC Markets

Technical analysis provides a good overview of the markets, based on charts and historical data

  • Fundamental analysis uses company financial releases to evaluate the health of a share price.
  • Economic data and calendars show when important announcements are due that could result in a price move.

Here’s where you can find out about 2020’s award-winning brokers.

Customer Service & Voice Brokerage

Trading is a lifelong relationship

Having the ability to quickly phone up an experienced dealing desk is an essential requirement of a CFD trading platform.  Whilst smaller traders may be happy to tap away online, but, if you are a big CFD or spread betting trader (and by that we mean £50k upwards), you need a broker that is going to give you a bit more than just the top ten traded forex pairs and a few commodities to trade online, you may need a dedicated dealer to help with corporate actions or to work large orders for you in illiquid markets.

Best CFD brokers for high net worth individuals and large traders

  1. IG
  2. Saxo Capital Markets
  3. CMC Markets

IG tops this list as they are a publicly listed CFD broker and offer DMA CFD trading and a personal service for larger clients.

Saxo Capital Markets is another good CFD broker for HNWs, as you can trade DMA, buy physical shares, bonds, and trade all sorts of exotic derivative products. They also have professional brokers available over the phone for trading if you want to work VWAP or other algo orders that may otherwise move the market if you did them yourself.

Best CFD broker for professional traders

  1. Saxo Markets
  2. Interactive Brokers
  3. IG

All three of these brokers have something in common – they all have their own proprietary trading CFD platform in that they built it themselves for their customers.

Saxo Markets is one of the best brokers for professional CFD trading, predominantly because their client base is generally more sophisticated than other CFD brokers. As such, their trading platform has been designed with professional traders in mind with DMA access, physical trading on a robust, institutional-grade platform.

Likewise, IG and Interactive Brokers (IBKR) both offer DMA trading and physical investing.

Whilst both IG and IBKR both offer institutional trading for hedge funds and professional traders, IBKR (as with Saxo Markets) also offers on-exchange futures and options trading, so comes in second and IG, third.

For more information on professional trading accounts, see our dedicated pro trader comparison page.

Base Currencies

Managing your foreign exchange exposure

When you trade CFDs the trade is usually settled in the contract currency. So, if you trade the FTSE, your P&L is in GBP, when you trade the US30, your P&L is in USD and when you trade USDJP your P&L is in JPY. This can result in lots of different currency conversions racking up FX fees, or it can result in you running a deficit in a currency and being charged interest. This is one area where CFD trading differs from financial spread betting where no matter the currency of an instrument your P&L is always in your base currency.

CFD brokers like Interactive Brokers let you have complete control over your FX and you can have an account in almost any major currency. Whereas other brokers like Saxo Markets will give you the choice of a few currencies and automatically convert your P&L into whatever base currency you are trading. So you can run three separate subaccounts in GBP, USD and EUR, depending on what you trade. Whilst other more retail focusses CFD provides like eToro only let you trade in USD, so it doesn’t matter if you deposit GBP and trade GBP stocks and have GBP P&L, your account base currency will always be in USD.

Pros & Cons of CFD Trading Platforms

There are many benefits of trading through a CFD broker, but there are drawbacks too.

Here’s a summary of the main pros and cons of CFD trading.

Advantages

Trading CFDs offer numerous benefits when compared to other products.

  • Leveraged trading
  • Trade long or short
  • No stamp duty
  • Low commissions
  • No fixed expiry dates
  • Cash settled
  • DMA/online trading
  • Daily funding
  • 24-hour markets available

Disadvantages

  • High-risk instruments
  • No ownership or voting rights conferred
  • May not rank equally for dividends or corporate actions
  • Not economic for long-term positions
  • Margin requirements + P&L swings can force traders out of positions prematurely
  • Profits are subject to UK Capital Gains Tax
  • Counterparty risk resides with the broker and not a clearing house or central counterparty

First of all, they are leveraged products, which means that traders can take and hold larger positions in the market than they might otherwise be able to afford. CFD trades on UK and Irish equities attract no stamp duty, creating an immediate cost advantage when compared to trading physical stocks. This can be a material difference for those trading an active strategy.

