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CFDs Trading and Brokers

When trading the global markets, specialization means better information and better performance.

What is a CFD?

A CFD (Contract for Difference) is a derivative product that allows investors to trade the direction of any global market (Forex, Equities, Cryptocurrencies, Commodities), without the need of owing any physical units. CFDs are easy-to-trade and offer the opportunity to speculate on the future market movements of a wide variety of underlying assets. 

• By trading CFDs, you can speculate on any financial instrument, without the need to own it
• Trade 24/5 rising or falling markets, choose among a wide variety of trading orders
• Trade via a simple WebTrader, or via the more advanced MT4/MT5 platforms
• Availability of thousands of different financial assets (Forex, Indices, Stocks, Crypto, Commodities, etc.)
• CFD brokers usually don't charge commissions, they charge a trading spread (1 pip minimum)

 

Compare Popular CFD Brokers

These are some regulated CFD brokers offering segregated client bank accounts. All the following companies have been operating in the market for at least 5 years.

CFD BROKER	SAFETY OF FUNDS	TRADING TERMS	PLATFORMS / ASSETS	ACCOUNT INFO	BROKER'S INFO
■ ROBOFOREX » ROBOFOREX WEBSITE   US TRADERS: NO ISLAMIC ACCOUNTS: YES EXECUTION: ECN/STP	REGULATION: IFSC/60/271/TS ACCOUNT SEGREGATION: YES CORPORATE INFO: The broker was founded in 2009 and it is based in Belize CUSTOMER SUPPORT: English Arabic Russian Portuguese Spanish Kazakh Malay Czech	SPREADS EURUSD: 1.0 GBPUSD: 1.4 USDJPY: 1.2 COMMISSIONS: No SCALPING: YES AUTOMATED TRADING: YES SLIPPAGE: 0.3 pip LEVERAGE: 1:30	PLATFORMS: MetaTrader-4, MetaTrader-5, MT4 for iPhone and Android cTrader WebTrader PAMM: NO DEMO: YES FREE VPS: YES RoboForex welcomes scalpers and algorithmic traders ASSETS: 40+ Forex currency Pairs Stocks and stock-indices Precious Metals Energy Assets Soft Commodities Cryptocurrencies	MIN. DEPOSIT: $10 DEPOSIT FUNDS: Credit Cards Bank Wire Skrill Neteller UnionPay Western Union PerfectMoney TRADING PROMOTIONS: Cash Bonus Trading Rebates	KEY POINTS Fast and low-cost trading Free VPS, PAMM Accounts cTrader   ► Open a Real/Demo account with RoboForex   ► Review RoboForex
■ IC MARKETS » IC MARKETS WEBSITE   US TRADERS: NO ISLAMIC ACCOUNTS: YES EXECUTION: ECN / STP	REGULATION: ASIC (Australia -license 335692) ACCOUNT SEGREGATION: YES CORPORATE INFO: The broker was founded in 2007 and it is based in Australia. CUSTOMER SUPPORT: Chinese English French German Italian Japanese Spanish	SPREADS EURUSD: 0.1 GBPUSD: 0.3 USDJPY: 0.5 COMMISSIONS: $7.0 / lot SCALPING: YES AUTOMATED TRADING: YES SLIPPAGE: 0.8 pip LEVERAGE: 1:30	PLATFORMS: MetaTrader-4, MetaTrader-5, MT4 for iPhone and Android, cTrader, Mobile cTrader, cAlgo WebTrader PAMM: YES DEMO: YES FREE VPS: YES (100 round turn lots per calendar month are required) ASSETS: 56 currency pairs 4 major metals Equities (12 index CFDs) Energies (Brent and WTI)	MIN. DEPOSIT: $200 for the MT4 account and $1,000 for the cTrader account FUND METHODS: Bank Wire Credit Card Skrill Webmoney Neteller TRADING PROMOTIONS: Trading Rebates	KEY POINTS Tight Spreads cTrader and cAlgo plus MT4 Low latency   ► Register a Real or Demo ECN Account with IC MARKETS   ► Review IC Markets
■ LQDFX » LQDFX WEBSITE   US TRADERS: NO ISLAMIC ACCOUNTS: YES EXECUTION: ECN	REGULATION: N/A ACCOUNT SEGREGATION: YES CORPORATE INFO: The broker was founded in 2015 and it is based in Malta CUSTOMER SUPPORT: English Arabic Russian French Italian	SPREADS EURUSD: 1.1 GBPUSD: 1.4 USDJPY: 1.2 COMMISSIONS: No SCALPING: YES AUTOMATED TRADING: YES SLIPPAGE: 0.8 pip LEVERAGE: 1:30	PLATFORMS: MetaTrader4, Mobile Traders PAMM: NO DEMO: YES FREE VPS: NO LQDFX welcomes scalpers and algorithmic traders ASSETS: 70 Forex Pairs Dow Jones, Nasdaq, S&P, and 9 more stock market indices Gold, Silver, and Copper COCOA, COFFEE, and SOYBEAN Crude and Natural gas	MIN. DEPOSIT: $20 DEPOSIT FUNDS: Credit Cards Bank Wire Skrill WebMoney Neteller FasaPay UnionPay UPaid Card TRADING PROMOTIONS: 100% Cash Bonus The minimum deposit to claim the bonus is $250 You can withdraw the bonus, after trading it ($5 per full traded round lot).	KEY POINTS Good asset index 100% welcome bonus that you can withdraw   ► Open a Real/Demo account with LQDFX   ► Review LQDFX

 

 

How do CFDs really work?

