CFD Brokers
The best CFD brokers in the UK facilitate the buying and selling of ‘Contracts For Difference’. CFDs allow traders to speculate on the price movements of an asset – both going up, or down (long or short). Often offered with leverage (or ‘on margin’), they give UK investors the ability to take positions on stocks, forex, commodities or indices. Read this guide to find the best UK CFD trading platform in 2022.
UK CFD Brokers List
What is a CFD Broker?
A CFD broker sells derivatives, as opposed to the asset itself. A CFD is a contract between broker and trader to pay the difference between the strike price of an underlying asset and the value at the close of the trade. Fees, platforms, analysis tools, regulatory status and the range of assets varies between brokers, so how would a trader properly compare their CFD trading platforms? Read on to learn how to find the best UK CFD brokers.
Contracts For Difference Defined
A Contract For Difference is an agreement between a brokerage and an individual trader to exchange the difference in the value of an asset (e.g gold, crude oil, or Lloyds shares) between the strike price and the expiry price.
A CFD is a form of derivative, meaning the underlying asset is not brought and sold, but the contract still allows traders to speculate on price movements. Since the asset itself is not owned, this has some key benefits. For example, for commodities, there is no delivery of assets, so you won’t receive your crude oil in the post. When trading stocks, no dividend is directly payable, but many platforms will still pass on the profits. This balances any drop in value once a stock goes ex-dividend.
Another key element of a CFD is the lack of expiry date. Some derivatives, like futures and options, expire on a pre-determined date. With CFDs, the trader decides when to close the position and can do so at any point.
CFD brokers in the UK offer opportunities on a wide range of assets, such as equities, indices, commodities and forex.
How To Compare CFD Brokers In The UK
There are many CFD platforms in the UK, so how should you compare them? And how might you identify the best CFD broker or top platform?
In short – there is no single brokerage that will represent the best choice for all investors – it varies. Some investors may perform a broker comparison on leverage rates alone, while others might review stock CFDs offered vs. trading platforms and fee structure. Look at your specific requirements and risk appetite before taking the plunge
Below are the top 10 key comparison features or ‘rules’ by which you can judge a particular broker-dealer. Use these factors to build a broker ranking and determine which CFD broker in the UK is right for you.
Spread Or Commission
The spread or commission impacts every trade, and every trader. It is the ‘cost’ of making the trade. If these costs are too high, they’ll eat into the profitability. Therefore, when comparing CFD brokers in the UK, the lowest spreads is often a crucial factor.
The spread will differ from broker to broker – but also asset to asset. So, a broker may have the smallest spread for forex pairs but may offer steep stock spreads.
When comparing based on the spread, ensure you are checking the cost on the assets you will be working with most.
The method for charging spreads can either be fixed or variable. For example, some dedicated forex CFD brokers with variable spreads may be able to offer a zero pip spread on a major pair while trade volume is high, but have uncompetitive spreads during less liquid hours. A fixed spread broker may thus be more lucrative at such hours, but profits would be limited at liquid times.
Spreads are not the only CFD brokerage fees; some brokers may charge commissions, transaction processing fees and overnight holding fees.
Our CFD broker comparison table lists the most popular asset in each category and the spread for that asset. Remember also that a demo account is a great way to check spreads – particularly where they are variable.
Margin & Leverage
The margin is the percentage of the overall trade value that a trader must deposit (and commit) in order to open a trade.
So a £1,000 trade on the GBP/USD currency pair may only require a deposit of £50. The position has exposed the trader to £1,000 worth of risk – hence the warning on CFD broker’s websites “losses can exceed your initial deposit“.
Margin is also referred to as ‘leverage’. Where this is the case, the leverage is often illustrated in terms of multiples – so 1:20 would indicate leverage of 20 times the deposit. The equivalent margin would be 5%.
So, when comparing the best CFD brokers in the UK, remember that a low margin requires smaller deposits. This will be important to some traders, but less so to others. Note, trading with high leverage means higher risk.
Platform
Many investors focus closely on fees and forget to consider the usability of the platform itself. This, however, could be a mistake.
Most platforms will have similar functions, for example, they should all have multiple time charts, a selection of order limits and the ability to trade various assets. But it’s also key that you’re operating a platform that is easy-to-use and intuitive for you personally. It is not uncommon for traders to miss prices, or worse, make mistakes when executing because the platform did not suit them.
