Risk Warning: Your Capital is at Risk.
Contracts-for-Difference (CFDs) are popular trading instruments that allow traders to speculate on the price movements of financial assets like gold or oil without having to own the underlying asset.
Traders who are residents in South Africa may trade CFDs on assets like commodities, and cryptocurrencies with brokers regulated by the Financial Sector Conduct Authority (FSCA).
In this CFD trading guide, we cover various CFDs offered to South African traders on the likes of international stocks and commodities like precious metals and energies. We also explore whether CFD traders in South Africa are eligible for taxation on profits.
Any broker that offers CFDs to retail and professional clients in Australia is overseen by the Australian Securities and Investments Commission (ASIC). Other derivatives like options are also available for Australian traders.
As of March 2021, ASIC has specified a new set of limitations on what brokers can offer retail traders — you can read more about it here.
We also explain how taxes apply to trading financial instruments like CFDs in Australia.
Whether you’re a retail or a professional trader, you can trade contracts-for-difference (CFDs) in Canada. Any legitimate broker that offers CFDs in Canada is regulated by the Investment Industry Regulatory Organization of Canada (IIROC).
Canadian brokers who offer CFDs must disclose the risk undertaken by traders when transacting CFDs.
A contracts-for-difference is a legal trading instrument in the UK, both for retail and professional traders. Cryptocurrency derivatives, including crypto CFDs, are banned in the UK for retail traders.
Brokers in the UK are regulated by the Financial Conduct Authority (FCA) — find out how the FCA regulates brokers, and what client-consumer protection it offers. We also explain how CFD profits are taxed in the UK.
Are CFDs legal in the US?
No. CFD trading is illegal for US citizens and residents.
Additionally, most CFD brokers don’t accept US citizens or US residents as clients. CFDs are illegal in the US because they are an over-the-counter (OTC) trading product. OTC trading products aren’t listed on regulated exchanges like the New York Stock Exchange (NYSE), bypassing US regulatory bodies.
However, US traders have alternatives such as forex, options and stocks.
Please Note: Availability subject to regulations. Cryptocurrency CFDs are not available to UK retail traders.
How Do CFDs Work?
A Contracts-for-Difference (CFD) is a type of financial product that allows traders to speculate on the price movements of an underlying asset like gold or oil instead of taking physical ownership of the product.
Let’s take crude oil, for example, and compare the difference:
| Purchasing 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 other 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.
Understanding Leverage In Trading
A critical part of understanding how CFDs work is the concept of leverage.
Leverage is a way for a CFD broker to underwrite much larger trades than a trader could otherwise afford. It essentially multiplies a trader’s wager.
Here’s an example of how leverage works:
Example: A trader has $400 dollars in funds, crude oil is trading at $40 USD 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.
Understanding Margin In Trading
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.
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 typically cannot make transactions that exceed their margin amount.
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 (eg, 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
As we explain above, the margin is a method of financing that traders can use in combination with leverage to try for larger profits than they otherwise could afford to make.
The flip side of this financing is that losses are larger, too. Losses for a trader turn into profits for the CFD broker.
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 to Choose a CFD Broker
IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.
You can use the following features to assess whether a CFD broker is right for you. Where applicable, we’ve also included comparison tables for the brokers we’ve reviewed.
Regulation and Reputation
The most important consideration in choosing an online broker is whether it’s regulated by a credible governmental agency with real enforcement powers.
A regulated CFD broker must obtain a license with government oversight agencies and adhere to the rules established by them.
These rules usually include important 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.
How Does The FSCA Regulate CFD Trading In South Africa?
Prior to its 2018 formation, the Financial Sector Conduct Authority (FSCA) was known as the 1990-founded Financial Services Board (FSB). The FSCA is a member of several domestic and international financial securities organizations like the International Organisation of Securities Commissions(IOSCO).
The FCSA oversees businesses that fall under the categories of financial intermediaries, payment providers, banks, insurers, and several other financial service providers in South Africa.