 

A CFD contract is designed to track the price movements of any financial instrument. That means that a CFD contract is able to mirror the price fluctuations of almost every traded financial asset. When a new position is opened, the profit/loss is determined based on the price movement of the underlying asset.

A CFD trade can close in three ways:

(i) If the price of the underlying financial instrument touches the take-profit price (pre-determined profit)

(ii) If the price of the underlying financial instrument touches the stop-loss price (pre-determined loss)

(iii) The trade can close also manually by the trader anytime he wants to

 

Example of a CFD Trade on EURUSD (Calculating the Profit/Loss)

For example, it is assumed that a Forex trader buys 1 lot of EURUSD at 1.1002, and later sells it at 1.1022

• Initially, EURUSD is bought and sold at 1.1000 / 1.1002 (bid/ask)
• In order to buy 1 standard lot (100,000 USD of value), the trader needs to have about $500 in his account (that means leverage 200:1)
• As the position is opened the trader notices that his account is charged with about $20. This is due to the difference between ask and bid (in our example 1.1000 / 1.1002, which means 2 pips spread)
• As EURUSD moves 20 pips higher, the trader decides to close his position
• The new Ask/Bid is 1.1022 / 1.1024
• The trader closes his position at 1.1022
• The profit is calculated as 1.1022 – 1.1002 = 20 pips
• 20 pips of profit equal about $200

 

CFDs and Cost of Trading

 

These are all the fees and commissions charged by CFD brokers that you should know about before starting a new account.

 

(1) Trading Spreads

Where can you find information about the trading spreads? at each CFD broker's website or via 3rd parties specialized in comparing spreads

The spread is the difference between ask and bid. The great majority of CFD brokers charge trading spreads without any trading commissions. The minimum spread when trading CFDs is about 1.0 pip on EURUSD. A clever way to reduce your trading cost is to join a trading rebate plan.

Be aware of Re-Quotes (if you plan to trade intraday)

A re-quote means that when you open a trade position the price you pay is worst than the one you have entered. That means extra cost. Re-quotes usually occur in fast-moving markets, such as markets after important news announcements. You can protect your account from re-quotes by placing a pending order (limit order) and not an instant execution order. When you place a limit order, you state that you are willing to open a trade position at a specific price or better.

(2) Trading Commissions Charged

Where can you find information about the commissions? at each CFD broker's website

CFD brokers usually don't charge trading commissions. When they do, these commissions are calculated on a round-lot basis.

(3) SWAPs / Overnight Financing

Where can you find information about the SWAP rates? at CFD broker's website

• The SWAP rates exist in order to balance the overnight cost of money.
• When you open a long or a short CFD position, it becomes the subject of interest rate charges as any other cash transaction. This is because FIAT money offers different interest rates. The difference in positive/negative rate charges depends on the asset you are trading, and on the direction you are trading.
• The SWAP cost applies every calendar day at the end of each trading day at midnight (according to your broker's server time). The SWAP rate amount is tripled on Wednesdays in order to cover Saturday and Sunday. That means the SWAP rates are applied 365 days per year.
• The SWAP rates can be either positive or negative. For example, if you trade a Forex pair such as AUDUSD or NZDUSD the difference is positive and it is credited to your trading account. If you trade USDZAR the difference is negative and it is removed from your trading account.

Explanation of SWAP Rates in Forex

As currencies are traded in pairs, each time a transaction occurs, one currency is purchased and one currency is sold. There are Forex currencies offering high-interest rates (NZD, AUD, etc.) and other currencies offering low-interest rates (USD, EUR, etc.). When you trade any Forex pair, the difference between the two interest rates may be positive or negative:

(i) If the difference is positive, then a swap amount is credited overnight

(ii) if the difference is negative, then a swap amount is debited overnight

Note, that if you trade commodities or equities, the SWAP rates will be always negative.

TIP: Avoid paying SWAP fees by trading CFDs on Futures

A very smart way to avoid paying SWAP rates is to buy CFDs on Futures. For example, if you buy the USD30 Index via a CFD on Futures you will pay a greater spread but you will not pay any SWAP charge until the contract ends. Usually, CFDs on Futures last 2-3 months and mirror the price movement of the underlying asset exactly the way a simple cash CFD contract mirrors it. If you are a swing or a long-term trader, CFD on Futures is your best weapon to make money.

