Different CFD brokers will use slightly different rates. And the long and short rates are usually based on a major bank's overnight interest rate. The rate charged for long positions will usually be 2-3% above that base rate, and the interest paid for short positions will be 2-3% below.

7. Do their CFD prices exactly mirror the underlying stock price, or is the spread widened?

Some online CFD brokers widen the spread by a small amount, say 0.05%, or even further. You'll have to take this in context of the other costs of trading, as the same provider that widens the spread very slightly may also have smaller commissions, whereas another provider who does not widen the spread, may have higher commissions.

As you can see from the above points, there may be some online CFD brokers who do better in one area than another, such as having a large list of tradable CFDs but having a much higher commission, or having a small number of shortable CFDs may have a smaller commission.

There are ways around this, which many CFD traders are doing…

So now that you know these 7 keys, keep them in mind when c

But what a lot of people don't realise is that having a good online CFD broker is also crucial to your success in CFD trading.

Why?

Because choosing the right CFD broker can determine whether you can trade your system properly. This includes whether you can trade the number of CFDs that you need to trade, short a sufficient number of CFDs, place the order types which you need to place, and to keep your transaction costs as low as possible to increase the profitability of your trading system!

By the time you finish reading this article, you'll know the 7 keys to choosing a CFD online broker that will enable you to properly trade, and to maximise the returns from your CFD trading systems.

CFD brokers are now mostly online and use electronic platforms, which makes your trading routine a lot faster. You can trade without needing to call and talk to a CFD broker, unless of course you have a query, or need help with a particular order.

So when you're looking at their websites, keep these points in mind, some of which, you'd only be aware of if you've actually already traded CFDs, with online CFD brokers.

The 7 points to consider when choosing a CFD broker online are:

1. Their margin requirement.

Most CFD brokers' margin requirements are around 10% (usually from 5-20%), thus offering around 10 to 1 leverage. This is a good amount of leverage which makes the high profits from CFDs possible, when compared to stock and share trading. Note however that some CFD brokers require a margin of 30-80%, varying for each of their CFDs, so the leverage available is much more limited with these brokers. So if leverage is important for you to use (which it is for most of us), check the amount of leverage available.

2. Their one way brokerage or commission

The one way commission for CFDs is usually around 0.1 to 0.2% of the trade size. With most brokers there's also a minimum commission of around $10-25, to cover small trade sizes. What you should realise here, is that with some CFD brokers, the commission is negotiable, and it says so on their websites. So don't forget to ask!

3. The number of CFDs available to trade

A large enough number of CFDs available to trade is important if you're trading systems that produce a much greater profit if traded on for example, the top 200 or 300 CFDs, than if they are designed to trade say the top 30 or 100 only.

If your system is designed for a certain number of CFDs to produce a certain amount of profit, then you'll need to check that you can trade this number of CFDs. It's wise to backtest with a current list of CFDs that are offered by the provider that you're intending to trade with, so that you know that you're designing a system that you can apply in real life.

4. The number of CFDs that are shortable

The fact that many more CFDs are shortable, is another feature of CFD trading which dramatically increases the profitability of CFD trading over share trading. What you should check is that the CFD online broker allows short trades on a significant number of their total available CFDs. It can be helpful to backtest your systems with a real list of shortable CFDs to again ensure that the system you design, will reflect real life trading.

5. What are the order types that are available to be placed?

With most CFD providers, you can place orders at anytime, that is, when the market is either open or closed. So if you're working in the day, you can place all your orders at night, including limit orders to enter a position, and don't have to watch the prices at all during the day.

Some providers however only allow you to place entry orders during market hours. So you'll have to be there during the market open.

Also consider these points:

Do you need to place an “if done” stop loss order, attached to your pending order to enter the CFD?

With these “if done” stop loss orders, can they placed it at a specified price, or are they placed a specified distance away from the entry price?

How far or how close from the entry price, can the stop loss order be placed?

If you place a guaranteed stop (where if the price gaps through your price, you'll be guaranteed to exit at your intended price, and there's a premium for this), can the stop be moved and if so, is there a cost in moving it?

6. The interest charged for long overnight held positions, and paid for short positions

Different CFD brokers will use slightly different rates. And the long and short rates are usually based on a major bank's overnight interest rate. The rate charged for long positions will usually be 2-3% above that base rate, and the interest paid for short positions will be 2-3% below.