Brokers licensed under the FSCA are classed as over-the-counter derivatives providers (ODPs) and must report any trade that’s classed as a commodity derivative, credit derivative, foreign exchange derivative, equity derivative, or an interest rate derivative — all of which may involve CFDs.
Are Profits From CFD Trading Taxable In South Africa?
CFDs traded by both retail and institutional traders may be classed as taxable income by the South African Revenue Service (SARS).
Capital gains tax in South Africa is applicable to instances where an asset is disposed of for a greater value than what it was acquired for. The SARS criteria for assets defines ‘contractual rights’ as an asset, which would likely include CFDs.
That said, profits or losses from trades, as well as ‘investment income’ with the given examples of interest and dividends, either privately or as a trust beneficiary, are listed under South Africa’s income tax criteria.
Given that ‘investment income’ may also involve specific investment-related contractual rights, the SARS may either tax profits from derivatives like CFDs as taxable income on marginal rates, or as profits eligible for Capital Gains Tax (CGT) — as to how the SARS differentiates between the applicable tax is unclear.
How Does The ASIC Regulate CFD Trading In Australia?
The Australian Securities and Investments Commission (ASIC) is an independently commissioned organization by the Australian government to oversee financial services providers and protect their clients. This includes brokers that offer CFDs and other derivatives products in Australia.
ASIC was founded in 1998 reports directly to the Australian Treasury. Prior to ASIC, financial operations in the country were overseen by the National Companies and Securities Commission Corporate Affairs offices in local jurisdictions.
As a trader in Australia, you can consult ASIC about issues like banned brokers, claiming lost funds, advice in the event of a financial service provider’s insolvency, and even matters like insurance disputes.
How Are CFDs Taxed In Australia?
Australian traders are subject to taxes when trading CFDs. The Australian Taxation Office (ATO) differentiates spread betting as products with differing cash flow and wider spreads.
The ATO’s TR 2015/15 documentation outlines what defines a CFD, and what defines a CFD specifically on the Australian market. Australian traders are obliged to pay tax on profits from CFDs under section 15-15 of the Income Tax Assessment Act 1997 (ITAA 1997).
However, losses from CFDs can also be claimed as tax deductibles, provided that any potential gains from the CFD contract would have been assessed as tax-eligible under section 15-15 of the ITAA 1997.
How The IIROC & CSA Regulate CFD Trading In Canada
The main regulator of brokers and financial instrument dealers in Canada is the Investment Industry Regulatory Organization of Canada (IIROC). It is a non-profit organization founded in 2008 by the merger of the Investment Dealers Association of Canada (IDA) and Market Regulation Services Inc. (RS).
Any broker that offers CFDs in Canada must be approved by the IIROC and disclose the risks undertaken by CFD traders as a % of average losses in a given timeframe. The IIROC has five publicly disclosed rule books, two of the main ones being the IIROC Dealer Member and the Universal Market Integrity rulebooks.
As with the SEC in the US, Canada’s main securities agency is the Canadian Securities Administration (CSA), which oversees all other regional securities organizations in the country.
The CSA and the IIROC are presently working together to create regulatory guidelines to address reporting and auditing of cryptocurrency transactions on the Canadian financial market.
Are CFD Profits Taxed By The Canadian Revenue Agency?
Canadian traders must refer to tax guidelines on profits and losses from the Canadian Revenue Agency (CRA).
The official CRA website does not mention taxes on CFDs per se, though states that traders are subject to taxes on certain eligible dividends, all foreign interest and dividends, and other securities like treasury bills and domestic savings bonds.
How US Trading Is Regulated By The SEC & FINRA
While CFDs are not available in the US, other securities like commodities and stocks are actively traded, as well as derivative securities like options and futures. Any business that operates as a transaction medium or direct buyer and seller of securities is classed as a broker-dealer and falls under the regulatory guidelines of the Securities and Exchange Commission (SEC).