(4) Funding (Deposit/Withdrawal) Fees

Where can you find information about these fees? Use each CFD broker's live chat service

Funding fees may be charged on deposits and/or withdrawals.

(5) Maintenance/ Inactive Fees

Where can you find information about these fees? Use each CFD broker's live chat service

A few CFD brokers may charge fees for inactive accounts. These fees are called Maintenance/Inactive fees.

 

Some Important Tips When Trading CFDs

 

These are some key tips when you are trading CFDs:

(1) Limit your deposits

• Don't deposit too much in your trading account. Deposit exactly as much as you need to cover your initial positions.

(2) Limit your portfolio risk

• Don't use capital leverage more than 5:1. Capital leverage increases your risk more than the average trader can anticipate.
• Also, don't risk more than 2% on any individual position. If you hold USD10,000 then don't risk more than $200 on any individual trade.

(3) Place small pilot orders

• Pilot orders are very useful if you are a beginner.
• If you want to risk $200 on a single trade, you can open a small pilot position (i.e. 0.01 lot) and check the amount of loss that covers your stop-loss. If you see that the 0.01 lot trade results in a $20 risk then you know that you need to open an additional position of 0.09 in order to risk no more than $200.
• An alternative is to use a demo account and place your pilot orders there before you execute them on your real account.

(4) Trade what you know

• Traders enjoy greater success when they trade assets they already know. Therefore, avoid trading unknown financial instruments, and when you do, use pilot orders.
• Most professional traders are specialized in particular instruments. For example, they may trade only Gold, Crude Oil, US30, or EURUSD. Specialization means better information and better information means better performance.

 

■ CFDs Trading and Brokers

TradingFibonacci.com

 

COMPARE TRADING SIGNAL SYSTEMS

-COMPARE SYSTEMS-

A trading signal can be seen as a sign of an important upcoming market movement. This sign alerts traders to instantly buy or sell the market at an early stage of the market movement.

 

A trade signaling service usually operates as a monthly subscription service. But there are also trading systems that are programmed to generate trade signals based on their complex algorithms. These systems are purchased ones and can be used in unlimited MT4/MT5 accounts.

 

These are some popular MT4/MT5 trading signal generators.

TRADING SYSTEM	ASSETS	SIGNALS / PLATFORMS	DELIVERY METHODS	COST	LINKS
◙ EA BUILDER Create Custom Indicators Create Custom Expert Advisors (EAs) No Programming Skills Needed	■ Foreign Exchange ■ Energy ■ Metals ■ Stocks & Indices	◘ Create custom trading signals ◘ All timeframes ◘ Advances Technical Analysis tools ◘ Money Management ◘ Convert your ideas into Expert Advisors (EAs) ◘ Education (tutorials & videos) ◘ MT4 / MT5 / TradeStation	Email Alert Pop-up alert with sound Push Notification	> Free for creating indicators > 97.00 USD (One-time fee) for creating EAs	» START A FREE ACCOUNT FOR CREATING INDICATORS » REVIEW EA BUILDER
◙ FOREX TRENDY Signal Generator Market Analysis Forex Education	■ Foreign Exchange ■ 34 Forex pairs	◘ Trading signals for beginners ◘ 9 timeframes ◘ Trend Analyzer ◘ Custom Interface ◘ All trading platforms ◘ Recognizing Triangles, Flags, Wedges, and Trendlines	Email Alert Sound Alert	> 37.00 USD / 3-Months	» VISIT HOMEPAGE » REVIEW THE FOREX SYSTEM
◙ FIBO QUANTUM Based on Fibonacci Ratios Entry/Exit signals	■ Foreign Exchange ■ Any Forex Pair in Multiple Timeframes	□ Trades any Forex Pair in Multiple Timeframes (M15, M30, H1, H4, and D1) □ Shows exact points for entering/exit (Includes Take-Profit and Stop-Loss levels) □ Price Volatility Detection □ Multiple Trading Styles and 3 different modes (Conservative, Normal, and Aggressive) □ Never Re-Paints	Email Alert Pop-up alert with sound Push Notification	> 147.00 USD (One-time fee)	» VISIT HOMEPAGE » REVIEW FIBO QUANTUM

More: » Online Brokers

 

Trading Signal Categories

A trading signal which is based on technical analysis can take various forms (intraday, daily, swing signal). These signals are usually triggered by price breakouts, reversal/continuation patterns, etc. But a trading signal can also be generated via the use of fundamental analysis. For example, due to unexpected fundamental changes, the price of gold is expected to move 3-5% higher.

In general, trading signals can be categorized based on their delivery method (manual and automated trading signals).

• Manual Trading Signals

Manual trading signals are delivered via email, SMS, on-screen, or even via Social Media.

• Automated Trading Signals

Automated trading signals are delivered via a copy-trade mechanism on MT4, TradeStation, and similar trade platforms. There are hundreds of automated signal providers online.

 

MORE: » ONLINE FOREX BROKERS COMPARISON

 

■ Trading Signals

TradingFibonacci.com