CFD brokers

In this article, we will take a look at few things that are good to know before you select a broker for your CFD trading. The Contract for Difference (CFD) is an over-the-counter (OTC) derivative instrument that can be used to speculate on a variety of assets, e.g. stocks, stock options, commodities, forex, cryptocurrency, and exchange-traded funds (ETFs).

CFDs makes it easy to speculate on price movements without actually buying, owning and selling the asset. You do not need to become the owner of company shares to speculate on the stock price, you do not need to own Bitcoin to speculate on the BTC/USD exchange rate, and so on. With CFDs, it is also easy to speculate on downward moving prices without short-selling.

Among CFD traders, it is common to use leverage to boost trade sizes. This means that you borrow money from your CFD broker to complete a trade.

Market Maker brokers vs. Direct Market Access (DMA) brokers

Most CFD broker belong to one of two categories; they are either market makers (MM brokers) or use the direct market access model (DMA brokers).

A DMA broker will send your buy and sell orders directly to a liquidity pool provided by another company; a so called third-party liquidity provider. If the DMA broker uses an Electronic Communication Network (ECN) for this, they will also be known as an ECN broker. DMA brokers do not cover any liquidity gaps with their own resources. Typically, you need to make a larger deposit to get started using a DMA broker than an MM broker.

The MM broker can cover quite large liquidity gaps with its own resources, because the MM broker will purchase large positions from liquidity providers. The MM broker will still work as a broker and match buyers and sellers, but I can also cover liquidity deficits if necessary. Typically, you do not have to make a large deposit to start using an MM broker.


When comparing different CFD brokers, knowing where they are based, regulated and licensed is important.

When it comes to online brokers, some jurisdictions are more strict than other, especially when it comes to non-professional clients. This can for instance take the shape of banning brokers from offering certain instruments (e.g. binary options) to non-retail traders or severely limit how much leverage a broker is allowed to give a non-professional trader. While some non-professional traders have welcomed this stricter approach, others feel that they – not the government or a licensing body – should be in charge of making their own investment decisions.

A few questions that are good to keep in mind when comparing different jurisdictions and license givers:

  • Do they limit how much leverage a broker can give a non-professional CFD trader? Would this limit hamper your trading strategy? Remember that in some jurisdictions, the underlying asset will impact the limits. The limit might for instance be much lower for a CFD based on cryptocurrency than a CFD based on equity.
  • Do they require brokers to keep company funds strictly segregated from trader funds? If the segregation is not strict enough, it can be very difficult for traders to get their money back if the broker becomes insolvent.
  • What does the conflict resolution routines look like? Where can you file a complaint if a conflict arises between you and your broker?

Does this broker offer the assets necessary for your particular trading strategy?

The assortment of underlying assets vary a lot between different brokers, so it is important to pick a broker that is suitable for your trading strategy.

A few questions to keep in mind:

  • Which types of underlying assets are available with this broker? Examples of popular categories are equity (stocks), commodities, forex, cryptocurrencies, futures, options, and exchange-traded funds. Some brokers also offer speculation on indices.
  • Do you need a lot of variation (e.g. you need the commodity category to be large and varied) or do you need one specific thing (e.g. you are highly skilled at and focused on USD/EUR speculation)?

If you are employing several different trading strategies based on different underlying assets, your best choice might be to sign-up with the ideal broker for each strategy instead of trying to find a lukewarm comprise. You might for instance need CFD Broker A for your crude oil speculation and CFD Broker B for your BTC/USD speculation.

Deposits and trade sizes

When picking a broker, make sure the minimum deposit size and the minimum trade size fits your trading plans. Many novice traders want to start out with a small first deposit and make small trades. If this is you, make sure you pick a broker that permits small deposits and small trades. The permitted trade size ought to be small enough for you to carry out sensible risk-management; it is not a good idea to risk a big part of your total bankroll on each individual deal.

How do CFD brokers make money?

When comparing different CFD brokers and trying to get a feel for how they work, it can help to understand how they themselves make the bulk of their money. Different CFD brokers have different approaches, and this will in turn impact terms and conditions for traders. A CFD broker might for instance make a big deal of not charging any commissions or additional fees, but when you look close you realize the spreads are definitely less tight than the average and they are not really offering good terms and conditions for your trading strategy.