The SEC’s main regulatory guideline is the V.A Antifraud Provisions section that obliges all broker-dealers to comply with the SEC’s duty of fair dealing, suitability requirements, a duty of best execution, customer confirmation rules, disclosure of credit terms, short-sale restrictions, and trading during offerings.
Another acting regulator in the US is the Financial Industry Regulation Authority (FINRA), a non-profit watchdog-like organization. FINRA oversees US brokers to detect any misconduct as active market participants.
Taxes On Trading Profits In The US
US traders are subject to tax on profits from dividends, on both domestic and foreign company shares. Taxes also apply to profits from interest, with the exception of profits from interest on bonds.
When US traders profit via mutual funds, exchange-traded funds, taxes are still applicable under Capital Gains Tax measures.
The most up-to-date tax requirements for US traders are provided by the IRS as well as tax advisors who specialize in US investment taxes.
UK Brokers Are Regulated By The Financial Conduct Authority (FCA)
The Financial Conduct Authority (FCA) was founded in 2013, preceded by the Financial Services Authority (FSA). The FCA oversees over 50,000 UK business operations with the aim to regulate financial services in the interest of consumers and clients.
The FCA is held accountable by the Treasury and the UK parliament.
Traders who transact with FCA regulated brokers are covered under the Financial Services Compensation Scheme in case a broker or financial services provider goes bankrupt.
As of October 2020, the FCA banned the sale of all crypto derivatives for retail customers, meaning retail traders in the UK can no longer trade crypto CFDs, or other crypto derivatives. The FCA also prohibits UK brokers from advertising crypto-related exchange-traded notes (ETNs) to retail traders.
In 2019, the FCA banned all of it’s regulated brokers from marketing CFDs, including options on CFDs to UK traders.
Taxes On CFD Profits In The UK
As a UK trader and taxpayer, you may be liable to pay Capital Gains Tax (CGT) when you make money on CFDs, provided that you break the CGT threshold for the tax year. CFDs are exempt from stamp duty.
Some brokers also offer spread betting, similar to CFDs — profits on these products are exempt from CGT, as long as it is not considered a source of income by the HMRC.
The Dangers of Unregulated CFD Brokers
A trader who opens an account with an unregulated broker is taking serious, unnecessary risks.
- An unregulated broker doesn’t answer to any authorities and, therefore, can do whatever it wants with customer funds.
- Since these firms operate online, it can be difficult to track them down if they defraud customers.
Reputable CFD Brokerages Are Licensed
Traders should beware of claims of regulation by bogus brokers or agencies.
Prior to opening an account, traders should check a brokerage firm’s website for the licenses and registrations held by it.
Some of the largest regulatory agencies in the world include:
- Financial Conduct Authority (FCA)
- Cyprus Securities and Exchange Commission (CySEC)
- Australian Securities and Investments Commission (ASIC)
- Financial Crimes Enforcement Network (FinCEN)
For more information about regulators in , see our in-depth regulators page.
CFD Broker Availability in
CFD brokers vary in terms of the countries they serve and the types of financial instruments they offer. Not all financial instruments are legal to trade in all countries.
Note: Cryptocurrency derivatives are not available for UK retail traders.
Mobile and Desktop Trading Platforms
The best trading platforms offer a streamlined experience. They are fast-loading, offer real-time charting and quotes, and provide a variety of technical analysis tools.
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 (eg, 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 broker website. Please note, this is an example trade – not a recommendation.
