Risk Warning: Your Capital is at Risk.
CFDs are popular trading instruments that allow traders to speculate on the price movements of assets, like gold or oil, without having to buy the underlying asset. In the case of commodities like gold and oil, that also means not having to take delivery of the commodity and store them.
Contents
Best CFD Brokers In Australia
Here is an overview of CFD brokers supervised by ASIC (Australian Securities and Investments Commission) and with an ABN/ASFL number, meaning they are able to legally onboard Australian traders.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
How Do CFDs Work?
CFDs – contracts for difference – are a financial instrument that allows traders to speculate on the price movements of an underlying asset, like gold or oil, without taking physical ownership. The typical CFD trader is looking to trade the market short term with a CFD position, rather than taking a long term position as their trading strategy.
Let’s take crude oil, for instance, and compare the difference between buying physical crude oil vs trading crude oil CFDs:
| Buying Crude Oil | Trading on Crude Oil CFDs |
|---|---|
| If a trader wants to purchase crude oil and then trade it, they’ll need a place to store it and a means of shipping it. | Storing and shipping costs are unnecessary because you’re not actually purchasing or selling the oil itself. |
With CFDs, a trader is making a wager about whether the price of crude oil (or another underlying asset) will increase or decrease over an agreed-upon period of time.
The amount of this wager, the direction of the price movement (up or down), and the time period are written into a contract between a trader and a CFD broker.
When the time period for the CFD expires, the trader reaps a profit or suffers a loss, depending on whether the price change they predicted comes true or not. For instance, if you want to start share trading, you can do so via CFDs, but you will not own the shares. You just speculate on the price movement.
Be sure to check out whether you need to pay tax on CFD profits as an Australian trader.
How Does Leverage Work?
A critical part of understanding how CFDs work is leverage – a way in which the broker multiplies a trader’s available wager.
Through a ‘loan’, a CFD broker can underwrite much larger trades than a trader could afford with cash funds.
Here’s an example of how leverage works:
Example: A trader has $400 in funds, crude oil is trading at $40 per barrel, and the leverage offered by a broker is 1:10.
- Without leverage – A trader can only speculate on 10 barrels of oil.
- With 1:10 leverage – A trader can speculate on 100 barrels of oil.
Leverage amplifies both gains and losses. If you take a long position in a falling market, for example, your leveraged CFD position can rapidly turn against you.
How Does Margin Work?
If leverage sounds similar to a “loan,” that’s because it amounts to CFD broker financing for the contract duration of the CFD. The “loan” part of leverage is called margin.
In the oil CFD trading example above, the trader is borrowing $3,600 on margin from the broker for a trade: $4000 worth of oil CFDs purchased for $400. Margin requirements differ greatly from CFD broker to broker, from market to market – and sometimes even from minute to minute during a crisis where falling markets are spreading panic.
Just like with a loan, a trader must have sufficient collateral to trade on margin. In the case of a CFD broker, that collateral comes from a trader’s equity.
It’s important to understand that a trader cannot make transactions that exceed their margin amount.
How to Choose a CFD Broker
Here’s a detailed explanation of key aspects to consider when you choose a CFD broker specifically for Australians. (see our international CFD Broker guide if you are outside of Australia)
Is The Broker Regulated To Operate In Australia?
A regulated CFD broker in Australia is licensed by the Australian Securities and Investments Commission (ASIC) — this is the first thing you ought to check.
Government oversight agencies and independent organizations like ASIC tend to provide customer safeguards such as:
- Segregating customer trading funds in separate accounts
- Submitting regular audits to regulators and
- Maintaining adequate capitalization.
If a CFD broker firm fails to adhere to a regulator’s standards, the regulator can levy fines or even revoke a firm’s license.
Australian CFD Brokers Are Regulated By ASIC
Australian Securities and Investments Commission (ASIC) began operating in 1991, preceded by the National Companies and Securities Commission (NCSC) and other Corporate Affairs offices in particular regions.
ASIC is an independent Australian Government body and regulates financial services, consumer credits, as well as financial markets.
