In order to trade CFDs (Contracts for difference), you just need at least 500 USD. But for a risk-free, ideal and healthy management it is advised to deposit 3000-4000 USD. Overtime, CFDs have become popular and most traded financial agreements. A CFD is basically a bet on the price of a particular commodity which includes foreign currency, commodity or a stock after some time. Through an online platform, there is a contract between a broker and an individual. The online platform offers various other instruments in addition to CFDs.
By signing a CFD, you agree to pay the difference in the value of a particular asset once the contract expires. There is no restriction on the time you need to hold the contract for. You can sell the contract whenever you feel the need to do so. The broker also offers a lot of leverage with the highest ratio of 1:500.This gives a great potential to make big profits with a small budget.
The CFD trading brokers UK mostly make their profits through the spread which is a difference in the buying and selling of the CFD.CFD brokers offer a big range of leverage which makes it easy for traders to trade large amounts of stock, with a small amount of money All its makes CFD a much sought-after business.
Things to look for a best CFD Broker
Nowadays there are many CFD brokers available about whom you might have never heard before. All these CFD brokers have their website displays describing them but you should not completely believe on what is displayed. You should look for the Regulation registration number and also check them with the Regulator. Following are some of the important things to look in the best CFD:
- Firstly, you should make sure that the broker you are looking for is regulated. A regulated broker’s website will be displayed on his or her website. Across the globe in all countries, there are regulators to keep a check on the brokers. Each broke is required to deposit millions of dollars with the regulator. The regulator ensures that the broker runs all the business according to the laws and regulations. Regulated brokers work within a framework set which ensures greater safety of traders’ money.
- The next important thing to look at is whether your broker works on the principle of dealing desk or no dealing desk. If the broker works on the former principle, there is a great likelihood of him manipulating the CFD prices. While on the other hand, a non-dealing desk broker allows his or her, trader, to trade on a common network directly. This also leads to greater transparency by allowing traders to trade at prices other traders without brokers are trading at. To check whether the broker follows dealing desk process or no dealing process look for whether or not the broker is charging a spread or a commission.
- Moreover, if a broker follows a straight through process (STP) or an ECN (Electronic Currency Network) there is a guarantee that the broker is not manipulating any trades.