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The rationale behind choosing a contract for difference (CFD) online broker must concentrate on utility. It's important that you choose a broker who can meet your expectations and who fits your budget and your access needs. The first thing to keep in mind is that CFDs are not traded in every country, so be sure that your CFD online broker is licensed in your country and in the country in whose CFD market you're trading.
Make sure to choose a broker whose commissions are reasonable and commensurate with the services provided. On the surface, CFD online brokers who do not charge a commission seem to be the best deal, but they often have limited market access. You could, by comparison, choose a broker whose commission is comprised of a base rate plus a percentage of your trade.
Next, check access. If you've narrowed the field to CFD online brokers whose fees and service pair up, your next concern should be to pick the broker who offers the most market access. Maximize market access, but if it becomes an issue, choose the broker whose services most closely align with your investment goals. The most functional CFD online broker is useless to you if the broker does not trade on the markets in which you're interested.
Study the restrictions a particular CFD online broker has for a trader's account, then compare them to the degree of functionality. Account minimums, policies regarding margin buying and interest rates are all important factors to consider. Margin buying is a technique that allows you to buy CFDs with borrowed money, using the shares as collateral. Most CFD online brokers do allow margin buying, so when making your choice, find the one whose policies best suit your needs. You'll be charged interest when you buy on a margin, so check your potential broker's rate before you commit.
CFDs are an excellent security for day trading, which is a style of investing for which most investors use an online broker. CFDs are extremely short-term and speculative, and, in order to day trade, investors need a platform that can keep up. There are many variables to consider when choosing a CFD online broker, so you should give research due diligence when making your decision. A point or so difference in interest rates might seem slim but will add up over time. Similarly, the amount of money that a brokerage will loan an investor for a margin buy could keep you from making an important buy if the loan isn't enough.
CFD markets are extremely volatile and fast-paced, so it is possible to make money and lose money relatively quickly when comparing CDFs to other securities. The function and value of a CFD online broker shouldn't be the only thing you research when making your choice. Don't unnecessarily expose yourself to financial risk too; always research your investments before you buy.
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