Forex and CFDs are one of the ways anyone interested in online trading can reach every corner of the market. While usually traders need to contact big stock brokers and banks if they want to speculate on stocks and other financial assets, forex and CFD brokers offer a good alternative to gain access to the market without the need to have a huge starting capital and without high fees some brokerages request.
Now trading financial instruments based on prices of underlying assets is easy with web based platforms and low minimum deposits offered by licensed forex and CFDs brokers. We have compiled a list of those we consider best and ranked them for you! Visit the website or read the review below.
If you want to trade any asset, it is broker’s job to ensure you can execute orders to buy and sell on the market. For this, the broker will take a fee. With derivatives, like forex contracts and CFDs, trading is executed over online platforms and online brokers. Since these derivatives do not require possession of the assets, online brokers can offer easy and fast access to anyone, and more importantly, with much lower prices. Forex and CFDs broker is a company that uses online market infrastructure to offer its customers – traders, to trade forex contracts and contracts for difference (CFDs).
In order to start trading, customers will have to create an account. The registration is painless and free. Usually brokers also offer account creation through Facebook, so there isn’t even need to type in all your personal info. After the account was created, trader can see the platform and other parts of the user control center. All forex and CFDs brokers offer a no deposit demo account traders can use before opening a full live account.
If the trader wants to trade real money immediately, she needs to deposit funds first on the trading account of the broker. This account with the broker holds the money that will be used to execute trades.
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Generally, one can start trading already with the minimum deposit, which varies between brokers, but can start as low as $10. However, in order to get a more complete service, it pays to take a look at premium accounts which bundle a set of interesting trading services like premium support, personal account manager, trading recommendations and signals, upgraded bonus features, additional market research daily and more. These accounts can start from $500 and go over $20000 in some cases. They are usually called “silver”, “gold”, “platinum”, “diamond” and so on to indicate they command better service than the basic accounts. In some cases, they bring more leverage, lower fees or faster withdrawals.
The deposit itself is done through the platform. Obviously, the trader will select the option to deposit money onto the trading account and then choose the amount and the payment method. fastest and cheapest payment methods are the e-wallets, like Skrill and Neteller and Paypal., while one can also use classic payment methods like bank wire or credit and debit cards.
As mentioned, minimum deposit with forex and CFDs brokers depends on the broker. Some brokers, like XM have minimum deposit of $5, while others are mid-range of $100, like Trade.com. With AvaTrade it is $100, however there one can trade and use social trading platform. This seems to be the trend lately. Many brokers are integrating all kinds of instruments into their platforms.
Demo account is a special type of the account where, most of the time, traders do not need to deposit any money in order to test the platform. One simply selects the “demo” option when creating the account and soon she can trade on a real platform, but with virtual money. This money is not real so it cannot be paid out, however, the experience is real enough for most people to figure out how platform works and if forex and CFDs trading is something they want to pursue.
Trading platform is the software developed solely for the purpose of trading. It includes chart analysis, ways to place orders and overview of the account and the portfolio. Platforms come in various layouts and forms. The most popular forex trading platforms are MetaTrader 4 and MetaTrader 5. Metatrader is a standalone piece of software that needs to be downloaded and installed. If you have Mac or PC, there exist a version of the MetaTrader, just make sure the broker you are planning to use offers the version you want. Other platforms are Sirix, JForex and some brokers also have proprietary trading software. Plus500 offers their own system.
Some brokers will charge fees with every trade you make. They are usually defined as % of the trade. Others will waive the fees, however, they will incur a cost on the trader through spreads. Spread is the difference between bid and ask price – the price you pay for an asset and the price you can sell the contract for. This difference helps cover broker’s operating costs. If you are trying to avoid paying too much to the broker – look at spreads. Brokers with lower spreads will then cost less. You can also trade zero spread account – in this case a commission per trade is paid. These kind of accounts are usually interesting to big raders who want to remove cost as share of their trade since they have large volumes.
Some of them will offer higher, albeit fixed spreads that you always pay, while others have variable fees that change with the market and can go either way. Your selection will depend on your own preference, but rule of thumb is to try to find broker with as lowest spreads as possible.
Leverage is an amazing tool that enables forex traders or CFD traders to use more money per trade than they would otherwise. Thereby the only limit is the margin, the remaining money on their account that guarantees in case of loss. Leverage will enable more profit in case of correct price prediction, so this is why it is extremely interesting to more advanced traders who also have experience in risk management. If you are really sure about some trade, maybe you want to put as much money as possible to gain from the prediction. However, be warned that leverage is a double-edged sword and that beginners should not consider leverage as determining factor when deciding which broker to choose.
Can I trade Forex and CFDs from my New Zealand?
Since online trading literally transcends borders, traders from the most of the world’s countries probably will have opportunity to try trading these instruments – so New Zealanders will have no issue depositing with any broker. In Australia (ASIC), New Zealand (FSB), EU (Cyprus-CYSEC and FCA UK) the authorities have already recognized this type of trading. Other important markets are South Africa, China, Japan. When choosing a broker, got to the live chat of the broker and ask the support agent if the broker accepts traders from New Zealand, even though most of them do.
Why should I use a licensed broker?
Licensed or regulated CFDs brokers are those companies who took time to comply with the governments standard of customer protection in order to make sure they are not scamming their clients and stealing their money. Many people are not always sure what forex and CFD trading means. Many unregulated brokers out there deceive customers that it is easy to earn money trading citing fake claims of huge profits for their clients. Regulated forex broker always needs to state the risks correctly, needs to keep customer’s money safe, needs to have a reserve in order to be able to pay out their customers when the business is not doing well. This way traders need to worry about trading and proper analysis and education, knowing their money is not in the hands of crooks that have fake headquarters and employ remote sales teams that use unfair practices to lure customers.