Demo accounts are the perfect way to test the platform before investing real funds. The best CFD brokers in the UK will offer this solution free of charge.
Some broker platforms are known as white label platforms, which means it has been developed and created by another company that allows the broker to advertise the technology as their own. These can be better than bespoke proprietary platforms as they are better established, though the use of them can increase broker costs.
MetaTrader 5 (MT5) platform
Features (Charts, Technical Analysis, Research)
If you plan to research your trades on the same CFD platform where you ultimately trade, you’ll want to ensure it has the best research tools available. Charting standards do differ significantly.
Some CFD brokers in the UK offer outstanding charting facilities, with a range of technical analysis tools that will satisfy even the most ardent analysis experts.
For those that prefer fundamental analysis, the latest news reports may also be available on some platforms.
On the other hand, some CFD brokers in the UK assume traders will have already researched their trades elsewhere, and offer pretty basic charts and little in the way of analysis tools. If this is important to you, ensure your CFD broker satisfies this need.
Deposit & Withdrawals
This factor is often missed by new traders. But for those who’ve experienced past issues moving between accounts, it could well be top of the list. Firstly, check your preferred CFD broker in the UK offers the method for funding and withdrawing that you’re after, such as PayPal, bank transfer for e-wallets like Neteller and Skrill. Remember, anti-money laundering obligations may mean you’ll need to withdraw to the same account you deposited.
It’s also worth checking the processing times for each method. Instant deposits and withdrawal are preferable, but not always possible. In addition, check what the minimum deposit requirement is. For beginners, in particular, CFD platforms with low deposit thresholds reduce the barriers to entry.
Regulation
There are many regulated CFD brokers in the UK, so this should be a top priority for investors.
Since contracts for difference are a financial service, CFD brokers in the UK are required to be regulated by the Financial Conduct Authority (FCA), in London.
Some platforms are not based in the UK but still advertise their services to British traders. These include global brokers licenced in other jurisdictions with stringent authorities, such as Europe or Australia, but also offshore online brokers that tend to reference regulation by Vanuatu Financial Services Commission (VFSC) or the International Financial Services Commission (IFSC) in Belize.
Regardless of your experience level or capital, when you’re looking for CFD brokers in the UK, we’d recommend you select one licensed with the FCA. This will bring with it several protections, from limits on leverage rates to negative balance protection and investor compensation schemes.
As it stands, the UK is part of the European regulation community, which means that British clients that use brokers from the mainland who are regulated by their local authority are covered by the FCA’s legislation. However, the future of such an agreement is unclear in the wake of Brexit.
Support & Education
Many of the best CFD brokers in the UK will offer educational material to their clients. These might include ebooks, webinars or even one-to-one training.
It is worth noting that CFD platforms make money when traders open positions. This means most educational materials will encourage trade execution. Overtrading is a frequent issue for many traders, particularly beginners. Those just starting out are also those most likely to look for learning tools. Therefore, it is recommended that you vary your knowledge base. CFD platforms are a good place to start, but wide research is vital. Investing.co.uk has lots of educational materials – try our Day Trading, MetaTrader 4, and Forex Guides as a starting point.
Finally, customer support may be reassuring for some – others may not envisage ever using it. Clients who prefer to contact their broker regularly should check the availability and contact methods for the support desk. Many firms offer a high standard of support, particularly the regulated, well-established CFD platforms in the UK.
Bonuses
A bonus or promotional code might also be a factor in a broker decision. However, these should rank low in the order of importance.
Crucially, regulated CFD brokers in the UK will not provide any financial incentives for joining, since these are banned by the FCA.
Traders looking for bonuses should always read the terms and conditions, as these can sometimes contain disappointing downsides. For example, you’re generally restricted from withdrawing profits made from no deposit bonuses. If this profit is in the same account as earnings from funded trades, CFD platforms may prevent you from withdrawing. For this reason, the FCA has banned these types of incentives, as they persuade investors to place positions that might not be in their best interest.
Asset lists
A broader range of tradable assets does not always mean a better broker. However, if a specific asset is important for your strategy – and that asset is not available elsewhere – then it might be a deal-breaker. The largest, more established CFD brokers in the UK tend to have a wider range of assets. If you’re looking for particular financial instruments or markets, check CFD platforms offer them before funding your account.