7. Do their CFD prices exactly mirror the underlying stock price, or is the spread widened?

Some online CFD brokers widen the spread by a small amount, say 0.05%, or even further. You'll have to take this in context of the other costs of trading, as the same provider that widens the spread very slightly may also have smaller commissions, whereas another provider who does not widen the spread, may have higher commissions.

As you can see from the above points, there may be some online CFD brokers who do better in one area than another, such as having a large list of tradable CFDs but having a much higher commission, or having a small number of shortable CFDs may have a smaller commission.

There are ways around this, which many CFD traders are doing…

So now that you know these 7 keys, keep them in mind when ch

The 7 points to consider when choosing a CFD broker online are:

1. Their margin requirement.

Most CFD brokers' margin requirements are around 10% (usually from 5-20%), thus offering around 10 to 1 leverage. This is a good amount of leverage which makes the high profits from CFDs possible, when compared to stock and share trading. Note however that some CFD brokers require a margin of 30-80%, varying for each of their CFDs, so the leverage available is much more limited with these brokers. So if leverage is important for you to use (which it is for most of us), check the amount of leverage available.

2. Their one way brokerage or commission

The one way commission for CFDs is usually around 0.1 to 0.2% of the trade size. With most brokers there's also a minimum commission of around $10-25, to cover small trade sizes. What you should realise here, is that with some CFD brokers, the commission is negotiable, and it says so on their websites. So don't forget to ask!

3. The number of CFDs available to trade

A large enough number of CFDs available to trade is important if you're trading systems that produce a much greater profit if traded on for example, the top 200 or 300 CFDs, than if they are designed to trade say the top 30 or 100 only.

If your system is designed for a certain number of CFDs to produce a certain amount of profit, then you'll need to check that you can trade this number of CFDs. It's wise to backtest with a current list of CFDs that are offered by the provider that you're intending to trade with, so that you know that you're designing a system that you can apply in real life.

4. The number of CFDs that are shortable

The fact that many more CFDs are shortable, is another feature of CFD trading which dramatically increases the profitability of CFD trading over share trading. What you should check is that the CFD online broker allows short trades on a significant number of their total available CFDs. It can be helpful to backtest your systems with a real list of shortable CFDs to again ensure that the system you design, will reflect real life trading.

5. What are the order types that are available to be placed?

With most CFD providers, you can place orders at anytime, that is, when the market is either open or closed. So if you're working in the day, you can place all your orders at night, including limit orders to enter a position, and don't have to watch the prices at all during the day.

Some providers however only allow you to place entry orders during market hours. So you'll have to be there during the market open.

Also consider these points:

Do you need to place an “if done” stop loss order, attached to your pending order to enter the CFD?

With these “if done” stop loss orders, can they placed it at a specified price, or are they placed a specified distance away from the entry price?

How far or how close from the entry price, can the stop loss order be placed?

If you place a guaranteed stop (where if the price gaps through your price, you'll be guaranteed to exit at your intended price, and there's a premium for this), can the stop be moved and if so, is there a cost in moving it?

6. The interest charged for long overnight held positions, and paid for short positions

Different CFD brokers will use slightly different rates. And the long and short rates are usually based on a major bank's overnight interest rate. The rate charged for long positions will usually be 2-3% above that base rate, and the interest paid for short positions will be 2-3% below.

7. Do their CFD prices exactly mirror the underlying stock price, or is the spread widened?

Some online CFD brokers widen the spread by a small amount, say 0.05%, or even further. You'll have to take this in context of the other costs of trading, as the same provider that widens the spread very slightly may also have smaller commissions, whereas another provider who does not widen the spread, may have higher commissions.

As you can see from the above points, there may be some online CFD brokers who do better in one area than another, such as having a large list of tradable CFDs but having a much higher commission, or having a small number of shortable CFDs may have a smaller commission.

There are ways around this, which many CFD traders are doing…

So now that you know these 7 keys, keep them in mind when c

A large enough number of CFDs available to trade is important if you're trading systems that produce a much greater profit if traded on for example, the top 200 or 300 CFDs, than if they are designed to trade say the top 30 or 100 only.

If your system is designed for a certain number of CFDs to produce a certain amount of profit, then you'll need to check that you can trade this number of CFDs. It's wise to backtest with a current list of CFDs that are offered by the provider that you're intending to trade with, so that you know that you're designing a system that you can apply in real life.

4. The number of CFDs that are shortable

The fact that many more CFDs are shortable, is another feature of CFD trading which dramatically increases the profitability of CFD trading over share trading. What you should check is that the CFD online broker allows short trades on a significant number of their total available CFDs. It can be helpful to backtest your systems with a real list of shortable CFDs to again ensure that the system you design, will reflect real life trading.

