What Exactly Is A CFD Broker?

CFD – Contract for Difference – brokers are online providers who use electronic platforms to provide mobile CFD trading. This helps to speed up your trading routine.

A CFD broker offering Contract for Difference is an online provider, who uses electronic platforms to provide mobile CFD trading, which helps to speed up your routine of trading. You don’t have to call or talk with a CFD broker, except if you need to ask something, or require some help regarding a specific order.

CFDs are a trading product whereby you can benefit from movements in stock prices or any other investment (e.g. currencies), even though you don’t actually own the underlying asset. The name Contract for Difference arises out of the design of CFD products, which allow traders to take a position (long or short) without buying or selling the nominal assets. This coupled with the margin gives great potential for leveraged profits, hence the popularity of CFDs.

How to choose your CFD broker

A good way to start your enquiries is by asking around other professional traders or maybe someone you met whilst doing a CFD training course, or anyone you know may have some experience. But whichever broker you eventually choose you need to check that what they are offering meets your requirements. Some CFD brokers will even let you open demo accounts and try out their platform to see if it suits you.

What should you look for with an online CFD Broker?

1. What is the margin requirement?

Margin requirements for most CFD brokers are about 10%, so offer about 10:1 leverage. But, other share CFD brokers expect a margin of approximately 20% to 70% dependent on the turnover of a particular CFD.

2. Their commission

CFD broker commissions can vary between 0.1 and 0.2 per cent of your trade, with the least commission required of $10 to $25. Some CFD brokers are prepared to negotiate commissions, particularly if you are trading frequently, so always ask.

3. Number of shortable CFDs and amount of CFDs available to trade

A larger amount of CFDs is important if you are trading systems which are intended for trading upon frequently. When your system gets set up for a specific amount of CFDs in order for you to make a profit, then you need to make sure enough CFDs are available for trade. If there aren’t enough available you might need to consider redesigning your system. It’s a good idea to back test, so you know your system will work in real time trading.

4. What order types can be placed?

If you are working during the day time, and want to place your order after markets closing, most CFD brokers will allow that. The benefit to that is you don’t need to keep watching prices during the day’s trading if you don’t want to. However, other providers may require you place your trade whilst the market is open. A lot depends on your strategy or system.

5. What interest is payable for overnight positions? What is charged on short positions?

You will find that there will be different base rates for different providers; however, it is usually comparable to the overnight interest rate of a major bank. For example for long positions it is usually 2 or 3% above the base rate (LIBOR), and for short positions the interest may be 2 to 3% below.

6. Fees

Dependent on which country’s CFDs you are trading, there could be a monthly fee to be able to access dynamic live prices. However, your broker may forgo this fee if you are trading frequently each month.

7. Check the company’s reputation and stability


It’s sensible to trade with a forex broker that is established and has a good reputation. Because of the range of services offered by different CFD brokers it’s not uncommon to find that a trader has more than one broker.

Always check what services your CFD broker has available and that they meet your requirements, and suit your trading system/style.

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1. Forex Frequently Asked Questions