CFD Broker Mobile Features Comparison
IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.
| iOS & Android Apps | MT4 Mobile | MT5 Mobile | Other Features | |
|---|---|---|---|---|
| AvaTrade | ✅ | ✅ | ✅ | Same features as desktop app, including registration, deposit, social trading notifications |
| City Index | ✅ | ✅ | ❌ | Same features as desktop app, including charting, dashboard, real-time price alerts & notifications |
| EasyMarkets | ✅ | ✅ | ❌ | Same features as desktop app, including analytical tools, news, real-time account monitoring, news, open/close positions, place pending orders, deposits & withdrawals |
| Etoro | ✅ | ✅ | ❌ | Same features as desktop app, including CopyTrader, Crypto wallet, Community forums, Real time market updates, CopyPortfolios |
| Forex.com | ✅ | ❌ | ❌ | Same features as desktop app, including real-time trade & order alerts, integrated fund management |
| Fortrade | ✅ | ✅ | ❌ | Same features as desktop app, plus low memory footprint, ultra-high speed execution, and take-profit, stop-loss, & pending orders |
| FXCM | ✅ | ✅ | ❌ | Mobile available via MT4 only |
| HYCM | ✅ | ✅ | ✅ | Mobile available via MT4 only |
| Markets.com | ✅ | ✅ | ✅ | Fundamental, technical, and sentiment-based tools, risk management tools, real-time access to experts |
| Pepperstone | ✅ | ✅ | ✅ | cTrader mobile: Advanced take-profit/stop-loss levels, multiple monitor support. MT4 & MT5 mobile: Historical data, MT5 mobile only: CFDs on shares |
| Plus500 | ✅ | ❌ | ❌ | Same features as desktop app |
| Trading212 | ✅ | ❌ | ❌ | Same features as desktop app |
| XM | ✅ | ✅ | ✅ | Mobile available via MT4 and MT5 |
| XTB | ✅ | ✅ | ❌ | Same features as desktop app |
Proprietary, MT4, and MT5 Trading Platforms
Many brokers offer the popular MetaTrader 4 (MT4) or MetaTrader 5 (MT5) platforms.
Some CFD brokers 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
| CFD Broker | MT4 | MT5 | Proprietary Platforms | Other Platforms |
|---|---|---|---|---|
| AvaTrade | ✅ | ✅ | AvaTrade Web | DupliTrade, MQL5, ZuluTrade |
| City Index | ✅ | ❌ | Web Trader | AT Pro |
| EasyMarkets | ✅ | ❌ | Browser-based | |
| Etoro | ✅ | ❌ | Browser-based | |
| Forex.com | ❌ | ❌ | Web standard, Web advanced | |
| Fortrade | ✅ | ❌ | Fortrader | WebTrader4 |
| FXCM | ✅ | ❌ | Trading Station, TradingView | ZuluTrade, NinjaTrader |
| HYCM | ✅ | ✅ | n/a | |
| Markets.com | ✅ | ✅ | Marketsx, Marketsi, | |
| Pepperstone | ✅ | ✅ | cTrader | |
| Plus500 | ❌ | ❌ | Browser-based | |
| Trading212 | ❌ | ❌ | Browser-based | |
| XM | ✅ | ✅ | XM Web Trader | |
| XTB | ✅ | ❌ | xStation 5, xStation Mobile |
This screenshot is only an illustration. Current market prices can be found on the broker website.
Account Types and Opening Requirements
Check the CFD broker’s available account types to make sure they have one that meets your needs. Here are some common account types.
| Account Type | Description | Prevalence |
|---|---|---|
| Standard | A retail brokerage account 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. |
Account opening requirements vary by broker and account type, but usually involve the following:
- Proof of identity – Proof of identity typically requires address and phone information plus a government-issued picture ID like a passport.
- Account funding – Minimum account balances can range from $1.00 to $250 for standard retail accounts. Islamic accounts sometimes require higher balances (eg, Fortrade requires $2,000). Day trading account minimums start at $25,000.
Deposits and Withdrawals
- Deposit sources – Most CFD brokers accept wire transfers and credit card funding. However, if you wish to transfer money to your account another way (eg, PayPal or Neteller), make sure the broker you like supports your preferred method.
- Account minimums – Brokers typically require a certain 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.