5. What are the order types that are available to be placed?

With most CFD providers, you can place orders at anytime, that is, when the market is either open or closed. So if you're working in the day, you can place all your orders at night, including limit orders to enter a position, and don't have to watch the prices at all during the day.

Some providers however only allow you to place entry orders during market hours. So you'll have to be there during the market open.

Also consider these points:

Do you need to place an “if done” stop loss order, attached to your pending order to enter the CFD?

With these “if done” stop loss orders, can they placed it at a specified price, or are they placed a specified distance away from the entry price?

How far or how close from the entry price, can the stop loss order be placed?

If you place a guaranteed stop (where if the price gaps through your price, you'll be guaranteed to exit at your intended price, and there's a premium for this), can the stop be moved and if so, is there a cost in moving it?

6. The interest charged for long overnight held positions, and paid for short positions

Different CFD brokers will use slightly different rates. And the long and short rates are usually based on a major bank's overnight interest rate. The rate charged for long positions will usually be 2-3% above that base rate, and the interest paid for short positions will be 2-3% below.

7. Do their CFD prices exactly mirror the underlying stock price, or is the spread widened?

Some online CFD brokers widen the spread by a small amount, say 0.05%, or even further. You'll have to take this in context of the other costs of trading, as the same provider that widens the spread very slightly may also have smaller commissions, whereas another provider who does not widen the spread, may have higher commissions.

As you can see from the above points, there may be some online CFD brokers who do better in one area than another, such as having a large list of tradable CFDs but having a much higher commission, or having a small number of shortable CFDs may have a smaller commission.

There are ways around this, which many CFD traders are doing…

So now that you know these 7 keys, keep them in mind when c

With most CFD providers, you can place orders at anytime, that is, when the market is either open or closed. So if you're working in the day, you can place all your orders at night, including limit orders to enter a position, and don't have to watch the prices at all during the day.

Some providers however only allow you to place entry orders during market hours. So you'll have to be there during the market open.

Also consider these points:

Do you need to place an “if done” stop loss order, attached to your pending order to enter the CFD?

With these “if done” stop loss orders, can they placed it at a specified price, or are they placed a specified distance away from the entry price?

How far or how close from the entry price, can the stop loss order be placed?

If you place a guaranteed stop (where if the price gaps through your price, you'll be guaranteed to exit at your intended price, and there's a premium for this), can the stop be moved and if so, is there a cost in moving it?

6. The interest charged for long overnight held positions, and paid for short positions

Different CFD brokers will use slightly different rates. And the long and short rates are usually based on a major bank's overnight interest rate. The rate charged for long positions will usually be 2-3% above that base rate, and the interest paid for short positions will be 2-3% below.

7. Do their CFD prices exactly mirror the underlying stock price, or is the spread widened?

Some online CFD brokers widen the spread by a small amount, say 0.05%, or even further. You'll have to take this in context of the other costs of trading, as the same provider that widens the spread very slightly may also have smaller commissions, whereas another provider who does not widen the spread, may have higher commissions.

As you can see from the above points, there may be some online CFD brokers who do better in one area than another, such as having a large list of tradable CFDs but having a much higher commission, or having a small number of shortable CFDs may have a smaller commission.

There are ways around this, which many CFD traders are doing…

So now that you know these 7 keys, keep them in mind when c

Different CFD brokers will use slightly different rates. And the long and short rates are usually based on a major bank's overnight interest rate. The rate charged for long positions will usually be 2-3% above that base rate, and the interest paid for short positions will be 2-3% below.

7. Do their CFD prices exactly mirror the underlying stock price, or is the spread widened?

Some online CFD brokers widen the spread by a small amount, say 0.05%, or even further. You'll have to take this in context of the other costs of trading, as the same provider that widens the spread very slightly may also have smaller commissions, whereas another provider who does not widen the spread, may have higher commissions.

As you can see from the above points, there may be some online CFD brokers who do better in one area than another, such as having a large list of tradable CFDs but having a much higher commission, or having a small number of shortable CFDs may have a smaller commission.

There are ways around this, which many CFD traders are doing…

So now that you know these 7 keys, keep them in mind when choosing a CFD broker online, to ensure that you can trade your system as designed, and that your profits are maximised.

There are more keys to choosing an online CFD broker, but the above is a good start for traders when comparing and choosing between various CFD borkers and providers.