Most CFD brokers in the UK will offer them for stocks, indices and forex, while those with more expansive asset lists will also allow crypto, commodity and ETFs.
Brokers may also have different trade size limits on their assets, which can limit market access for clients with less capital. For such investors, look out for CFD brokers in the UK supporting micro lots.
Business Model
There are several types of CFD brokers, each with different methods of executing orders, providing liquidity and making their money. Dealing desk (DD) brokers, also called market makers, are perhaps the most common type of broker. These firms act as the counterparty to all of your orders, taking your losses as their profits and losing money when you invest successfully. Essentially, market makers do trade against their clients, which some investors consider dishonest.
Non-dealing desk brokers come in three forms, straight-through processing (STP), direct market access (DMA) and electronic communications network (ECN) brokers. DMA brokers place your orders directly onto the respective market, often resulting in the tightest spreads and the lowest probability of slippage and requotes. STP brokers have a fully automated system for immediate order processing on the interbank market with zero broker intervention. Finally, ECN brokers have a different routing approach, acting more as a liquidity hub than a tool to find a specific liquidity provider.
STP and DMA brokerage models are often best suited to those who wish to invest at times of high volatility and market volume, such as for scalping or news strategies, as slippage is greatly decreased. The benefit of ECN brokers is more focused on their liquidity provision, which is often superior as they are connected to a network of liquidity providers.
There are also hybrid brokerage models that combine several of the above order executions to specialise the service they provide their clients. For example, an ECN-market maker hybrid broker may immediately fill the other side of your position and then decide whether to hedge their risk by filing it on an exchange or taking it on themselves.
Other Factors
Some other things that enable people to compare CFD brokers in the UK might include the quality and availability of a mobile application. Investing on the move will be important to many traders – others will be happy to stick to their desktop.
In general, most apps been developed to a very high standard. While some firms may have delivered a poor mobile service in the past, they simply cannot survive without one now.
Users of iOS, Android will always be catered for. Those with less common devices may have to look further afield.
MetaTrader mobile
Remember: Traders can use multiple CFD brokers in the UK to pick and choose those with the best terms for specific trades or assets.
Summary Of Broker Comparison Tips
- Consider your own methods, required assets and frequency
- Shortlist the CFD brokers in the UK that suit your strategy
- Pick from the list of regulated CFD brokers in the UK
- Use demo accounts to compare platforms shortlisted
- Open an account, deposit and get trading
Conclusion
Our reviews cover all of the factors mentioned above. Generally, the CFD brokers in the UK listed on our pages provide demo accounts. So traders can take their time, read the detailed review, and try out the platforms themselves before making a choice. Once you have all the information, you can then decide on the best CFD broker in the UK for you.
FAQ
Are UK CFD Brokers Safe?
Yes, CFD brokers in the UK that are regulated by the FCA are considered safe to trade with. The FCA ensures retail traders are protected by imposing certain rules on CFD platforms. For example, CFD brokers in the UK must provide negative balance protection and provide a risk warning on their website.
Which Is The Best CFD Broker In The UK?
The best CFD broker varies depending on your personal requirements. Look out for those that offer a platform suitable for your experience level, the right level of fees for your strategy, as well as solid customer service. Use our list of CFD brokers to find the best one for you.
Do CFD Brokers In The UK Need To Be Regulated?
CFD brokers operating from the UK must be regulated by the Financial Conduct Authority (FCA). There are platforms that operate from other jurisdictions that offer services to UK traders. These may be regulated by other reputable bodies, such as ASIC or CySEC, instead.
Which CFD Brokers Are Suitable For Beginners?
The biggest CFD brokers in the UK can accommodate traders who are new to the game. Beginners should trial the broker’s platform by opening a demo account before investing real funds.
How Do CFD Brokers Work?
CFD brokers offer derivative contracts that allow investors to speculate on the price of an underlying asset. They do not sell the asset itself, but instead, offer the opportunity to profit from a change in its value.
Do CFD Brokers Lose Money?
Not all CFD brokers are effective and run a successful business. Therefore, not all brokerage firms manage to earn the revenue to pay their overheads and may go under. This can be dangerous if unregulated, as client money may be at risk.
Do CFD Brokers Support Hedging?
Yes, hedging is a form of risk management that involves taking out a second position that may mitigate your loss if the first is unsuccessful. CFDs, and other derivatives, are great for hedging as you can take a long or short position on a market.