Sep 5 2010
I have been buying and selling CFDs in Australia since they were first introduced in 2003. Over this period I have traded with all of the main CFD providers in Australia first hand. When talking to groups of traders at trading expos and seminars all-around Australia I regularly get asked who is the top CFD provider? I wrote this review to help answer this million dollar question.
This review covers all the major CFD providers in Australia that I have traded with first hand, whilst writing this review I took into consideration 4 main things that as an expert trader I believe are the crucial requirements to consider when deciding on a CFD provider, these are:
1. Customer Service
2. Platform stability and ease of use
3. Product range
4. Pricing
It is important to to note that there are CFD provider reviews conducted by a number of internet sites and magazines in Australia most of which are biased with the winners often being selected by journalists not traders and determined by the amount of money spent on advertising in the magazine or on the website that conducted the review. Only genuine traders with real life experiences are able to conduct a fair an unbiased review.
The main players in the CFD industry in Australia are:
· IG Markets
· CMC Markets
· International Capital Markets (IC Markets)
· MF Global
I didn't conduct a review of Etrade or Comsec as these organizations are simply resellers of MF Global’s CFD offering.
In this review I talk about my real life experiences with every one of the companies mentioned above whilst taking into account the 4 crucial elements that I regard as crucial when selecting a CFD provider.
IG Markets
Customer Service: I've had an account with IG Markets for the last three years I use this account as my backup account. Over this time I've found that their customer support has declined considerably, in-fact at on one occasion I was unable to reach a dealer as they were all busy. In general I consider their customer service to be poor and wouldn't recommend them.
Platform stability and ease of use: I use both their Pure Deal and L2 trading platforms and have had problems with both. Recently I experienced the problem of being unable to view my positions and free equity stopping me from buying and selling all morning. I would not regard either of their platforms as appropriate for a professional trader.
Product range: IG Markets has a good product range, this is without doubt one of their strong points. One thing I'd say is that if you're looking to trade CFDs on exotic futures contracts and currency pairs IG Markets is definitely not the CFD provider for you as they have a tendency to stick to a fairly mainstream offering.
Pricing: On Australian share CFDs IG Markets has competitive pricing, their minimum commission on share CFDs is low and their spreads are tight on the main currency pairs, however for anybody who is an active trader and are looking for volume discounts don’t bother trying to negotiate with IG Markets their commission schedule is fixed.
CMC Markets
Customer Service: Out of the many CFD providers that I've ever dealt with I've found CMC Markets to have the worst customer service, with CMC Markets your problems start from the moment you call them up for support and choose a number from 1 to 10 just to speak to someone. I have also found their support staff to have only a basic understanding of their platform. General queries and problems frequently must be escalated to more senior staff, not the kind of support an experienced trader demands.
Platform stability and ease of use: In recent times the stability of their trading platform Market Maker has improved drastically, however the trading platform still lacks functionality such as course of sales for share CFDs, something a professional trader demands.
Product range: CMC’s product range is extensive and not dissimilar to that of IG Markets though it is worth noting that CMC provides an excellent range of CFDs over exotic futures contracts and forex pairs, exactly what is missing from IG Markets product offering.
Pricing: Like IG Markets CMC markets provides good entry level pricing but lacks the pricing flexibility required when it comes dealing with high volume traders.
International Capital Markets (IC Markets)
Customer Service: I had not heard about these guys until about one year ago. After calling them up and talking to one of their sales staff I thought I'd give them ago. My experience to date has been second to none. Their customer service is top notch. Despite the size of my trading account I have my own dedicated account manager that knows the market and what I need, this is very different to the call centre operations of IG and CMC Markets.
Platform stability and ease of use: They provide a variety of trading platforms to cater for a varied range of clients. They have got a platform for beginners, intermediate and advanced traders. As I'm an experienced trader I selected their advanced platform Pro Deal which provides all of the functionally a professional trader needs. Although I can not speak for all of their platforms their advanced platform continues to be trouble free and I'd certainly recommend it to anyone.
Product range: All of the products missing from the two major providers such as futures, DMA functionality and exotic forex pairs are offered by these guys. Whilst writing this review I could not think of a product that these guys couldn't offer.
Pricing: Like many of the CFD providers reviewed these guys offer good entry level pricing, however the difference with these guys is that they also have a flexible pricing structure for frequent traders. As I am an active day trader they were prepared to drop their minimum charge and offer me a commission rate of 0.04% on DMA CFDs, the very best rate offered to me by the other providers was 0.08%, they are 50% more affordable!
MF Global
Customer Service: At first I thought that these guys would take the cake on the customer support front, however unfortunately their high level of service did not last for more than one week after funding my account, this was quite astonishing and not something that I would have expected. Once I was up and trading these guys did not want to know me, this type of customer support leads me to rate them as the worst of the lot.
Platform stability and ease of use: These guys offer one trading platform for CFDs, webIRESS. Although webIRESS is a good platform they don’t offer anything else, in comparison with IC Markets who offer webIRESS along with many other trading platforms. Their product offering is basic and not what an expert trader demands.
