But you also get all the profits. All for a tiny commission cost. But unlike Bitcoin, you can make moonshot investments in everything from lean pork to Ethereum and Apple.
In this guide, we’ll cover the top contracts for differences platforms.
Table of Contents:
Our Top Pick of CFD Platform (UK) 🇬🇧️
Ready to flip CFDs? Don’t let envy spiral you into bad investments. When crunching your Trading Data, take time to learn your strategy, platform, and use good financial common sense.
Best CFD Platform UK – Review Section 📚
|Service Provider||Rating||Sign up|
|*1. eToro||★★★★★||Open Account|
|**2. Plus500||★★★★★||Open Account|
|3. ActivTrades||★★★★★||Open Account|
|4. Trading 212||★★★★★||Open Account|
|5. CMC Markets||★★★★★||Open Account|
* eToro disclaimer: 76% of retail CFD accounts lose money.
** Plus500 disclaimer: 81% of retail investor accounts lose money when trading CFDs with this provider.
Note: Some of the platforms on our list, Plus500 for example, are CFD-only.
1. eToro – Best CFD Platform Overall
I’ve written before on how eToro has its fingers in tons of advertising and sponsoring deals covering the full gamut of celebrity world, sports world, and global stages.
So it won’t be a surprise to hear this placed as one of the top-recommended CFD platforms for a good level of investors; from active traders to those, passive looking for copy-trading automations that don’t require technical wranglings behind-the-scenes.
76% of retail investor accounts lose money when trading CFDs with this provider. You should consider
whether you can afford to take the high risk of losing your money.
Indeed, the value was £610 million in 2018, this tripled to £1.9 billion in 2020.
Apart from passive investment using social trading, using this platform eliminates a plethora of potential hazards.
The contracts for differences industry is a minefield; but eToro’s network is FCA-regulated, with a few security practices aimed at mitigating risk of bots and scammers, such as account verifications and minimum deposits.
While scammers and bots are warded off through heightened security in eToro’s minimum training requirements, there’s a lot of reasons to recommend this as a favourite contract for differences platform, namely its flexibility in trading types and market access.
For instance, eToro’s fingers spread further than advertising the sponsoring for Premier League football clubs; they also headquartered in a bunch of different countries, expanding how much access users have to company stocks, currencies, and commodities. Being a social trading app, the research and analytics offerings are lock-and-step with the speed of the market. This misses the best-rounded CFD trading platform.
No platform is perfect. You’ll have to sacrifice anonymity for more security. Accounts need to be fully verified, also trading is by default in U.S. dollars, although the app automatically converts things.
2. Plus500 – Top-Rated CFD Platform
Plus500 is a contracts for differences specialist, which right away offers deeper exposure to a huge breadth of CFD-based trading instruments and execution strategies.
Importantly, they’re also fully FCA-regulated. And a good host of the instruments are commission free. If you’re speculating on currency pairs, there are more than 70 covering the majors, minors, and exotics in a moderately paced trading environment.
81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
To go into more detail on the trading environment, the headquarters company is listed on the London Stock Exchange and distributes services around the world through subsidiaries. Each subsidiary is regulated, offering a wide variety of instruments and CFD indices from more than 20 countries.
There isn’t much of note to say about fees, which are competitive overall. You’ll come across typical overnight fees which are pretty much at the typical industry rate. The main repeat fee to be aware of is currency conversions, which kick into place if profits occur in a currency other than the currency funding the account.
3. ActivTrades– Underdog CFD Platform
Standout features include competitive trading rates against the market average and deep global access to markets.
ActivTrades is well-established for holding to high regulatory standards and reliable executions. Of particular mention is the wide array of market order types for hedging and speculating.
Because CFDs are completed markets, more advanced traders can benefit from using this popular CFD platform, whether by browser or app. Market order types offered, to give traders more control over their executions, of course include the typical market, limit, stop, and trailing stop orders.
But ActiveTrades goes further by offering special order time limits, such as Good ‘til Time (GTT) and Good ‘til Cancelled (GTT). In order to maximise opportunity from each order to optimise every trade, investors should include market orders where possible, lowering the risk or downside that can happen during a volatile market.
