Trade at your best by choosing top CFD brokers in 2020
What is spread betting and what are CFDs?
Both spread betting and contract for difference (CFDs) are derivative instruments that allow traders to speculate on the price of an underlying instrument without actually owning it. The main difference between the two is spread betting instruments have an expiry date and are excluded from capital gains tax in the UK. Most CFDs have no expiry date making them perpetual instruments and are subject to capital gains tax in the UK.
The key factors for analysing CFD brokers
We delved deep into the leading CFD and spread betting Brokers so that you can make the correct choice for your trading decisions. We took into account a number of key factors when choosing the best CFD brokers and spread betting providers. We looked into the features available to users of these trading platforms such as what kind of markets and trading tools are available but we also assessed what kind of assurances can be provided to the users. For example, where the CFD brokers are regulated and what kind of security procedures they put in place are paramount to protecting the money in the investor’s account. We also took into account the costs associated with each as trading profitably requires considering fees as well as considering price movements.
After taking into account these key factors, the following brokers were decided to be among the best CFD brokers:
City Index is a London headquartered spread betting provider and CFD broker that has been operating since 1984. The broker is regulated by the Financial Conduct Authority (FCA) in the UK. The broker is a subsidiary of Gain Capital, a US-based company which also owns Forex.com and GTX.
City Index facilitates traders to access a number of different markets and instruments including equities, indices products, commodities, forex, and cryptocurrencies. It is noted that 73% of retail investor accounts lose money with this broker.
City Index has accounts available for both retail and professional traders. To avail of a professional account, clients need to meet a number of requirements. Professional traders have higher capabilities to leverage products and can leverage some products up to 400:1 meaning that they will only require 0.25% of their own equity in the position. For example, $100 can be used to open a position with a notional value of $40,000.
For retail investors, both the spreads and the margin capabilities vary from product to product. Products such as cryptocurrencies have a high margin requirement of 50%. These products also have high spreads which are mostly over 1% of the price of the product. Other products such as shares have much lower spreads at 0.2%. City Index has a number of different platforms through which users can trading including a web-based platform, mobile platform, and the hugely popular MetaTrader 4 desktop platform.
IG Group is one of the longest operating CFD brokers. The company was founded in 1974 in the UK and has expanded operations into multiple markets beyond the UK. The company is publicly traded and listed on the FTSE 250. The company is regulated by the FCA in the UK and also by regulators in other markets it has expanded into such as the Australian Securities and Investment Commission (ASIC). IG Group notes that 81% of retail investors lose money trading on their platform.
Being one of the largest CFD providers, IG provides its clients with access to numerous markets. IG have CFD’s that allow traders to expose themselves to equities, bonds, interest rates, cryptocurrencies, and many more. Traders can open up accounts based on which instruments they wish to trade. Charges vary based on the region of the trader and the product being traded. For non-share CFDs, the charge is incorporated into the spread and for share CFDs, the charge is in the form of a commission of 0.1% which is charged both when entering and exiting the position. There is a minimum fee applied based on the region the trader is in. for example, the minimum fee is €10 for clients in the eurozone. There is also an overnight fee charged when holding shares and stock index CFDs overnight but other products such as commodities do not charge the overnight fee. Margin is offered across the different products but varies widely. Similar to City Index, IG Group has a number of platforms available to traders including a web-based platform, applications, and the MetaTrader 4 trading platform which can be downloaded for desktop
Plus500 is a more recently established CFD provider. Operating since 2008, Plus500 provide CFD products across a number of markets and regions. The company is headquartered in Israel and is regulated by the FCA along with a number of other regulators in regions where it operates. Markets that traders can access through the CFD platform include cryptocurrencies, shares, forex, indices, commodities, options, and ETFs. Plus500 have both a retail and professional account. The margin requirements vary based on the markets and whether the trader is a retail or professional client. Initial and maintenance margin requirements for retail investors are specific to each financial instrument.
One of the key differences between Plus500 and the other CFD brokers included on this list is that the charges that Plus500 apply are mainly through the spread whereas other brokers typically have other fees that they charge in addition to the spread. The spread will vary based on the instrument being traded and can be clearly seen before entering a position. There are a number of other fees which may be charged in certain circumstances. These include a fee for getting a guaranteed stop loss, an overnight fee for holding trades, and an inactivity fee if the account is not logged into for a period of three months.
Of all the brokers listed, Pepperstone is the most recently established. Founded in 2010 in Australia, Pepperstone is regulated by the FCA. Pepperstone offers CFD products which allow traders on the platform to access a wide variety of markets including forex, cryptocurrencies, commodities, indices, and shares. Pepperstone have a number of different account types that users can open to trade on their platform. The fees charged and the account capabilities vary based on the type of account opened. It is noted that 78% of Pepperstone’s retail investor clients lose money when trading on their platform.
Pepperstone have a number of trading platforms available to clients. This includes a web platform, mobile platforms for both Android and iOS, and both MetaTrader 4 and MetaTrader 5 for desktop. Traders can easily open a demo account before opening a real account to see if Pepperstone and the trading platforms provided are the right choice for them.
Pro's and Con's
74% of retail CFD accounts lose money
72% of retail investor accounts lose money when trading CFDs with this provider
79.3% of retail investor accounts lose money when trading CFDs with this provider.
Checklist before choosing the best CFD broker
- Does the CFD broker have the markets I wish to trade?
- What is the spread I will be paying on the products?
- Are there other charges apart from the spread?
- Is the broker regulated?
- What margin capabilities are there for the product?
- What percentage of retail investor accounts lose money trading on the platform?
- What trading platforms and features are available?