Product range: MF Global can offer you all the futures contracts you could ever ever think of however when it comes to forex, CFD and share trading they cannot compete with the likes of IC Markets. If it’s only futures you want than these are the guys to speak to, but for
CFDs you should give them a miss.
Pricing: The entry level pricing for CFD trading at MF Global is expensive, they do however offer packages for frequent traders with discounts down to 0.08%, this is still a far cry from the 0.04% offered by IC Markets. Although the CFD commission charges are expensive I am sure that if you were only trading futures you could possibly get some great pricing from MF Global
Conclusion
As an expert trader I'm quite demanding in what I expect from my
CFD provider, I'm sure that this is not the norm for many traders. There was actually only one CFD provider from those reviewed that was able to give me what a professional trader would demand, the remainder of the
CFD providers have great offerings that might suit an regular trader but when pushed to their limits might falter, this is something a professional trader can't afford to have occur when money is on the line. Apart from my number one choice IC Markets I'd chose IG Markets as my backup, regardless of their shortfalls they do have pretty good trading platform and a broad product range. There is however a huge difference in customer support and pricing of IG Markets offering compared to my number one choice, IC Markets.
Sep 5 2010
Before you start trading Contracts for difference it is vital to obtain a few suggestions from the professionals to ensure that you do not make many of the costly errors that newbie traders make. Below are three trading pointers that will help you in your
CFD Trading success.
1. Manage your Positions
Over and over again new traders spend a large amount of time choosing, planning and executing new positions, however they often make the mistake of exiting these trades with much less thought. This is unfortunate as it's the exit which will determine whether a trade has been profitable or not.
It is human nature to take profits quickly while the fear of incurring a loss will see the same trader leaving poorly performing positions open in the anticipation that prices will move in the right direction and reduce losses or even turn them into profitable trades.
Numerous new traders ignore the old proverb “Let your profits run and cut your losses short”. As the saying states when you have a profitable position, you must allow that trade to achieve its full potential, instead of closing it out at the first sign of a small profit. On the other hand, if you happen to hold a position that is moving against you, you should move quickly to get out of that position, before the loss becomes too great.
If you're managing your trades properly, your average winning trade should be considerably larger than your average losing trade. After you have the discipline to trade in using this method, you should be able to attain overall profitability even when only half of your trades are winners. Many traders make the error of not closing poorly performing positions fast enough. One tool that makes this simpler is a stop-loss order.
Once you have identified a price level that corresponds with the amount of risk that you are prepared to take on a particular trade, a stop-loss order can be placed at this level to automatically close out the trade. This removes the human element from the exit, reducing the risk that the emotion of hope will interfere with rational decision making.
It is essential to understand that a stop-loss order simply gives you a trigger point for the execution of an order. If a sell stop has been placed on a long position, the stop-loss will likely be activated if the price trades at or below the nominated stop level. Every so often, this can result in trades being executed a price that is less favorable than the nominated stop-loss price. This is called slippage.
2. Understand the instrument you're trading
Being over-the-counter products, there are various variations in the contract specifications of Contracts for difference. If you are buying and selling these products, it is crucial to know what these specifications are.
You should also be aware of the influence that currency price changes can have on your holdings. If the base currency of the Contract for difference rises against the base currency of your account your profits may be eroded by any currency fluctuation or your losses could be made worse.
Most CFD traders buy and sell Contracts for difference based on stocks listed in their own country. The simple explanation for this is that traders are more comfortable trading CFDs that they're familiar with. Most traders also enjoy the convenience of trading their home market as it is not practical to sit up for half the night to trade a CFD over a share listed on an exchange in another part of the world?
In lots of circumstances it is much better to stick to Contracts for difference quoted on stocks listed on exchanges that you are familiar with rather than trading Contracts for difference based on shares listed on markets you don't fully understand.
3. Use the correct order types
You must always treat trading as a serious business. As such, you need to take some time to ensure that you thoroughly understand the tools of your business. Many
CFD traders miss opportunities or have been closed out of trades at the wrong time simply because they placed the incorrect type of order.
At the very least, you should become familiar with these order types:
Market order: This type of order is used to execute a trade at the present market price.
Stop-order: This order type is used to exit a trade at a specific price. Stop-orders are located at a level that is worse than prices presently obtainable in the market. On a long position, the stop-loss order to sell would be positioned below the present market price. Conversely, on a short position, the stop-loss order to buy would be positioned at a level higher than current market prices.
Limit order: A limit order is utilized to exit a trade. Limit orders are positioned at a level that is better than the present market price. When seeking to lock-in profits on an open long position, a limit order to sell would be positioned at a level greater than current market prices. If seeking to lock-in profits on a short position, a limit order to buy would be positioned at a level below current market prices.
You must always keep in mind that as CFDs are geared and that buying and selling them can be risky. However if used correctly
CFDs will become a valuable tool in your trading arsenal.
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