If you’re planning to invest in CFDs, then choosing a broker is probably one of the most important decisions that you’ll make. A good broker has an excellent trading platform and offers a wide range of financial instruments, and provides its traders with all the necessary information they need to assess their performance and grow their capital.
The best brokers are transparent and have a global presence, but some fail to live up to these expectations. Saxo Bank has great brokers available to help with your CFD trading journey.
What to Look at to Ensure You Choose a Good Broker?
1. Check if ASIC Licenses Them
In Australia, any brokerage that handles over AUD 3 million in client transactions every year must be regulated by the Australian Securities and Investments Commission (ASIC). If you are not sure whether ASIC regulates a broker, check the list of licensed financial services companies on their website to find out.
2. Look at Their Trading Platforms and Offers
A good broker will offer many different trading platforms for its traders. These include Metatrader 4 (MT4), cTrader, and FX Trader. Ensure the platform is user-friendly and has all the features you might need for your investment strategy, including charting tools, price alerts, portfolio management tools, and mobile applications. You should also ask the broker what kind of CFDs they offer: forex, indices, commodities, treasuries and stocks – among others.
3. Determine How Well You Understand Their Offer
Before committing to a broker, you must understand everything about their offer. Read the company’s FAQs and terms of service; if you do not fully grasp why they are doing something or how they operate, don’t trade with them. Discovering this information after investing your money will be too late.
4. Find out About Any Additional Costs Associated with Trading CFDs
Some brokers charge an extra fee for withdrawing funds from your account; others may even levy additional fees on top of any losses you incur due to unprofitable trades. The bottom line is that there should always be some form of the cost associated with opening and closing positions – but these should be limited and reasonable.
5. Check the background of the Broker’s Management Team, Directors and Advisers
For a company to succeed, it has to have good leadership: this is why the background of its management team and directors is critical. Take some time to research whether these people have been involved in past business scandals. Also, look them up on Google and see what comes up.
This will give you an idea of any potential red flags that may arise further down the road. While for some beginners starting with no knowledge about such things can be intimidating, there are several who (already having experience) prefer not to use brokers with shady backgrounds or new ones who quickly disappear after a few months of operation.
6. Check Their Communication and Hours of Operation
Good brokers provide 24/7 customer support and constant updates on service outages. You can quickly determine this by checking whether they operate a live chat system; if they don’t, then the chances are that they’re not customer-friendly. Also, if you prefer to trade after regular working hours (for example, at night or during the weekend), make sure that the broker will not cut your connection as soon as their trading platform goes offline.
7. Find Out About Their Trading Conditions
To begin with, avoid any brokers who offer only 0% commissions – it’s too good to be true. Instead, look for those offering competitive commission rates: usually, anything below $10/trade or less than $0.1/pip is quite reasonable.
In Conclusion
Also, brokers should not levy any hidden costs; these may include the spread (the difference between the buy and sell prices), overnight swap rates, deposit fees, withdrawal fees, margin call fees (the fee charged when your account equity falls below a certain level set by the broker), and irrational market pricing (when traders are forced to pay more on some markets than on others regardless of their size). Finally, make sure that your broker provides all-inclusive margins; this means that you will never get hit with any additional commissions or unexpected extra costs during trading.