Best CFD Trading Forex Brokers in 2023
CFD Forex brokers are an essential part of CFD trading, as it is different from a regular forex trading. Contract of Differences stands for CFDs, which is a financial contract between you and the broker. You will earn from the opening and closing difference of a trading position.
However, on CFD trading, you don’t own any assets. Instead, you are investing only based on the price changes. It sounds tempting, while it has some risks too. Selecting the right type of CFD broker would definitely reduce your risks.
If you want to invest in forex CFDs and are confused, don’t know which type CFD brokers to use and which one is the best forex broker for CFD trading! Don’t worry, within a few minutes you will learn everything after finishing this article.
CySEC, FCA, FSB, DFSA, SCB
FCA, ASIC, CySEC, SCB, DFSA, BaFin and CMA
What is a CFD Broker?
Forex CFDs are new financial derivatives that have paced some popularity to the investors. Unlike regular brokers, CFD forex brokers give you access to a certain number of contracts that you can buy and sell them later. Besides, you have to agree to exchange the difference with the CFD brokers.
What are the Different Types of CFD Trading Forex Brokers?
Among all the available CFD forex brokers, those fall into two overall categories ECN and Market Makers. Although novice traders may not find the significant difference between them, they are substantially different from each other. Let’s get some knowledge about both types.
ECN CFD brokers are usually based on the non dealing desk. It works through reading the bid and asking prices for certain stocks by the traders, investors who are connected through the electronic network. When ECN finds a matching bid and asks price, it executes a transaction between the agreed parties.
Although the process runs automatically, bid and ask prices have to be set by the trader. Now, the question is, how does ECN make money?
As it is a non-dealing desk platform, it makes money by charging a small transaction fee per CFD trading instead of profiting from spread.
The other type of CFD broker is called market maker, who completes orders through a liquidity provider by offering the best price. They typically make the forex trading on top of the real trading.
They are also referred to as dealing desks. Besides, market makers are artificial types of brokers who cannot reflect the market directly; instead only quote the price. Furthermore, some market makers work for some large clients such as trading firms, banks, while other market makers cater only to retail traders.
How do the Market Makers Make Money?
Market makers usually profit from the difference between the bid and ask prices. As the market makers are liquidity providers themselves, they may earn money by selling and buying stocks from you. So, when you lose money, market makers make it, and it works vice versa.
CFD Trading Accounts
Like a regular forex broker, CFD forex brokers offer different types of forex account types for their users. Additionally, users can open any of the following accounts, depending on their investments.
Also called micro accounts that offer tight floating spreads with sometimes instant execution for CFD trading. Trading with a micro account requires a small number of deposits, such as it may start from $50.
Mid-range retailers use this account as their investments are neither higher nor the minimum. Usually, the investors who want to invest $500-$1000 on CFD forex brokers mini account are best for them.
Typically a standard account needs to have at least $1000 deposits to start. Moreover, you will get some benefits such as instant execution alongside the tight floating speed. Besides, it also offers hedging.
These are the common types of trading accounts you can open with CFD brokers. However, best CFD brokers offer some other types of accounts, too, such as CFD demo account and VIP account.
CFD Demo Accounts
When you are a novice trader, you must get to know the entire trading procedures. For that, you can start with a demo account with some virtual money for learning purposes.
VIP accounts are intended for large organizations whose investing power is more than $20000. Besides, VIP account holders get some exclusive benefits from the brokers.
Best CFD Trading Platform
CFD forex brokers don’t work by themselves. They mostly work with the support of third-party platforms. From our research and experience, we have found two such forex trading platforms that best CFD brokers offer. Eadon to get to know them.
CFD Trading on MetaTrader 4
MetaTrader 4 offers a range of popular CFD pairs, which includes commodities and indices. It is popular with the CFD forex brokers because it provides some advanced technologies, including better security. Furthermore, brokers, as well as the traders, can remain worried free in the case of stability of the platform as MT4 does trading on behalf of the trader.
Moreover, MetaTrader 4 CFD trading platform provides some excellent charting capability that doesn’t require high resources to run.
CFD Trading on MetaTrade 5
Also referred to as MT5 is an updated version of Meta Trader 4 that comes with several improvements, especially for CFDs. For example, while you trade CFDs on the MT5 CFD trading platform, you can switch between the tabs even if you are in a rush on trading. Additionally, it also comes with all the features of MT4.
Advantages of Forex CFD Trading
Many investors choose CFDs over regular forex because of some advantages. Some of the top advantages you will get from the best CFD brokers are-
- Usually, brokers offer higher leverage for CFD trading than regular forex.
- It provides both short and long on instruments.
- Brokers give access to a wide range of indices, cryptocurrency and commodity markets.
CFD forex brokers do have some underlying risk, and traders must company the risk management strategy. However, if you are a novice, you should carefully start trading with a small amount.
On the other hand, as we said earlier, you must be clear now about everything CFD trading. Though Trading CFDs are complex and are not suitable for all. So, it is advisable to learn first before going for a shot, you can check our forex broker reviews and top forex brokers list to find out the best CFD brokers.