Fund your account using a range of different funding sources, including PayPal and Skril, but the basic way of adding the deposits are through debit or credit card, or bank transfer. The platform charges no fees for withdrawals. The quickest way to deposit (instant access to funds, in order to begin trading), is through e-wallets like PayPal.
e-wallets are instant for processing, however deposits by bank transfer or credit / debit card take up to 3 days for withdrawals. Whatever the funding sources, deposits are instant, and e-wallet withdrawals are always instant too. For some reason, there are also no price alerts.
4. Trading 212 – Start Trading Fast
Trading 212 is well suited to traders who do high-volume trading, particularly if they are moving funds between different platforms.
And also if fast account setup is needed.
Suppose you are splitting your time and attention between different brokers, in order to do different types of trades want opportunity, trying to want to make a simple because it doesn’t charge you any fees for making withdrawals, or if you allow account linger for a few weeks or months (there won’t be any inactivity fees).
In fact, Trading 212 doesn’t charge commissions for stocks or exchange-traded funds. Which is one of the reasons why this newer platform has gained a lot of attention in a short period of time
The other reason is that full account verification is fast. Simply have your tax details to hand, fill in a couple of questions about your earnings and any pre-existing trading experience, and within the day you’ll be able to make your first deposit and begin trading.
The dashboard is intelligent; quickly look up trades, markets, and perform a full execution through the app. Users across iOS and Android.
All of the above said, the CFD market access isn’t as deep as a few other choices available, with somewhat higher forex charges too and not the most impressive customer support channels despite widespread positive feedback.
5. CMC Markets – Best Low Fee CFDs
Founded in 1989, FCA-regulated trading platform CMC Markets focuses on Forex options and contracts for differences. That means it has a pretty long-lived footprint for security and trust, which is important for trading overall but especially so when dealing with CFDs.
Do a bit of digging and you’ll find a high volume of user reviews claiming that they had a good experience with this beloved CFD-based trading platform.
One of the key reasons for this is its competitive fee structure, which is largely commission free and otherwise competitive for industry averages.
You find a modern user interface: the search bar lets you filter for different trading instruments, new species, market research, and trading execution tools. Use this as a broker in tandem with the MT4 interface, or in the CMC native platform. Whatever you choose, its selection of CFDs and options cover forex, stocks and bonds, crypto, indices, and more.
We’re still waiting for CMC Markets to add-on two-factor authentication (2FA), which although simple is a high-leverage security feature that can add a final-resort barrier between you and hackers. And while they do have good support channels, such as live chat and phone, it isn’t around-the-clock.
Nonetheless, similar to Trading 212, you’ll be hard-pressed to find sources of high-volume negative user feedback. So they’re doing something right.
Guide for Choosing your Top CFD Platform 📟
This section is good for newbies still learning how contracts for differences work. It will also help when making a buying decision on the best CFD platform to use:
Contracts for Differences Explained
How CFDs work: These contracts let investors and traders pay part of the value of an underlying asset, while borrowing the rest - on the chance that the market will move favourably, so that any small associated fees are more than covered.
It’s a way to leverage capital to accomplish far more than its weight. For instance, a leverage of 5 will mean 5 times the profit (or potential losses) on the amount of capital initially invested.
And unlike most traditional trading, CFDs let you go long and short, which means you’re able to take a position regardless of whether the market rose or fell. The actual underlying asset isn’t a condition, only speculation on it. For this reason, CFD trading opens up access to worldwide markets, including commodities, invoices, shares - all from one point of control.
Using a Platform to do CFD Trading: Example
CFD pricing is based on the underlying asset’s real-time market value. Rather than purchasing the underlying asset, for instance shares in a company stock, you’re purchasing units of a CFD contract (i.e. a certain number of contracts).
If you think its market price will grow, then you’re borrowing to buy, if you think it might drop, then you’re borrowing to sell.
Suppose you purchase CFD units in Amazon, with an impact leverage of x4 (1:4). This amount of exposure will affect the nature of the positive or negative trade. The contract itself, through the broker platform, is between you and the broker. Listings for the asset will be based on the real condition of the stock market and that particular stock.