Because CFDs are cash-settled and not deliverable contacts, traders can take long or short positions with equal ease.

Being able to trade on the short side opens up many more trading opportunities and allows traders to profit from or hedge against the effects of falling markets.

Because of the leverage in CFD contracts, traders do not need as much capital to trade CFDs as they would to trade comparable positions in physical stocks and shares. CFDs have no fixed expiry dates and are priced to reflect the cost of carry. This means that they are transparently priced and ideal for trading on a short-term basis.

CFDs opened and closed within a business day attract no overnight funding charges, though CFD positions held open over prolonged periods may prove to be uneconomic because of those daily funding charges.

CFDs on leading equity indices and some shares can be traded 24 hours per day, providing a further degree of flexibility to traders. And the larger CFD providers offer a near-global coverage, with thousands of instruments available.

Here’s how to choose an equity CFD broker.

CFD trading offers low commission rates or sometimes a flat fee per deal, and active traders can receive rebates or reduced commissions, which can bring down the trader’s cost even further.

CFD trading is mostly conducted online using state of the art trading platforms that have charting, news flow, position and money management functionally built-in.

Whilst CFDs do not attract stamp duty, profits made through CFD trading are subject to UK capital gains tax, and traders need to allow for these liabilities and ensure they keep proper trading records.

CFDs are a highly flexible way to trade the financial markets, though they are not without their drawbacks and are not suited for use in long-term investment planning, and only risk capital should be used to trade them. That said, they can provide long-term investors with a way to hedge portfolio risk in periods of market volatility, and for traders to create market neutral pairs trading and spread strategies.

As with all geared derivatives, CFDs were designed to allow traders to diversify risk. The problems with them tend to arise when traders use them to concentrate risk instead.

Best CFD trading platforms for experienced traders

In our awards the winners of best CFD trading platform have been:

  • 2022: Saxo Marktes – won again as their DMA CFD trading platforms continue to be industry-leading
  • 2021: Saxo Markets – DMA CFD trading on the widest range of markets for experienced traders
  • 2020: Saxo Markets – provides one of the most comprehensive CFD offerings in the UK with a robust trading platform and DMA access to international markets for experienced traders.
  • 2019: Saxo Markets – continues to provide an excellent CFD offering through their proprietary trading platform with DMA, CFD options, level-2 pricing, research tools, and voice execution support.
  • 2018: Saxo Markets – an excellent trading platform with DMA, CFD options, level-2 pricing, and research tools

Saxo Markets gets the top spot as the best overall CFD brokers, four years in a row. Saxo Markets offer OTC and DMA CFD trading on a very broad range of markets. Saxo Markets, as with CFD trading, is aimed more at semi-professional traders.  Here’s our full 2020 Saxo Capital Markets review.

IG comes in a close second as it also offers DMA CFD trading, but is not quite as heavy-duty a trading platform.

CMC Markets comes third as whilst they offer a very broad and competitive CFD product, there is no DMA CFD trading for stocks.

If you are more interested in how established a CFD provider is here are some of the biggest CFD trading platforms ranked by when they were founded:

  1. IG (1974)
  2. Interactive Brokers (1978)
  3. City Index (1983)
  4. CMC Markets (1989)
  5. Saxo Markets (1992)
  6. Spreadex (1999)
  7. Markets.com (2008)
  8. Pepperstone (2010)
  9. Capital.com (2016)

Popular Markets On CFD Trading Platforms

The most popular traded markets on CFD trading platforms are the ones with the most liquidity and news flow, like indices, forex, commodities and shares.

Commodities

Most CFD trading platforms and CFD brokers offer access to gold, silver and crude oil, a good CFD trading platform for trading commodities should also include the lesser traded softs and exotic commodities.

Here are three of the best CFD provides for commodities

  1. IG – IG has one of the broadest ranges of commodities trading via CFDs. If you want the simplicity and flexibility of trading commodities via CFD then IG have an excellent offering.
  2. Saxo Markets – DMA CFD trading on commodities
  3. Interactive Brokers – commission-based DMA CFD trading on on-exchange commodities markets

Here are some of the best CFD trading platforms that offer the most commodities for trading as a CFD:

  1. IG – 38
  2. CMC Markets – 33
  3. Capital.com – 28
  4. City Index – 25
  5. Pepperstone – 23
  6. Spreadex – 21
  7. Saxo Markets – 19
  8. Markets.com – 10

For a full breakdown of CFD brokers that offer commodities trading, view our comparison table.