CFD Broker Account Funding & Minimums Comparison
| Minimum Deposit | Credit/Debit Card, & Wire Transfer | Skrill | PayPal | Neteller | Other Funding Methods | |
|---|---|---|---|---|---|---|
| AvaTrade | $100 | ✅ | ✅ | ❌ | ✅ | WebMoney |
| City Index | $100 | ✅ | ❌ | ✅ | ❌ | |
| EasyMarkets | $100 (EU + VIP), $200 (outside EU) | ✅ | ✅ | ❌ | ✅ | SoFort, GiroPay, iDeal, WebMoney, BPay, FasaPay, UnionPay, WeChatPay |
| Etoro | $50 (AUS/US), $1,000 (Islamic Accounts), $200 (Everywhere else), $500 (wire transfers) | ✅ | ✅ | ✅ | ✅ | Diners Club |
| Forex.com | $100 | ✅ | ❌ | ✅ | ❌ | |
| Fortrade | $100, $2,000 (Islamic accounts) | ✅ | ✅ | ❌ | ✅ | |
| FXCM | $50 (Retail + Non-EU), $300 (EU) | ✅ | ✅ | ❌ | ✅ | Union Pay |
| HYCM | $100, $250 (wire transfers) | ✅ | ✅ | ❌ | ✅ | |
| Markets.com | $100 | ✅ | ✅ | ✅ | ✅ | iDeal, Sofort |
| Pepperstone | $200 | ✅ | ✅ | ✅ | ✅ | Poli |
| Plus500 | $100, $500 (wire transfer) | ✅ | ✅ | ✅ | ❌ | iDeal, BPay, Klarna, Giropay, Trustly |
| Trading212 | $1 to $10 (Varies by region + method) | ✅ | ✅ | ✅ | ❌ | Dotpay, Giropay, Carte Bleue, Apple/Google Pay, iDEAL |
| XM | $5 (Micro + Retail), $100 (Zero) | ✅ | ✅ | ❌ | ✅ | Union Pay, Moneta, QIWI, CASHU, Abaqoos, Przelewy24, Giropay, Fasapay |
| XTB | $250 | ✅ | ✅ | ✅ | ❌ |
CFD Asset Classes Offered
In 2020, derivatives traders have a remarkable array of underlying assets to trade CFDs on:
| Underlying CFD Assets | Examples |
|---|---|
| Commodities | Gold or oil price movements or on commodity futures |
| Currency Pairs | EUR/USD |
| Cryptocurrency | BTC/USD (Crypto derivatives, including CFDs, are not available for UK retail traders) |
| Index Futures | FTSE 100, US 500 |
| Stocks and ETFs | Tesla (TSLA), Facebook (FB), and Amazon (AMZN) |
| Other Assets | Bonds, US Treasuries, Baskets |
Please Note: Availability subject to regulations. Cryptocurrency CFDs are not available to UK retail traders.
| Commodities, Shares, Indicies | Crypto | Forex | ETFs | Other Assets | |
|---|---|---|---|---|---|
| AvaTrade | ✅ | ✅ | ✅ | ✅ | Bond/US Treasuries |
| City Index | ✅ | ❌ | ✅ | ✅ | Options, Interest Rates, Bond/US Treasuries |
| EasyMarkets | ✅ | ✅ | ✅ | ❌ | Vanilla Options, Baskets |
| eToro | ✅ | ✅ | ❌ | ❌ | ❌ |
| Forex.com | ✅ | ✅ | ✅ | ❌ | ❌ |
| Fortrade | ✅ | ✅ | ✅ | ✅ | Bond/US Treasuries |
| FXCM | ✅ | ✅ | ✅ | ❌ | Baskets |
| HYCM | ✅ | ✅ | ✅ | ✅ | ❌ |
| Markets.com | ✅ | ✅ | ✅ | ✅ | Bond/US Treasuries |
| Pepperstone | ✅ | ✅ | ✅ | ❌ | ❌ |
| Plus500 | ✅ | ✅ | ✅ | ✅ | Options |
| Trading212 | ✅ | ✅ | ✅ | ✅ | ❌ |
| XM | ✅ | ❌ | ✅ | ❌ | ❌ |
| XTB | ✅ | ✅ | ❌ | ✅ | ❌ |
Broker Leverages
CFD brokers vary according to whether they offer leverage and how much. Local regulations (such as those required by ESMA in the EU) also affect the amount of leverage that you are allowed to trade with.