Net losses and profits are worked out when the trade is closed -- by deducting the value of the CFD at the end of the contract from its starting value.
- For each point move in the instrument's price that is favourable, your profits work out to 4 times more for each CFD unit you have purchased or sold.
- For each point move in the instrument's price that is unfavourable, your losses work out to 4 times more for each CFD unit you have purchased or sold.
In this event, your leverage of 1:4 is the same thing as 100 / 4. Which means you're investing 25% of the total value of the underlying asset upfront. The CFD platform brokers the deal, agreeing to the trade that has an actual full value four times higher.
For instance, the current value of Apple stock (NASDAQ: AAPL) is currently £133.06. You will need to invest 25% of this, which is £33.26.
Key Summary of Contracts for Differences
- 📰 They are agreements between trader/investors and brokers to settle the cash-difference between a CFDs value from its starting value and closing value. (Directly ties to the market price of an underlying asset)
- 📰 The investor never actually owns the underlying asset and doesn’t need financial exchanges for actual transactions (behind the scenes, brokers make their own bids).
- 📰 Because of this workaround, the biggest advantage of CFDs is access to major global markets, that can be profitable in either direction.
- 📰 But disadvantages of CFDs include leverage risks, needing to keep up a high-enough margin, less industry regulation, and the possibility of low liquidity.
CFD Platform Fees
There are small fees that get deducted against your net profits. These include financing fees in some situations (eg. interest rates, overnight fees), and commission fees in some situations.
These commission fees don’t always exist for commodities or sometimes even forex pairs. But brokers normally do charge stock commissions. For instance, CMC Markets, a UK financial broker, has commission fees that begin from 0.1% for US and Canadian shares. (This works out to just over a penny and-a-half per share.)
Financing charges come into play for long positions. In other words, if you are in a position that lasts overnight, this is seen as an investment (the broker is lending you that money, to hold onto the asset derivative). Financing fees usually take shape as interest charges, per day of the position.
Suppose a trader wants to purchase CFDs in stock for XYZ company. Share prices are £20, and you expect this will grow to £23 per share, which means the spread is £25-£20.
As mentioned above, a 0.1% commission applies to opening and closing of the trade, so that is 0.2% in total. But there is an extra financing fee for overnight holds (which is usually around 2.5% per day + a LIBOR interest rate).
So you purchase 50 units for £20 share, which puts you at a £1,000 investment. Suppose that the market value climbs to £25 in 20 days. Because the starting trade is £1,000 and the closing trade is £1,250, this is £250 profit.
But with factoring commissions which are 0.1% twice over (1,000 / 1,000 x 2), which is £2.00. Let’s say that the total interest rate is 7.5% across 20 days (50 x 25 x 0.075 / 365 = 26p. Because this lasted for 20 days, the total interest charges are 20 x 26p = £5.20).
£250 profit – £2.00 (commissions) – £5.20 (interest) = £242.80.
How Do Stocks & CFDs Differ?
The primary difference between a stock and a contract for difference is ownership. When you push the stock directly, you have ownership of the underlying asset proportionately, through shares. When you buy a stock, you pay the full price of each share. You gain certain ownership rights in context, such as dividends.
The secondary difference is leverage. CFD contracts let you take a position on a stock’s price without directly trading the asset. This detachment lets you leverage some of the broker’s capital to claim a share. Less upfront capital is needed. Traders do not use financial exchanges for this. And you can bet against the market, or for the market, across a wide range of vehicles.
How Risky Are CFDs?
High: while the potential benefits are great, this goes in either direction. Risks include liquidity, margins, markets, and brokers. This industry has fewer regulations and there is the possibility of losing more money than was invested in the initial trade.
How Do You Trade CFDs?
Contracts for differences are traded using OTC transactions. This happens in two trades. The first trade creates the contractual position. And the second closes that contract.
- ✔️ If a CFD was opened via a Buy order on a security (eg. purchasing a commodity), then you’ll need to sell that order in order to close the CFD. This is vice versa if the first order was to Sell.
- ✔️ Your profits or losses are calculated as the difference between the two values (opening CFD value and closing CFD value) minus commissions. Note that this means the broker is covered for losses, but lets you have profits for a tiny commission cut.