Since their introduction to the UK market in 1998 CFD's have
grown rapidly in popularity with retail and professional investors,
hedgers and speculators. The number of CFD
brokers has also increased with many now offering clients
direct market access (DMA) as well as a market maker service.
As is the case with other asset classes, the increased
competition in the market place has led to pressure on the brokers
to reduce the cost of dealing and we are now experiencing
commission costs at the lowest levels ever seen. Dealing costs are
not the only area of competition, online and mobile trading has
also become a vital area with more and more retail customers
expecting fast and reliable trading platforms together with
advanced trading tools. This has resulted in millions of pounds
being spent on the development of systems and has allowed access to
exchanges that only a few years ago would have been impossible
for a retail trader.
Whilst CFD brokers and market makers are offering an increasing
number of markets to trade on, including Indices, Currencies and
Commodities it is the trading of individual shares in the UK,
Europe and US that attracts most interest and volumes. There
are thousands of individual shares to trade so it is important to
focus on a smaller number of stocks, perhaps from a specific
sector, rather than attempting to research too many. Brokers
and market makers will often offer assistance with this research by
providing access to comprehensive reports prepared by their market
analysts. For those brokers who are not permitted to give advice
this research contains factual information about stocks and markets
whereas brokers that are licensed to give advice will not
only provide factual research but also trade recommendations that
will include price targets for both trade entry and exit. For those
wishing to receive the advisory service from their CFD broker you
will find the cost of trading will be considerably higher than if
you are relying on your own judgement to place a trade. Whether the
additional costs are worth it will obviously depend on the quality
of recommendations your broker makes! Spend some time
researching the services offered by the various CFD brokers before
deciding if you are looking for a an execution only firm or if you
would prefer some assistance with your decision making. Sometimes
the cheapest service isn't always the best, especially if you are
new to trading and you may find that a broker offering a
complete service can prove to be very valuable in the long run.
For those wishing to go it alone but who would like to learn a
little more about how to trade there are a number of excellent
educational courses teaching various technical and fundamental
analysis techniques although, as with the choice of broker, it is
important to research the education provider before booking,
especially if the course is expensive to attend. Whilst there
are no magical answers as to what makes a successful trader some of
these courses provide valuable insight into how to increase the
chances of success in your favour whilst maintaining a sensible and
balanced approach to risk management.