How to Choose and Online Contracts for Differences Broker
One of the most important decision you will make as an investor, is the broker you choose. Each broker brings a different set attributes that include their trading platform, their customers services and the range of products they offer. Brokers that provide contracts for differences (CFD) also offer leverage. The amount of leverage that you are offered can also be a determining factor in your decision to choose a specific CFD broker. Here are 5-criteria you should consider before you fund an account with a CFD broker.
What Financial Instruments are Available?
While many CFD brokers will describe the number of assets they offer, the breadth of these offerings is important. If a broker offers 100-different currency pairs but does not provide CFDs on other assets such as commodities, indices, or shares, you will be confined to trading only one asset. While currency pairs provide ample opportunities to generate profits, there will be times when currencies are trading sideways making it difficult to make money. By trading several different assets classes, you are diversifying your risk.
Does the Broker Have a Demo Account?
When a CFD broker offers a demo account, they are allowing you to trade without risking real capital. A demo account allows you to test drive a platform. You cannot lose any capital when you are trading a demo account, which means you can test different types of transaction without any ramification. In addition, a demo account allows you to test different types of trading and risk management strategies. Each time you find a strategy you believe is worth trading, you can test it in real-time using a demonstration account before you risk real capital.
How Much Leverage Does the Broker Offer?
Leverage allows you to use borrowed capital to enhance your trading profits. Leverage is a double-edged sword. While your profits can be enhanced, your loses can be magnified. If a broker offers extreme levels of leverage, this should raise a red flag. You also want to make sure that the leverage a broker is offering falls within the regulatory guidelines.
What Kind of Customer Service is Available?
You want to make sure that it is relatively easy to contact your CFD broker. CFD brokers that offer multiple ways to contact them provides a layer of trust. You also want to make sure that your broker has a technical support group that can help you with any software issues.
Does Your Broker Have Several Platforms?
A combination of two or more platforms can make trading a more efficient process. Generally, there are three types of platforms. A downloadable platform, a browser-based platform and a mobile platform. A mobile platform can be very helpful as you can check the markets and your positions while you are on the go.
Before you choose a CFD broker you should consider the types of assets that the broker offers. You want to make sure that your broker offers leverage and it falls within the regulatory guidelines. You want to make sure your broker offers multiple trading platforms as well as has many ways to contact them. Lastly, make sure your broker offers a demonstration account.