When looking for a CFD broker and platform, there are a number of things that need to be considered.
1. The reputation of the broker in terms of how long they have been operating for, who they are backed by, and their standing in the sector. Unfortunately there are always going to be suspect operators that crop up, so it is important that you do some research and go with a trusted name.
2. Ensure that the client funds are kept in separate trust accounts. This is an important safeguard to ensure the funds are available if you want to withdraw money from your account.
3. Ensure that the instruments that you are interested in trading are in fact available on the trading platform you choose. Aside from shares, many investors and traders are looking to gain access to more exotic markets, such as currency and commodity markets. Those looking to gain exposure to gold or oil, for example, will need to ensure that the CFD broker they choose offers these instruments.
4. Fees and commissions. There are a number of ‘costs’ involved in CFD trading which traders and investors need to be aware of.
Commissions, just like those paid to a share broker, are the costs incurred when a transaction, such as a purchase or sale, is made. Much like share brokers, there is a vast difference between the cheapest and most expensive CFD brokers. Typically, competitive CFD brokers will charge no more than 0.1% of the position size, or, a minimum of between $8 and $10 per transaction, whichever is greater.
The cheapest commission rate we have seen in the industry is 0.1% for regular traders, or 0.08% for traders who turnover high volumes. In our opinion, no one should pay any more than 0.125% for brokerage.
Although it doesn’t seem like much of a difference, excessive commissions will add up over time and could mean many hundreds, if not thousands of dollars difference over the course of a year and beyond. Remember, this is money that could be better off in your pocket, if not your trading account!
The other part of the fee structure when it comes to CFDs is the interest charge. Because CFDs are a leveraged instrument, essentially what takes place when taking a position is that you put up a deposit, known as the margin requirement, and the CFD broker puts up the rest.
Like with any other financial institution, when you borrow money from a CFD broker you will be charged interest on the position.
As with the commission rate, although it doesn’t seem like there is much difference, it can and will add up over time if you choose a CFD broker with interest charges that are too high.
5. A platform’s reliability and functionality. Although difficult to assess at the beginning, once you have begun trading you want to make sure the trading platform that you are using is not prone to crashing, and that the functionality of the platform includes standard features such as quality live price charts with technical indicators and news feeds.
Based on all of these considerations, Egolis’ preferred CFD broker is:
IG Markets, click to open an account.
IG Markets offer a quality platform backed by strong customer service, they are very competitive in terms of fees and commissions, and they cover the widest range of markets of any CFD provider that we’re aware of.