Here are a few ways for brokers to make money:

  • Commissions. Some brokers will charge commissions to facilitate trades. Commissions can be fixed (you pay a fixed fee per trade) or vary depending on the size of the trade. If the commission vary, make sure you understand how it will be calculated and if there is a minimum commission that will be charged even if the trade-size is very small.
  • Spreads. It is very common for CFD brokers to make the bulk of their profits from spreads. The spread is the difference between the quoted buy and sell prices and the real market prices.
  • Making money from leverage and margin trading. When you engage in leveraged trading or margin trading, you are borrowing money from your broker – and you are probably paying some type of fee or interest.
  • Hedging. Some CFD brokers earn additional money through heding.
  • Being the counterpart. Some brokers are not really brokers (at least not in all deals); they are your counterpart in the trades. This means they earn money when traders lose money, and vice versa. Some brokers in this category will get stingy when a trader is deemed to be “too successful” and will try to curb them by imposing trading restrictions.
  • Various fees. CFD brokers can charge deposit fees, withdrawal fees, platform fees, and more. When comparing brokers, make sure you check the fee structure to avoid spending too much on fees. Each extra $1 you spend on fees is a dollar you could have used for trading instead.

Is this broker suitable for your particular trading strategy?

When comparing CFD brokers, try to find out what it would cost you to employ your particular trading strategy with them. It doesn´t matter much if Broker A is offering great terms and conditions for cryptocurrency speculation, when your focus is on equity, and so on.

Also, which transaction method do you want to use and what would it cost to use that particular method for deposits and withdrawals?

Do you like the trading platform(s)?

The trading platform will have a huge impact on your overall trading experience and an improper platform can also end up costing you money. A platform that is slow or difficult to navigate can delay trades in a situation where every second counts, a platform that freezes up can wreak havoc with your plans, and platform where you keep making small clerical errors when placing orders can cost you $$$$, and so on.

Proprietary platform or independent third-party?

Many CFD brokers have developed their own proprietary platforms, but there are also CFD brokers that will give you access to one or more independent third-party platforms which are used by traders from many different CFD brokers. Notably, some brokers will do both: you get access to their own proprietary platform but also to one or more third-party platforms.

Examples of well-known independent third-party trading platforms:

  • Meta Trader 4 (MT4)
  • Meta Trader 5 (MT5)
  • cTrader

Browser platforms, downloadable platforms and mobile apps

When it comes to trading on a desktop computer, proprietary platforms are usually designed to open directly in the browser window. (There are exceptions.) Large and well-known third-party platforms are usually available not only for the browser window, but also as a piece of software that you can download and install on your computer.

If you want to be able to trade on a mobile device (smartphone or tablet), it is advisable to pick a platform that is available as a mobile app, which you download and install on your phone. Opening a browser platform in the browser of your mobile device can work, but it can be difficult to use a browser platform intended for a desktop computer on a small touch-screen.

Make sure a downloadable mobile app is available for the operative system of your phone. A mobile trading app developed for Android will not work on an Apple phone and vice versa.

A few other things to consider

  • With some brokers, which platforms you get access to depend on your trading account level.
  • If technical analysis (TA) is a part of your trading strategy, it can be a good idea to pick a platform that have suitable TA tools included and offers integrated trading, e.g. the ability to place orders directly from the charting area.
  • It is a good idea to test run platforms using a free play-money Demo Account before you make any decision.

Payment methods

It is important to pick a CFD broker that accepts at least one method for deposits and withdrawals that you are okay with using and that will not cost you an arm and a leg to use for your transactions. Today, many CFD brokers accept a wide range of transaction method types, including credit/debit cards, e-wallets, bank transfers and wire transfers. It has also become increasingly common for CFD brokers to accept deposits and withdrawals of cryptocurrency, e.g. BTC transfers and ETH transfers. Even if your account currency is a traditional currency (e.g. USD or EUR) you might still be able to make deposits and withdrawals in cryptocurrency.

Customer support

Customer support might seem like a not very important issue when selecting a broker, but when something happens (and it usually does, sooner or later) you will regret picking a broker where the support can only be reached by you making an expensive phone call to Timbuktu during Timbuktu office hours.

  • Which method do you prefer to use to contact the customer support, and is it available with this broker? Examples of common methods are phone call, live chat, live video chat, and email.
  • If you want phone support, is there are local number or toll free number available from your part of the world? Skype/Whatsapp call? Maybe a call-back service so you don´t have to worry about the phone bill?
  • During which hours do you typically trade, and is the support staffed during those hours? Sometimes, we need help right away to solve a situation.

Sign up for a free Demo Account

Most of the serious CFD brokers will happily give you a free Demo Account filled with play-money and let you use that money to explore the platform or platforms. It is a great way to find out if you like what a particular broker has to offer, learn how the platforms work and test-run your CFD trading strategies.