Indices

  1. IG
  2. CMC Markets
  3. Saxo Markets

Index trading is fairly straightforward and is second only to forex trading in popularity, and IG is the original index broker; IG also offers CFD trading on over 80 global indices, as well as ETFs. Spreads are competitive and IG also offer index trading at the weekend on European, UK, Asian and US indices. IG offers CFD trading on over 80 global indices, as well as ETFs.

CMC Markets comes in a close second as their primary focus is Forex.

Saxo Markets are also a good choice for trading indices via CFD, and for more information, you can compare all brokers for trading indices here.

CFD trading platforms ranked by which one offers the most indices:

  1. Spreadex – 37
  2. IG – 34
  3. Capital.com – 28
  4. Saxo Markets – 23
  5. CMC Markets – 22
  6. City Index – 21
  7. Pepperstone – 16
  8. Markets.com – 10

UK Shares

  1. IG
  2. Saxo Markets
  3. Spreadex

If you are trading UK stocks via CFD then IG is your best option because they offer some unique trading features that others don’t. For instance, you can trade CFDs on the grey market price of an IPO before it lists. IG offer out of hours trading on UK stocks, as well as CFD trading on smaller cap UK stocks.

Saxo Markets has a great offering for UK CFD trading and also the option (as with IG) to trade UK stocks via DMA.

Spreadex is also worth a look as they have recently launched CFDs (in addition to spread betting). Spreadex are a much smaller broker but offer personal traders who can work CFD orders on smaller stocks on request.

US Stocks

  1. Interactive Brokers
  2. IG
  3. Saxo Markets

If you are going to trade US stocks via CFD, you may as well do it with a US broker, and the best of the bunch is Interactive Brokers, AKA IBKR for short. IBKR was the pioneer of electronic trading (read up on them in our interview with Thomas Peterffy, the founder and CEO). While the Americans are not allowed to trade CFDs themselves, IBKR offer CFD trading through their UK office.

Saxo and IG are a close second and third as both brokers offer round the clock CFD trading on US shares. Both brokers offer DMA and out of hours trading, although IG pips Saxo to second place because of their presence in the US (albeit for forex trading only).

Options

  1. Saxo Markets
  2. IG
  3. Spreadex

CFD trading on options has grown in popularity as brokers try to compete on market coverage. Most CFD brokers offer a smattering of CFD options on the most popular traded instruments, but Saxo Markets stands out, with an excellent options board on a wide range of markets. For more information on brokers offering options trading, view our options broker comparison table.

CFD broker FAQs

Can you lose more than you deposit from CFD trading?

Yes. If you have a professional trading account, you can lose more than your account balance. However, for CFD traders classified as retail clients, there is negative balance protection, which means that your CFD trading account is guaranteed to not go into negative equity.

How long can you hold a CFD trade open?

In theory, you can keep a CFD trade open indefinitely. However, as overnight financing charges can add up quickly, CFD trading is more of a short-term speculation tool or hedge rather than a product for long-term investing.

Is CFD trading taxable?

Yes. You have to pay capital gains tax on CFD trading profits. You can offset CFD trading losses against other investment profits.

What are STP CFD trading brokers?

STP means Straight Through Processing, which means that when you put an order in, it goes into the market and the broker buys or sells on your behalf. The alternative is where a broker matches up with other traders or does not hedge your positions at all. In the grand scheme of trading, it does not matter whether your broker is STP or uses a B-Book. You make money if you call the market right. You can’t blame the broker if your trades are not profitable.

Here’s more about ECN brokers and STP brokers which may be of interest to more experienced traders

Which CFD brokers offer the tightest spreads?

You can see which CFD trading platforms offer the tightest CFD spreads in our comparison of CFD trading platforms. When choosing a CFD trading platform, the spreads and commissions you are likely to pay are going to be high up on your list of priorities. However, it shouldn’t be the only consideration you make. You should also consider market range, customer service and trading platforms.