ASIC is held accountable by the Australian Treasury and the Australian Government.
Traders who transact with an ASIC-licensed broker are covered and are to abide under several administrated laws under which ASIC functions. Such law is the National Credit Act and the ASIC Act.
ASIC recognizes other relevant Australian financial regulators as the ACCC, AFP, AFSA, APRA, and ASX, among others.
Are CFDs Taxable in Australia?
As an Australian taxpayer, you may be liable to pay Goods and Services Tax (GST) on traded commodities. Additionally, commodity derivatives contracts may fall under the Taxation of Financial Arrangements (TOFA) guidelines.
ASIC reports trading activity to the Australian Treasury. Such activity can include derivatives with underlying commodities like contracts-for-difference (CFDs), futures, options, or physical transactions with products like precious metal bullions.
Opening an account with an unregulated CFD broker is extremely risky. Most legitimate platforms in Australia are ASIC-licensed brokers. For more information about avoiding brokerage scams, see our tips on Avoiding Scams.
What Platforms Are Available?
The best CFD platforms tend to offer fast-loading, real-time charting, and quotes with a broad range of technical analysis tools. Popular CFD providers in Australia offer this on both mobile and desktop.
Some CFD brokers also incorporate:
- Copy-trading: the ability to mimic the trades of others on the platform
- Economic calendars
- Financial news feeds
- Drawing tools, so you can highlight areas of your technical analyses.
Mobile Trading
Since the majority of people trade on the go, a key consideration in choosing a CFD broker is the quality of the mobile trading app.
- Is it easy to execute trades on the go?
- Does it have all the features of the desktop app?
- Is the app fast?
- Is the app available for your phone’s mobile operating system (e.g. iOS, Android, etc)?
- Does the brokerage regularly update and improve the mobile platform?
This screenshot is only an illustration. Current market prices can be found on the provider website. Please note, this is an example – not a recommendation.
CFD Broker Mobile Features Comparison
Proprietary, MT4, and MT5 Trading Platforms
Many brokers offer the popular MetaTrader 4 (MT4) or MetaTrader 5 (MT5) platforms.
Some CFD providers like eToro and Plus500 have their own proprietary trading platforms either instead of or in addition to the MetaTrader apps. These platforms may work via your web browser or also as downloadable desktop software.
CFD Broker Desktop Platforms Comparison
This screenshot is only an illustration. Current market prices can be found on the provider website.
What Are the Requirements to Open An CFD Trading Account?
Check the CFD broker’s available account types to make sure they have one that suits your needs. Common account types include:
| Account Type | Description | Prevalence |
|---|---|---|
| Standard | A retail client with a brokerage that allows CFD trading. | All retail brokers offer these account types. |
| Demo | A way to try out a broker’s platform or practice trading using “play money.” | Most brokers offer demo accounts, but many of them have expiry periods. |
| Islamic | Halal (swap-free) accounts for traders who follow Sharia law | Some brokers offer these accounts. Contact the broker to be sure. |
| Professional | Designed for high-volume day traders. | Some brokers offer these accounts with strict funding and volume minimums. |
Requirements to open a CFD account vary by broker and account type, but usually involve:
- Proof of identity – A government-issued picture ID like a passport or Australian drivers’ license.
- Proof of address – A bill, Australian bank statement, or other formal documentation to prove your residential status in Australia.
- Account funding – Minimum account balances can range from 01 to $500 for standard retail clients. Islamic accounts may require higher balances. Day trading account minimums start around $25,000.
How Can I Deposit & Withdraw Funds?
Factors to consider:
- Deposit sources – Most Aussie CFD brokers accept wire transfers and credit card funding. However, if you wish to transfer money to your account another way (like PayPal or Neteller), make sure the broker supports your preferred method.
- Account minimums – Brokers typically require a set level of funding to be available in your account at all times, to cover losses. Be sure to check our reviews: we note the CFD broker’s minimum account requirements so you’ll have the information handy.
