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How do I Choose the Best CFD Account?

Article Details
  • Written By: Dana DeCecco
  • Edited By: Amanda L. Wardle
  • Last Modified Date: 02 July 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Opening a contract for difference (CFD) trading account with a registered broker is a prudent choice. Most regulated brokers provide a wide variety of services that will enable the investor to make the most of a CFD account. Commissions and fees can be a large portion of the trader's expenses. Trading tools such as charting and analysis will enhance the performance of a good CFD trader.

US regulations prohibit opening a CFD account. Many other countries regulate CFD brokers and require registration. All regulated brokers should provide their registration information online. A background check of business activities will prove helpful when selecting the best CFD broker. Complaints and customer service issues should be examined to prevent any possible problems in the future.

CFD contracts are complex financial derivatives created for the purpose of hedging and speculation. The best CFD account should offer a variety of educational resources. Trading derivative contracts is a risky proposition, and trading a CFD account without knowledge and understanding of derivatives can result in losses greater than the amount invested. A good educational program should be a primary concern when choosing the best CFD broker.

Financial speculation is not possible without accurate charting and analysis programs. The charting program should be equipped with relevant indicators and drawing tools. Pattern recognition is a popular method of forecasting market swings, and software that serves this purpose may be available. Technical analysis is based on charting programs that provide the tools necessary to implement reliable techniques.

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Fundamental analysis tools complement technical tools and reinforce trading decisions. The best CFD account will have access to fundamental programs that will keep the trader up to date on economic events. Financial news feeds can provide timely information on possible market moving developments. Economic calendars offer a "heads up" on financial announcements that impact future price moves on related securities.

Margin rates and fees for holding long term positions may influence the style of trading and the assets that will be traded. The CFD broker should post margin rates and all applicable fees online. Commission rates and software fees will certainly impact the trader's "bottom line." Short term CFD traders should consider commission rates a major factor in selection of a CFD account broker.

Many factors involved in CFD account selection depend on the trading style of the investor. System traders and short term traders should place the emphasis on technical and charting services. Long term traders may find fundamental applications more valuable. The successful CFD trader will make use of the services and programs that best suit the trading system. The best CFD broker will provide the services that will enhance the performance of the individual trader.

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