Can you trade CFDs on MT4?

MT4 brokers are a dime a dozen and there are so many terrible ones, to be honest. MT4 is the most popular trading platform out there because of its plug and play nature.

Here are three of the best CFD trading platforms that offer MT4:

  1. Pepperstone
  2. Saxo Markets
  3. IG

Pepperstone, one of the largest brokers globally, but HQ’d in Australia, offers MT4 and is worth a look as they won “Best MT4 broker” in our 2020 awards.

While not overly promoted, IG and Saxo also offer MT4 as a trading platform option, should you find their proprietary trading platforms not sufficient for your needs.

Which is the cheapest CFD broker?

The cheapest CFD trading platform is the broker that has the tightest spreads and overnight financing charges. There is no single answer to which is the cheapest CFD broker as there are too many contributing factors to accurately calculate which CFD broker is the cheapest.

What does leverage mean on CFD accounts?

Leverage in CFD trading means investors can leverage their money (or capital) to increase their exposure by trading on margin. CFD trading platforms allow those trading to take larger positions than they would be able to do through traditional investing platforms. The benefit is that your profits are multiplied. However, inversely, if you lose money, your losses are equally multiplied.

Do CFD brokers charge commission?

CFD trading platforms like Saxo Markets and Interactive Brokers charge a commission. Other CFD brokers like IG, CMC Markets and City Index charge a spread.  Widening the spread is equivalent to charging a commission. It is not normal for CFD brokers to charge private clients and retail traders a commission for CFD trading.

Normally, it’s only DMA (direct market access) CFD brokers that charge commission.

One of the advantages of trading CFDs is that the commission is built into the price you buy and sell at, so there is no need for additional calculations to determine your profit and loss after the commission is charged.

The disadvantage of this is that when trading CFDs, the bid-offer spread will be wider, so the market needs to move further before a trade turns profitable.

Why is the CFD spread important?

When you are trading CFDs the tighter the spread, the better, as this reflects what your trading costs are. The CFD spread is usually a fixed amount per share and for things like Forex and Index trading and is comparable to a percentage.

For example, if on your CFD trading platform the spread on Vodafone shares could be 0.25% from the actual price, and this represents a commission of 0.25% on the value of the trade. Or if you are trading the FTSE 100 and the market price (or bid/offer) is 5801 (to sell), 5801.5 (to buy), a CFD broker may offer a spread of 5801 (to sell) and 5802 (to buy), which means they have widened the spread by 0.5.

The size of the bid-offer spread quoted by a CFD broker is important because it has a big impact on the cost of your trading. If a CFD platform quotes spreads that are 0.5 points wide and you are trading 1,000 CFDs, the cost of each trade will be £5. So, if you trade 100 times over a year, you will have paid £500 in dealing costs. But, if that spread is 1 point instead of 0.5 points, you will have paid £1,000 in spreads. The difference of £500 can have a significant impact on your profit and loss.

How important is CFD spread width when trading CFDs?

Very important. When you trade CFDs you have to sell at the lower bid price and buy at the higher offer price, the closer the two prices are, the less the market has to move in your favour before you can lock in a profit.

If you are scalping the market and trying to make lots of small, profitable trades, the tightness of a spread can make all the difference between success and failure. Essentially, narrower spreads mean quicker potential profits and wider spreads mean greater price changes needed to make a profit.

Do I need a DMA (direct market access CFD) broker?

If you’re a professional CFD trader dealing in significant sizes and frequently, you will get much better execution prices if you deal through a DMA CFD broker. As the commission is charged after a DMA CFD trade, it is easier to make small, profitable trades as the bid/offer spread is tighter.

However, you will have to calculate your commission in your P&L as it may turn a profitable trade into a loss.

DMA CFD brokers are usually only suitable for clients that qualify for institutional traders or private clients with professional account status, who have a thorough understanding of CFD trading.

How to check if a CFD broker is regulated by the FCA (Financial Conduct Authority)

All onlin CFD trading platforms and brokers listed in our comparison are regulated by the FCA. You can check whether a CFD broker is regulated by the FCA in the UK by checking the FCA register.