Some common CFD broker payment methods include:
- Credit or debit card
- Wire transfers
- PayPal
- Skrill
- Neteller
- Revolut
Brokers in Australia also tend to support payment services like Apple Pay, Google Pay, iDeal, Trustly, UnionPay, WebMoney, and more.
CFD Broker Account Funding Comparison
| Minimum Deposit | Credit/Debit & Wire | Skrill | PayPal | Neteller | Other Funding Methods | |
|---|---|---|---|---|---|---|
| Plus500 | $100, $500 (wire transfer) | ✅ | ✅ | ✅ | ❌ | iDeal, BPay, Klarna, Giropay, Trustly |
| Etoro | $50 | ✅ | ✅ | ✅ | ✅ | |
| Forex.com | $100 | ✅ | ❌ | ✅ | ❌ | |
| AvaTrade | $100 | ✅ | ✅ | ❌ | ✅ | WebMoney |
| Pepperstone | $200 | ✅ | ✅ | ✅ | ✅ | Poli |
| City Index | $100 | ✅ | ❌ | ✅ | ❌ | |
| Fortrade | $100 | ✅ | ✅ | ❌ | ✅ | |
| CMC Markets | None | ✅ | ❌ | ❌ | ❌ | EFT, Personal cheque |
| FXCM | $50 | ✅ | ✅ | ❌ | ✅ | Union Pay |
| EasyMarkets | $200 (outside EU), $100 (VIP) | ✅ | ✅ | ❌ | ✅ | SoFort, GiroPay, iDeal, WebMoney, BPay, FasaPay, UnionPay, WeChatPay |
| Markets.com | $100 | ✅ | ✅ | ✅ | ✅ | iDeal, Sofort |
| XTB | $250 | ✅ | ✅ | ✅ | ❌ |
What CFD Asset Classes Does The Broker Offer?
What do you want to trade? Today, derivatives traders have a broad range of underlying assets to trade CFDs on:
| Underlying CFD Assets | Examples |
|---|---|
| Commodities | Gold or oil price movements or on commodity futures |
| Currency Pairs | AUD/USD, EUR/USD, GBP/USD |
| Cryptocurrency | BTC, ETH, XRP, SOL, ADA |
| Index Futures | FTSE 100, US 500 |
| Stocks and ETFs | Tesla (TSLA), Facebook (FB), and Amazon (AMZN) |
| Other Assets | Bonds, US Treasuries, Baskets |
Here’s a summary of what asset classes popular CFD brokers offer:
What is the Maximum Leverage?
CFD brokers vary according to whether they offer leverage and how much. Local regulations also affect the amount of leverage that you are allowed to trade with.
For ASIC-covered retail accounts, the maximum leverage is 30:1. Professional trading accounts can offer much higher leverage.
Leverage Limits by Regulatory Agency
Some regulators impose leverage limits on all CFD brokers within their jurisdiction. This means that ASIC-licensed brokers offer a maximum leverage of 30:1 for retail traders.
But this doesn’t mean that all brokers will offer the maximum. Some may have lower limits.
The following table provides a quick comparison of leverages offered by popular brokers in Australia:
Note that as of March, 2021 until September, 2022 or further notice, ASIC placed the following leverage restrictions on all CFD brokers operating in Australia:
- 30:1 on forex majors (maximum leverage)
- 20:1 on forex minors, gold, and major stock indices
- 10:1 on commodities other than gold and minor stock indices
- 2:1 on crypto CFDs
- 5:1 on CFDs with underlying shares or other unmentioned assets
For more about leverage, check our Commodity Trading Guide.
What Fees Does The Broker Charge?
When you choose a CFD broker, the fees charged determine your cost of trading. If you’re venturing into share trading CFDs, you may have to account for higher costs of stock research, so study this table well:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
Spreads and Commissions by Broker
Spreads can be tricky to compare between brokers because they can be charged in different ways:
- As a percentage of the trade amount (e.g. 0.13%)
- As points or pips (percentage-in-point) for forex trades (e.g. 50 pips)
As a rule of thumb, tight spreads mean cheaper trading fees. Commissions may also be charged as a flat fee per transaction or a percentage of the trade amount.