For retail accounts, maximum leverage typically tops out at 30:1 on average. 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.
There are no maximum leverages on CFDs for South African traders. Other global regulators set maximum leverage limits.
See how the ASIC’s maximum leverages on CFDs for Australian traders compare to other regulators like ESMA.
There are no upper leverage limits for Canadian traders. See how other jurisdictions’ financial regulators cap leverages on CFDs — note that these are not applicable to Canadian traders.
US brokers do NOT offer CFDs, but you can see the leverages offered by other international regulators below.
UK brokers are regulated by the FCA — you can compare the leverages offered by brokers in the UK to those in Europe, Australia, and the USA.
| Region | Maximum Leverage |
|---|---|
| Europe | In countries regulated by the European Securities and Markets Authority (ESMA), the maximum leverage on CFDs is 30:1 for retail traders. |
| United Kingdom | The UK currently abides by ESMA’s maximum leverage of 30:1 for retail traders. Note: Crypto derivatives are banned for UK retail traders. |
| Australia | ASIC allows for leverage up to 30:1. |
| USA | CFDs are not available to US residents and citizens. |
This screenshot is only an illustration. Current market prices can be found on the broker website. Please note, this is an example trade – not a recommendation.
Max Leverage by CFD Broker
The following table provides a quick comparison of leverages offered by popular brokers.
Important: CFDs are not available in the United States. This information is for research purposes only.
| Max Leverage | |
|---|---|
| AvaTrade | 30:1 on major currency pairs |
| City Index | 30:1 (UK), 50:1 (Singapore), 30:1 (Australia) |
| EasyMarkets | 30:1 on major currency pairs |
| eToro | 30:1 on major currency pairs |
| Forex.com | 50:1 on major currency pairs (30:1 in Australia) |
| Fortrade | 30:1 |
| FXCM | 30:1 on major currency pairs |
| HYCM | 200:1 |
| Markets.com | 30:1 on major currency pairs |
| Pepperstone | 30:1 (Australia), 30:1 (UK) |
| Plus500 | 30:1 on forex |
| Trading212 | 30:1 |
| XM | 888:1 (30:1 in Australia) |
| XTB | 30:1 |
For more about leverage, check our Commodity Trading Guide.
Fees by Broker
Important: CFDs are not available in the United States. This information is for research purposes only.
| Deposit & Withdrawal Fees | Overnight Fee | Currency Conversion Fee | Inactivity Fee | Other Fees | |
|---|---|---|---|---|---|
| AvaTrade | ❌ | ✅ | ❌ | ✅ | ❌ |
| City Index | ❌ | ✅ | ❌ | ✅ | ✅ Same day CHAPS transfers incur a £25 fee, Borrowing costs for shorting |
| EasyMarkets | ❌ | ✅ | ❌ | ❌ | ✅ dealCancellation |
| Etoro | ✅ | ✅ | ✅ | ✅ | ❌ |
| Forex.com | ❌ | ✅ | ✅ | ✅ | ✅ Same-day CHAPS transfers incur a £25 fee for amounts under £5,000. Dividend adjustment fee, Borrowing costs for shorting |
| Fortrade | ✅ | ✅ | ❌ | ✅ | ❌ |
| FXCM | ❌ | ❌ | ❌ | ✅ | ❌ |
| HYCM | ✅ | ✅ | ❌ | ❌ | ❌ |
| Markets.com | ❌ | ✅ | ✅ | ✅ | ✅ Islamic account fee: 1%, Borrowing costs for shorting |
| Pepperstone | ✅ | ✅ | ❌ | ❌ | ❌ |
| Plus500 | ❌ | ❌ | ✅ | ✅ | ❌ |
| Trading212 | ❌ | ✅ | ✅ | ❌ | ❌ |
| XM | ❌ | ✅ | ❌ | ✅ | ❌ |
| XTB | ✅ | ❌ | ❌ | ✅ | ✅ Penalty interest, all transactions on share CFDs from Italy are subject to FTT |
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. <b>Between 53.00%-83.00% of retail investor accounts lose money when trading CFDs.</b> You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Spreads and Commissions by Broker
Spreads can be tricky to compare across brokers because they can be charged in different ways:
- As a percentage of the trade amount (eg, 0.13%)
- As points or pips for forex trades (eg, 50 pips)
Commissions may be charged as a flat fee per transaction or a percentage of the trade amount.
