How to Choose a CFD trading platform
With CFDs (Contracts For Difference) gaining in popularity and in press coverage, here’s a useful guide to help you choose the CFD provider that is right for you.
As a general rule of thumb – and this may seem obvious – it really does pay to choose an established CFD provider, one that has been around for a while and is still successful.
DMA or Market Maker?
In the long-term you’ll find that it’s useful to have access to both DMA (Direct Market Access) and Market Maker.
DMA platforms offer greater transparency with the ability to trade shares at the exact market bid/offer price. You can even enter an order within the spread.
If you’re just starting out or if you want access to the whole range of markets from one single platform then a market maker platform is probably the way to go.
More important for the novice investor, look for a CFD provider who will invest time in helping you to learn how to trade CFDs.
Competitive spreads & margins
Do the hard work, who offers the best value for money? But also remember: it’s not all about the lowest rates, it’s about the service offered as whole.
Risk Management tools
Also important is the range of tools offered by the CFD provider to help you manage your risk. Lookout for free trailing stops and limit orders, while guaranteed stops will sometimes come at a price. More important perhaps is you should always remember that as a trader it is your ultimate responsibility to manage your own risk.
Demo of the Trading Platform
One of the most important steps is to test-drive the technology and the ease of use of the platform with a trading demo account.
Timing and Reliability. Trading is cyclical, during low volatility times the majority of platforms perform well. However, during a ‘perfect storm’ – think back to the recent general election in the UK and problems in the eurozone combining – the impulse to trade is so strong and this leads to periods of high volatility. And itss during these times that you’ll be thankful if you’ve chose a reliable and accurate trading platform.
Charts. Find out if they have simplified charts that’ll help you get a snap-shot of what’s going on and more advanced charts which you can use for a more studied approach.
Research resources. What kind of resources do they offer that’ll help you improve as a trader and make more informed decisions?
Another thing to lookout for in a trading practice account is the ease-of-use. We’re all different so it’s good to get a platform that’ll suit you.
To answer these questions you’ll need to compare CFD providers, do a bit of research among the CFD trading community online and talk to the companies directly. Don’t be afraid to ask them difficult questions.