What Market Sentiment and Social Trading Tools Are Available?
Most CFD brokers offer some way to measure market sentiment which can give insights into how the market as a whole is leaning on a particular position.
This screenshot is only an illustration. Current market prices can be found on the provider website. Please note, this is an example – not a recommendation.
For instance, social trading, pioneered by eToro, allows traders to copy the trades of the platform’s most successful traders.
Furthermore, consider available support channels (e.g. phone, email, live chat) and hours. Do they cover your time zone? Do they offer support in your preferred language?
You may want to further review the type of educational materials available CFD broker’s website with respect to your knowledge of trading.
CFD Brokers by Education and Customer Support
What Technical Analysis and Charting Tools Are There?
Technical analysis and charting can help traders make decisions about which positions to take. Some CFD brokers offer more complex analysis features or more robust charting than others.
Some of the most popular analyses include:
- Buying Call Options – A bullish strategy using leverage and is a risk-defined alternative to buying stock.
- Candlestick Basics – An effective way of visualizing price movements.
- Inverted Hammer – Can act as a warning of a potential reversal upward.
- Doji Candlestick – Can signal a possible price trend reversal.
- Relative Strength Index (RSI) – An oscillator that measures current price strength in relation to previous prices.
Does The Broker Offer Enhanced Account Security?
Although all CFD brokers require user passwords and employ back-end security measures, traders wishing for more security should look for a broker that offers Two-Factor Authentication (2FA) as a bare minimum.
2FA can be set up and used via:
- An SMS message sent to your mobile device
- An authenticator app from the likes of Google or Microsoft
- An email message
- A mobile security notification pop-up
- Unique one-time password (OTP)
For example, eToro, Pepperstone, and Plus500 all offer 2FA security.
How Do CFD Brokers Make Money?
CFD brokers make money in two ways:
- On an individual trader’s transactions via fees, spreads, and commissions
- Financing and hedging
Fees, Spreads, and Commissions
These charges allow brokers to make money on trading actions. Note that some CFD brokers may say they charge “no commissions” and still others may say they have “no fees.”
However, they may compensate for these costs in other ways. Check to see what your prospective CFD broker charges for the types of transactions you’re likely to make.
Here are some examples of fees that a CFD broker may charge:
| Monthly Account Fee | Withdrawal Fees | Deposit Fees |
| Inactivity Fee | Borrowing Costs for Shorting | Currency Conversion Fee |
| Overnight Fee | Professional Trader Fees | Other Fees (e.g. swap charges) |
Commissions and Spreads
Typically, a CFD broker charges either spreads or commissions, but in some cases may levy both types of overhead, depending on the trade type or account type.
The spread represents the difference between the Bid and Ask price of an asset. Brokers make money on this price difference.
For example, active day traders may be charged commissions while retail traders are only charged spreads.
Financing and Hedging
the broker may finance traders with borrowed money — we explained this with margins and leverages. Traders’ losses turn into profits for the CFD broker.
Some brokers also use hedging as a means of making money. Hedging is the practice of making trades (usually in the opposite pricing direction) that can offset potential losses.
Here are some common ways that CFD brokers hedge for profit:
- Forwards and Futures Contracts – These contracts “lock-in” the current price of an asset for sale at a later date, regardless of the price at that time. If the later price is greater than the locked-in price, the brokerage firm takes a profit.
- Long/Short Equity – A brokerage may go long or short on instruments that are expected to go in the opposite direction of a client’s trades.