Only fully FCA-authorised and regulated CFD brokers offer client funds protection under the FSCS. From the 1st September 2019, this protection extends to:

  • Limiting leverage to between 30:1 and 2:1 by collecting minimum margin as a percentage of the overall exposure that the CFD provides.
  • Closeout a customer’s position when their funds fall to 50% of the margin needed to maintain their open positions on a CFD account.
  • Provide protections that guarantee that a client cannot lose more than the total funds in their CFD account.
  • Stop offering monetary and non-monetary inducements to encourage trading.
    Provide a standardised risk warning, which requires firms to tell potential customers the percentage of their retail client accounts that make losses.
    source; FCA website, 01/07/2019.

Can US residents trade CFDs?

Unfortunately, you can’t trade CFDs in the US. Derivatives trading in the US needs to be done on regulated exchanges. As CFDs are an OTC (over the counter) product, they are not allowed and are illegal to offer to US residents. Therefore, if you want to trade on margin, you must do it with either futures, options or through a broker that offers margin trading.

If you are a US citizen or resident, you can’t trade CFDs with a UK CFD broker. UK and US regulations prohibit US clients trading with overseas online trading platforms or brokers.

But if you are a UK or European trader, you can trade US stocks on CFDs with a UK CFD broker. You can however compare US CFD stock brokers where you can usually trade on margin. The US equivalent of CFD trading is margin trading. Margin trading in the US is where a broker lends you money to buy shares.

So, unlike CFDs, where you are not buying shares but taking out a “contract for difference” with US margin trading, you are paying full price for the shares you want to buy. You will need to put down some initial margin of (for example) 25%.

Then the broker will lend you the rest of the money for the purchase. For instance, if you want to buy $1,000 of Apple shares, you will need to put down $250 and the broker will lend you the other $750. You cannot withdraw money a US broker lends you and you pay daily interest on what you borrow.

What’s the difference between CFD trading and spread betting?

Spread betting and CFDs are fairly similar in some respects but very different in others.

The key similarities for both financial spread betting and CFD trading are:

  • You can go long and short
  • You can trade on margin
  • Both are OTC derivative products
  • Both are regulated by the FCA
  • Both are a high-risk investment product

The key differences between CFD trading and financial spread betting are:

  • Spread betting is free from capital gains tax, CFDs profit and losses are taxable
  • With spread betting, you bet a certain amount per point move
  • With CFDs, you buy an equivalent amount of CFD as you would shares
    CFDs are available to international clients
  • Financial spread betting is unique to the UK

Here’s a video and some more information on the difference between spread betting and CFD trading.

Should I use an advisory CFD broker?

No, you should not. Advisory CFD brokers used to be quite common when it was harder to open a CFD account. Before CFDs became available to all private clients, investors wishing to trade CFDs would have to prove that they understood the risks involved.

As CFDs were mainly offered to sophisticated investors, the regulators were less concerned with the fact that advisory CFD brokers offered little added value to traders. However, CFDs are a very high-risk product and clients must understand the risks involved before opening an account.

Over the years, the FCA has clamped down on advisory CFD brokers providing advice and hardcore sales tactics used by CFD brokers to get clients to trade more. This website is all about execution-only CFD brokers – that means CFD brokers that do not provide advice or recommend trades. Here is how to find a CFD stock broker.

Don’t get ripped off by advisory CFD brokers

CFDs are a very high-risk product and should only be traded by individuals who have significant trading experience.

If you are new to trading and investing then they are not for you. Advisory CFD brokers are not as rampant as they used to be, but they are still around in one capacity or another. So here are our three golden rules to avoid being ripped off by advisory CFD brokers.

One of the most common ways traders get taken in by advisory CFD brokers is by greed.

They are contacted and offered trading ideas from a slick sounding city broker from an advisory CFD firm.
There are of course brokers out there that provide an excellent service and really do have their clients best interests at heart.

But the majority of advisory CFD brokers may as well be working in a call centre selling conservatories. Generally, they are commission based and their pay is related to how many trades you as their client enter into.