Market Sentiment and Social Trading Tools
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 broker website. Please note, this is an example trade – not a recommendation.
Social trading, pioneered by eToro, allows traders to exactly copy the trades of its most successful traders.
Technical Analysis and Charting
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.
Payment Methods
CFD brokers typically offer a wide variety of payment and deposit methods so that traders can choose which methods work best for them. The most common payment methods are:
- Credit or debit card
- Wire transfers
- PayPal
- Skrill
- Neteller
Some brokers also support niche payment services like: Abaqoos, Apple Pay, BPay, Carte Bleue, CASHU, DotPay, Fasapay, GiroPay, Google Pay, iDeal, Larda, Moneta, Poli, Przelewy24, QIWI, SoFort, Trustly, UnionPay, WebMoney, and WeChatPay.
Click here to compare different funding methods offered by different brokers.
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 (abbreviated as 2FA).
Two-factor authentication can be done via:
- An SMS message sent to your mobile device
- An authenticator app like Google or Microsoft Authenticators
- An email message
- A security notification popup on your mobile
- Unique one-time password (OTP)
Only the following brokers offer 2FA:
| Broker | Account Security |
|---|---|
| eToro | 2FA via SMS |
| Pepperstone | 2FA via Authenticator App |
| Plus500 | 2FA via One-Time Password on Google Authenticator app |
| Trading212 | 2FA via Google Authenticator or Authy app |
Education and Customer Support
Consider the available support channels (eg, phone, email, live chat) and hours. Do they cover your time zone? Do they offer support in your preferred language?
Also, review the CFD broker’s site for the type of educational materials available for traders at your level.
CFD Brokers by Education and Customer Support
| Educational Resources | Customer Support | |
|---|---|---|
| AvaTrade | Getting started guide, Strategy guide, Economic indicators, eBooks, video tutorials | Availability: 24/5 via Live chat, phone, email. Languages: 10+ |
| City Index | Trading academy, video tutorials, analytics guide, strategy guide, news and sentiments | Availability: 24/5 via Live chat, phone, email. Languages: Unspecified |
| EasyMarkets | Getting started guide, eBooks, video tutorials | Availability: 24/5 via Live chat, phone, email. Languages: 5+ |
| eToro | Trading academy, podcast, video tutorials, fintech guide, market overview | Availability: 24/5 via Live chat, phone, email, fax. Languages: 20+ |
| Forex.com | Trading course (beginner, intermediate, advanced), trading theme guides, video tutorials | Availability: 24/5 via Live chat, phone, email, fax. Languages: Unspecified |
| Fortrade | Trading academy, eBooks, video tutorials, market analysis course, practice trading tools | Availability: 9am - 9pm (Mon - Fri) via Live chat, phone, email. Languages: 10+ |
| FXCM | Online classrooms, live market news, forex-specific guide, trading tool guide | Availability: 24/5 via Live chat, phone, email. Languages: Unspecified |
| HYCM | Knowledge base, webinars, online workshops | Availability: 24/5 via Live chat, phone, email, fax. Languages: Unspecified |
| Markets.com | Trading tool guide, financial live-stream service, webinars, market analysis | Availability: 24/5 via Live chat, phone, email, fax. Languages: Unspecified |
| Pepperstone | CFD trading guide, forex trading guide, market analysis hub | Availability: 24/5 via Live chat, phone, email, fax. Languages: Unspecified |
| Plus500 | Trader's guide, risk management guide, video tutorials | Availability: 24/5 via Live chat, WhatsApp, email. Languages: 10+ |
| Trading212 | Trading guide, video tutorials, charting guide, trading concepts training | Availability: 24/5 via Email, support tickets. Languages: Unspecified |
| XM | Research hub, podcast, video tutorials, live educational streams, webinars, forex-specific live training, trading tool guide | Availability: 24/5 via Live chat, phone, email. Languages: 25+ |
| XTB | Live webinars, trading courses (beginner, advanced, intermediate, premium) | Availability: 24/5 via Live chat, phone, email. Languages: Unspecified |
How We Rate CFD Brokers
When we review CFD brokers, we consider the following areas.
