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When comparing different CFD brokers, various performance features have to be considered. Beginners must pay attention to other criteria than advanced traders. In any case, it is worth taking a look at details that often separate the wheat from the chaff.
If more than just small amounts are to be used, a serious regulatory environment is a necessary condition. A seat in an EU member state guarantees at least basic standards. A seat in Great Britain, Germany or the EEC member Switzerland is advantageous.
With CFDs one works with levers. Our comparison shows you which CFD brokers are particularly safe thanks to measures such as the exclusion of a margin call or guaranteed stop-loss orders:
1. Regulation and deposit protection
Customer deposits should be segregated from business assets and held in custody at banks with a robust deposit insurance scheme. A Cypriot broker can also invest his clients’ funds in the UK or Germany and keep them out of the unstable Cypriot financial system.
Deposit protection relates exclusively to claims from bank deposits, but not to claims from open transactions. Ideally, the Broker is affiliated to a protection scheme that also covers such claims.
2. The market model: DMA or Market Maker?
One of the most important points in the CFD broker comparison is the market model. If a broker offers DMA trading, he usually communicates this clearly visible. If no more precise information is given on the detailed course of a transaction and the price setting, the broker is usually a market maker.
In principle, DMA brokers are preferable because they offer the transparency of exchange trading and conflicts of interest are largely eliminated.
However, even among DMA brokers and market makers there are great differences. For DMA Brokers, access to as many trading venues and liquidity sources as possible is advantageous. It does not have to be exclusively regulated stock exchanges. If the liquidity of an MTF is additionally (!) made available, this cannot be a disadvantage.
3. Transparency and liquidity
Market makers can also offer their clients a certain degree of transparency. For example, the spread of most underlyings can be derived from the market spread of the largest reference exchange.
In Times&Sales, it is possible to see at any time which prices were traded at which time. Excessively large deviations are then conspicuous.
A criterion that is particularly important for beginners is the possibility of excluding losses beyond the deposit made.
Some brokers exclude negative account balances in their terms and conditions unambiguously and bindingly. Alternatively, the possibility of guaranteed stop loss orders can be granted, where the broker bears the risk of deviations in the closing price.
4. Conditions in trading: spreads and commission
Most of the costs in trading are made up of bid/ask spreads and commissions. The lower these are in combination, the better. Investors should look at the conditions for all tradable underlyings and not just at the major benchmark indices. Even though experience shows that these are the main focus of trading activity at the beginning, newcomers move more and more into other markets after a while.
In addition to the trading costs, the financing costs, possible account management fees, fees for price data and the minimum deposit required to open an account must also be taken into account. The insurance premiums for guaranteed stop loss orders must also be taken into account.
5. What does the trading platform do?
Especially if a broker uses a different trading platform than MetaTrader, the functional range of the platform should be thoroughly examined in advance. If this is limited to the essential trading functions and if chart analysis etc. are not included, this is a malus point.
If you want to develop automated trading systems exclusively on your own, you need a development environment with a simple programming language and many design options. If finished scripts are to be imported a big range of the platform is also important: most circulating scripts are based on the Metatrader4 language MQL. Backtests should be possible for as long as possible.
6. Community and Social Trading
At least larger brokers should provide their customers with a community function where traders can exchange information about the platform, the broker’s conditions and general market events.
Opinions are divided on social trading: some only want to trade in this way, others reject the concept in principle. Those who count themselves among the latter should make sure that Social Trading does not dominate the concept of broker and trading platform.
7. Training programs and new customer offers
Both beginners and advanced traders benefit from serious training programs – whether in the form of weekly live trading or seminars on topics such as technical analysis, market psychology or trading strategy. It is advisable to take a detailed look at the training offers of brokers before opening an account.
Many providers have placed pure alibi offers on their websites in order to be able to keep up superficially with competitors who are actually trying to compete.
New customer bonuses should be the least important criterion in the CFD broker comparison. It is of little use to receive a bonus credit of 50-500 € at the beginning and then pay 20 € too much with every trade.
Risk note CFD trading
Trading CFDs involves considerable risk and can result in the complete loss of your entire capital investment. There may be account types where losses may exceed the capital invested. Leveraged CFD trading may not be suitable for you! Therefore, please read more about how CFD trading works. You should not use funds that you could not afford to lose in the worst case. Make sure you understand all the risks involved in trading CFDs. The content of this website should NOT be misunderstood as investment advice! We recommend, if necessary, that you seek independent advice.
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