So, they will be on the phone to you all day suggesting buys and sells, in small amounts with high minimum charges taking small profits.  On paper, they may well have made you a profit but when you factor in commission and financing charges you’ll probably lose.

There is a great phrase that goes around the City:

“Why would anyone who drives a Rolls Royce take financial advice from someone that takes the tube to work.”

What this means is that it’s your money and you know best what to do with it.  Don’t get drawn into the promise of quick profits.

If you are going to trade CFDs you need to accept that there are risks involved and stick to a set of CFD trading strategies that mitigate risk.

If you want to see the top CFD brokers in the UK that provide an execution only service they see our CFD broker comparison tables.

One thing to bear in mind is that advisory CFD brokers also offer execution only services and will then try to upgrade you to a advisory account on higher commission rates.

They are best avoided altogether. Most advisory CFD brokers use the services of the execution-only ones then mark the commission up for their supposed added value.

Can you make money trading CFDs?

Yes, it is possible to make money with an online trading platform. However, it is also possible to lose money.

If you want to be a profitable CFD trader then you need to follow some golden rules of CFD trading. It’s not difficult to make profitable trades, but what is difficult is ensuring that you make more profits on your winning trades than you make losses on your losing trades.

It’s a well-known fact that even the best traders in the world only get it right half the time. It’s how they manage their CFD positions that sets them apart and makes them better traders.

Here’s where you can find out more about how to trade CFDs.

What are the basic rules for trading CFDs?

  • Don’t trade with more than you can afford to lose
  • Run your profitable trades
  • Cut your losing trades quickly
  • Use stop losses to minimise risk
  • Combine technical and fundamental analysis before trading
  • Don’t trade with more than you can afford to lose

You should not risk money by trading CFDs that you need for something else. CFD trading is high risk and there is a high probability that inexperienced traders will lose money quickly. CFD trading can successfully form part of your overall investment portfolio. Around 10% is a suitable percentage to assign to high-risk investments.

It’s important to budget and balance your portfolio to include a range of diversified low, medium and high-risk investments, with a larger portion being allocated to medium and low-risk, long-term investment products such as tax-efficient SIPPs and stocks and shares ISAs.

If you only have a small amount of money to invest and choose to trade it all through CFDs, there is a large chance that your entire risk capital will be eroded as you learn to trade CFDs.

Here are four key ways to improve your CFD trading

  1. Run your profitable trades: Managing a position is one of the most challenging aspects of trading CFDs. CFD traders are often too keen to take small profits, rather than keep a winning position alive. Using trailing stop losses on your online CFD trading platform can be effective in running profitable positions as the market moves in your favour. If you buy as the market is going up (or go short as the market is going down), it is more profitable to keep the position open and ride the trend as far as you can.
  2. Cut your losing trades quickly: Another key mistake that CFD traders make is to let losses increase without closing a position in the hope that the market will turn around. When trading, it is good practice to have a loss limit in place so that your profitable trades are not wiped out by a large loss. If you have a losing position, consider closing it and re-evaluating the market and trying again when the market is looking more predictable.
  3. Use stop losses to minimise risk: Using a stop loss means having a level in the market where your position is automatically closed to minimise loss. Stop losses are triggered automatically, even when you are not in front of your trading platform. The benefit of using stop losses is that you limit your downside risk (loss) on a position automatically and protect your account balance. Some CFD brokers offer guaranteed stop losses, which trigger even if the market crashes, and guarantee to give you your stop price, regardless of slippage.
  4. Combine technical and fundamental analysis before trading: The two most common forms of generating trading ideas are fundamental and technical analysis. Fundamental analysis means looking at the financial health of a business or economy. Technical analysis means looking at charting patterns of markets to see what has happened in the past and what is likely to happen in the future. The benefits of technical analysis are that it is somewhat self-fulfilling in that in the most liquid CFD markets, traders are looking for similar patterns and will trade when they occur, potentially moving the market. It is more popular in short-term trading. Fundamental analysis can be used to trade around economic indicators if you disagree with the consensus before the data is announced. Fundamental analysis is more popular for longer-term investing. For more information, read our guide on the difference between technical and fundamental analysis.
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