| 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? |
We revisit our assessments periodically in order to notify our readers in the event action is taken against these brokers by regulatory agencies.
There is no one online broker that’s the best fit for every trader.
Further Reading
Now you’re ready to start researching and trading CFDs!
You can also check out our other broker lists:
- Commodity Trading: Oil, Gold & Everything in Between
- Commodity Brokers: 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 South Africa?
CFD trading and other derivatives trading is legal for retail and professional traders in South Africa with brokers licensed by the Financial Sector Conduct Authority (FSCA). Traders are also liable for either income tax or capital gains tax, as determined by the South African Revenue Service (SARS).
Is CFD trading legal in Australia?
Yes, CFD trading is legal for retail and professional traders in Australia with brokers regulated by the Australian Securities and Investments Commission (ASIC). The ASIC reports to the Treasurer of Australia, and CFD traders are liable to both tax payments and potential tax deductions in the case of a loss.
What are maximum CFD leverages in Australia?
As per the ASIC’s restrictions in March 2021, retail CFD traders have maximum leverage allowances of 30:1 on major forex pairs. Minor forex pairs, gold, and major stock market indices have a maximum retail leverage of 20:1, while minor stock market indices and all commodities with the exception of gold have a maximum leverage cap of 10:1. Any CFD referencing crypto assets is capped at a 2:1 retail leverage, while shares and any other assets are capped at 5:1.
Is CFD trading legal in Canada?
Yes, contracts-for-difference (CFDs) are a legal financial instrument in Canada. For a broker or financial instrument dealer to offer CFDs, it must be regulated and overseen by the Investment Industry Regulatory Organization of Canada (IIROC). See when the IIROC was formed and how it oversees broker activity.
Why can’t I trade CFDs in the US?
CFD trading is illegal for US citizens and residents. CFDs are illegal in the US because they are an over-the-counter (OTC) trading product. OTC trading products aren’t listed on regulated exchanges like the New York Stock Exchange (NYSE), bypassing US regulatory bodies.
Thus, for US citizens to trade CFDs, the US Congress would have to change regulatory law. Additionally, most CFD brokers don’t accept US citizens or US residents as clients.
Are professional traders able to trade crypto derivatives in the UK?
While the FCA prohibits all UK retail traders from trading cryptocurrency derivatives, including crypto CFDs, professional traders based in the UK may still trade crypto derivatives. That said, the FCA also prohibits the sale and marketing of crypto CFDs to retail traders, so professional traders won’t see these offers on public brokerage websites.
What are the FCA’s limits on UK CFD trading?
As per the FCA’s rules of restriction on CFDs and all CFD-like options products, retail clients are limited to leverages between 2:1 and 30:1. CFD accounts are also subject to a margin call when funds fall below 50% of the required margin. UK brokers are required to ensure that CFD customers can’t lose more money than the total balance of the CFD account.
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 stocks. 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. <b>Between 53.00%-83.00% of retail investor accounts lose money when trading CFDs.</b> You should consider whether you understand how CFDs work and 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.