How We Rate CFD Brokers
When we review CFD brokers, we consider the following factors.
| Topic | Questions We Answer | |
|---|---|---|
| #1 | Reputation | What awards, accolades and publicity has the firm received from the trading community? |
| #2 | History | When was the firm founded? What were the major milestones in its history? |
| #3 | Operating Territories | Which countries does the broker serve? |
| #4 | Regulation | Which agencies regulate the broker? How do these agencies help protect customers? |
| #5 | Products | What are the specific financial products traders can trade on the platform? |
| #6 | Accounts | What types of trading accounts are available? What are the features of each type of account? |
| #7 | Fees | What spreads, fees and commissions does the broker charge its customers? |
| #8 | Deposits | What is the minimum deposit required to open an account? What methods can traders use to fund their accounts? What deposit and withdrawal restrictions, if any, does the broker impose on its customers? |
| #9 | Platform | What are the most important features of the trading platform? What does the platform look like? What educational materials (e.g., videos, reports and tutorials) does the broker provide to traders? Does the broker provide demo accounts and, if so, are there restrictions on using these accounts? |
| #10 | Promotions | Does the broker offer promotions such as signup bonuses for new account holders? |
However, there is no single online broker that suits every trader.
Further Reading
Before you start trading CFDs, you may want to research further. You can also check out our other broker and trading guides:
- Commodity Trading: Oil, Gold & Everything in Between
- Brokers In Australia: How and Where to Get Started?
- Stock Brokers: Which Broker Is Best For You?
- The Best Brokers For Options Trading
- Cryptocurrency Broker and Exchange Guide
- Best Forex Brokers: How to Choose a Broker for Forex Trading
- Bullion Dealers: How to Add Precious Metals to Your Portfolio
FAQs
Is CFD trading legal in Australia?
Yes, CFD trading is a legal practice in Australia. However, brokers without approval from the Australian Securities and Investments Commission (ASIC) may not practice in the country. As a trader who resides in Australia, it is your responsibility to ensure that you only transact commodities with brokers accessible from the jurisdiction of Australia — this is to ensure your coverage of ASIC’s consumer protection.
Does ASIC regulate CFDs?
Yes, ASIC regulates CFDs in Australia. In fact, as of March 29, 2021, all ASIC-licensed brokers are required to offer new leverage limits for specific CFD products, like 30:1 on forex majors, 20:1 on forex minors, gold, and major stock indices, 10:1 on commodities other than gold, 2:1 on crypto CFDs, and 5:1 on CFDs with underlying shares or other unmentioned assets. This law is in effect until September 29, 2022, or until further notice.
Where can I trade CFDs in Australia?
There are many CFD brokers in Australia. They are licensed by the Australian Securities and Investments Commission (ASIC) and therefore have a legal right to offer traders services in the country. Examples include Plus500 and eToro. See this list of recommended CFD brokers, or head over to our guide on how to choose a CFD broker.
Is CFD trading safe?
No, CFD trading — or any form of trading — is not “safe.” Trading involves complex risks, that is, factors affecting price movements of assets that retail traders are unaware of or that are unpredictable. Most retail CFD accounts lose money. Only experienced traders should consider trading CFDs.
Is eToro a CFD broker?
Yes, eToro is a CFD broker (though not in the US). eToro offers CFD trading on commodities futures, currencies, indices futures, and shares. They also offer cryptocurrency trading and cryptocurrency-fiat currency trading. In addition, account holders can buy and sell cryptocurrency on eToro without a digital wallet.
eToro is fully regulated by CySEC, FCA, and ASIC.
What is the difference between CFD trading and forex trading?
CFD trading and forex (FX) trading differ in terms of the underlying assets you are trading on and the nature of the contracts. When you are trading in the foreign exchange (forex) market, you are trading currency pairs only. CFD contracts are available on a wide range of asset classes, including forex, commodities, indices, stocks, ETFs, and events.
Unlike CFDs, forex trading offers the opportunity to benefit from interest rates associated with currencies and it is legal in the US.
You can also trade spot metals in the forex market because they are considered a form of currency. For example, you can trade gold, silver, platinum, or palladium against fiat currencies. You can also trade metal pairs, such as gold vs. silver (XAU/XAG).
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
Credits: Originally written by Lawrence Pines. Major updates by Natalie Mootz and with contributions from the Commodity.com editorial team.
