What to look for in a CFD Provider

Before getting started in CFDs and CFD trading you must find a CFD provider who is suitable for your needs. We can assist you in this decision by providing basic guidelines. Potential CFD traders should also consider the following.

Cost of Trading

Commissions and funding charges should always be taken into consideration but don’t always think that cheapest is best, look into product range and how trades are executed. Some companies may charge a little more but the customer service or general advice may be worth paying that little extra. Beware of hidden costs including extra charges for executing deals over the phone or additional fees for statements and the transferring of funds, these costs may be fair but make sure you are aware before entering into an agreement.

Range of Products

If you are looking at trading just share CFDs then your range of providers is quite vast but many traders are getting involved in overseas exchanges, Indices and FX contracts. Some CFD providers will also offer conventional share trading including the use of shares held as collateral for CFD trading. If you are looking for a vast range of products then this must be considered.

Trading Platform

Over the past few years quite a lot of trading platforms have come onto the scene for different providers to use ranging from rather basic web based platforms to advanced software systems:

  • Web Based – Great for traders on the move as all you need to do is visit the providers website, enter a user name and password and you can have access to your trading platform from anywhere in the world. The downside is that the security levels are low and the detail on the platforms is a lot more simplistic than the software based ones.
  • Software Based – These must be downloaded onto each computer that you intend to be able to access the trading platform from. They are however much more advanced and detailed, often offering extensive charting packages and technical analysis tools.

It’s worth noting that some software based platform providers are considering releasing a ‘trimmed down’ web based version for portability.

Direct Market Access (DMA), Market Maker (MM) or Straight Through Processing (STP)

When choosing a provider it’s important to know how your trades are executed. There are three main methods of placing trades that providers will use:

  • DMA – All your trades will be individually be placed directly into the market and dealt at market price.
  • STP – The provider will usually quote the underlying market price but will decide which trades to ‘hedge’ directly into the exchange.
  • MM – The provider decides to make their own market and the price may not necessarily be the same as the underlying market.

All styles of trading have their pros and cons but view our CFD education section to see which method is suitable for you.

Services Offered

Are you an active trader who is a dab hand at how the market works and knows what to trade or do you need a helping hand? Most CFD providers will simply offer a dealing service with no additional trading advice or opinions. If you are new to trading or simply want someone else to do the hard work for you it may be worthwhile contacting one of the full service CFD providers or one that at least offers an account manager to assist you with getting started. Full service CFD providers may cost that little extra but its in their interest to give good advice otherwise you wont be a client for very long.

Methods of Execution

If you are not able to access your trading platform then will the provider allow you to place orders via telephone, Email or PDA mobile phone trading? You don’t want to be stuck in a trade with no way to unwind a winning, or even worse a losing position just because your provider has limited resources to take a trade. Check with the provider whether they offer any of the above trading options and most importantly whether it will cost you anything extra.