5 Essential Things to Consider Before Choosing a CFD Trading Platform
In previous years, trading was limited to large investors, top institutions, and brokerage firms. Thanks to technological advancements, retail traders now have the power at their fingertips to perform trading transactions without the help of a brokerage firm.
While this is a laudable feat, the number of available CFD trading platforms can be overwhelming, especially if you’re a beginner trader. Some platforms are fraudulent, hard to use, and unfriendly to the ordinary trader.
When you don’t know what to look for, you’re likely to waste time and financial resources trying out different platforms that you should have avoided in the first place. This article details five essential things to consider when choosing a CFD trading platform.
What is CFD Trading?
CFD stands for Contract for Difference, and it’s a type of trading where the entry and exit price determine the trader’s profit and loss. The calculation is made by subtracting the entry price from the exit price and multiplying by the number of units bought.
Suppose you entered the Gold market with $100 at $20 per unit and bought five units of gold. If you sell all five gold units at $22 per unit, you’d have made $110 with a profit of $10.
A good CFD trading platform should have basic features like real-time price quotes, price charts, and order entry and cancellation efficiency. Beyond the essentials, we’ve included other vital factors to consider when choosing a CFD trading platform.
| Trading shares CFDs | Investing in shares |
| Trade on the price of the underlying market | Own the asset |
| Speculate on falling prices is possible | You cannot sellashare you have not previously bought |
| Leverage available | No leverage |
| Stamp duty fee* | Subject to stamp duty* |
| No shareholder rights | Eligible for dividends,if applicable |
| Commission-free ** | Fees apply |
| Suitable for day traders and traders with
medium-term trading strategies |
Suitable for long-term investors |
Deposit and Withdrawal – Methods, Speed, and Cost
Your trading platform of choice should have multiple methods of depositing and withdrawing your funds. If your usual method fails, you’ll need another way to deposit or withdraw your funds.
While finding your perfect choice, watch out for platforms that process deposits and withdrawals more slowly than you’d like. Check how many minutes or hours it would take for your deposit to reflect in your trading account and how long your funds will take before reaching your bank account.
Another thing to consider is the cost of deposits and withdrawals. If you’re trading with high capital, you might not notice how high a withdrawal fee is. But if you’re starting with little, you might find yourself paying more than you can afford to withdraw your funds.
Some platforms do not have it all. One may have a fast deposit but slow withdrawal or a fast deposit time and easy withdrawal. Whichever one you choose, make sure it’s something you can cope with over a long period.
User Education
CFD trading with any commodity is a continuous process of learning, studying and keeping up with current trends in the market. Many trading platforms give their users information and help them learn more about trading.
Some platforms engage their users via articles on their blog, videos on Youtube or weekly newsletters to users. They usually start from the easy parts, like definitions of trading terminologies to expert-level advice for trading strategies.
If you pay enough attention, you might go from novice to expert trader in a few months or weeks. Platforms that help their users to learn about trading tend to care more about a user’s experience on their platform and the needs of these users.
Security Measures
When it comes to your finances, security measures on a CFD trading platform should be a deal breaker. No matter how advanced the features are or how low their fees are, your money and all sensitive information need to be secure on their platform.
The first thing to look out for is their login process. How many layers of security do you encounter while you log in? Check if they have two or more security measures such as Password, captcha, Google code authentication, face recognition, fingerprint, etc.
Beyond the login process, you also need to know their policy on protecting your personal information. Your CFD trading platform will likely request sensitive information such as your full name, bank information, identity document, passport, and maybe your social security number.
If they outsource their security, ensure you do some research about the cyber security company and how they do their work. If they’ve recently had a data leak, you should stay away from such a platform to prevent loss of financial resources.
Responsive Customer Support
Trading can be complicated when you’re a novice trader. You may need extra hands and heads to sort out some problems initially. Who better to help you with these issues than customer support on a platform you trade with?
A good CFD trading platform gives users access to their support team through several communication channels. They also have support representatives that can communicate with you in your language. However, it’s no use if they have these numerous support channels but are unresponsive when contacted.
If you’re not sure if they’ll reply quickly, run a search on Twitter or other social media channels to see what their current or past users say about them. If they have a mobile application, you’re likely to grasp how they operate in the reviews section.
Bonus offerings and Add-ons
Competition is high among CFD trading platforms. They’re all trying to get as many users on their platform as possible. That’s why some platforms include bonus offerings and add-on features.
The more bonus features a platform offers beyond the basics, the better. Some give these features to their users for a small fee, while others provide them for free. For example, market analysis can be complimentary on one platform but require a fee on another.
Suppose you’re a beginner in CFD trading and can’t afford paid features. In that case, it’s best to avoid platforms that charge subscription fees for bonus features. Find a trading platform that gives you all or parts of it for free and trade with them.
Conclusion
Beyond trading complexities, CFD trading can be easier and more fun. Using the criteria we outlined above, you’ll be able to find a CFD trading platform that’s compatible with you and your trading needs. Remember to do your research, take some notes, and trade with a safe, beginner-friendly platform.