Brokerchooser blog

CFDs are exciting financial instruments that can help you achieve your invesment objectives and give you an opportunity to test your investment skills in exotic markets. However, they don't come without risks. In the following CFD trading tips article we explain why guaranteed stop-loss orders are must-haves and why you should limit your leverage. We only recommend CFD trading to experienced investors, and if you're a rookie, it's an absolute must that you read our CFD trading tips.

CFD trading, in a nutshell is using contracts which you can invest in to make a bet whether a particular financial asset, like an equity or commodity, will increase or decrease in value – without actually investing in the financial asset. For example, when you want to bet on the increase of the oil price, you chose a CFD, which has its price change linked to the price change of a crude oil contract. When the price of the oil increases one percent, the price of the CFD will also increase one percent, so you will gain the price difference of the crude oil. Hence the name: Contract for Difference.

CFDs started out as a type of leveraged equity swap in the 1990s in London, primarily used by hedge funds. In the late 1990s CFDs appeared on the retail market as well, while the 2000s and 2010s saw the first exchange traded and centrally cleared CFDs – so things really picked up. The FCA estimated that the number of UK CFD brokers doubled between 2010-16 and UK clients held £3.5bn in their accounts in total. Of course, the picture is not completely rosy. Because of the risks inherent in these contracts, regulators are increasingly strict with CFD providers. The Australian Exchange closed its CFD exchange in 2014, while in some countries, such as the United States or Belgium, CFD trading is outright banned.

Ok, but some of you might ask, what on earth is a CFD trading? Don't worry, we will let you know.

I am pretty sure you already imagined several times to invest in the stock exchange, gain enough cash to travel the world and rest for your entire life.

Achieving this vision is not easy but you have to start somewhere, and to purchase shares online is one of the best ways for that. The good news is you can do this fully online. In this article I will explain jargon-free how to invest in shares online. It is not as easy as watching TV series, but don’t worry it is not rocket science either.

There are two main motivations for you to ask the question: how to buy and sell shares online. The first is profit and the second is experience.

Both can provide fun if you select the right stocks.

If the share you bought pays dividends or its price increases, you can make a profit. If you do this in the long run, these profits can add up and make you even a millionaire, like it happened with Mr. Gremel. The 98-year-old Mr. Gremel bought 20 Walgreens shares for $1000 in 1953. This investment today is worth $2 million.

On the experience side, you will improving your financial literacy is one of the best long term investments. Did your friends or neighbours talk about investments and the stock market, and you had no clue about the topic? Once you start investing and learning about it, this will not happen again. You will understand better how the stock market works and how it influences the economy and your everyday life.

Last but not least, as a shareholder you will be part of a company's story. Want to know how to buy company shares? Have you ever wanted to participate in a Berkshire Hathaway annual meeting? If you buy some Berkshire shares, you will have the opportunity, just have to master the buying of shares.

Let's take a look at the six steps to buy shares online.

The brokerage world can be intimidating and confusing, especially for a beginner. Complicated words, complex definitions, and head-spinning graphs can discourage people from investing themselves. 

Our aim is to help people invest, and with this article, we wish to help the beginners. The article will include the best brokers to choose as a beginner and will outline each broker's strength.

We have tested a total of 17 brokers on our site and picked the best 10 brokers for beginners. At the end of the post, we have also compiled a useful educational resource 101. This consists of useful educational content from our previous posts.

This post will focus on two sections: brokers for beginner buy and hold investors, and brokers for beginner frequent traders. Beginner buy and hold investors are people who wish to invest their money in the long run, and make few trades per month. Beginner frequent traders are people who are new to trading. 

Take a moment to look through the following table. It is a compiled list of all the brokers in this article, and also a useful resource to see which broker you can open an account at:

The two sub-groups differ in the style of trading you wish to start investing with. Let's take a look at each.

Brokers for beginner buy-and-hold investors

Buy-and-hold investors are characterized by buying a portfolio of assets and holding them in the long run. They adjust their investment portfolio usually once every two-three months.

The brokers we chose for a beginner buy-and-hold investor have the following characteristics:

• Competitive pricing - to ensure low long-run costs
• User-friendly trading platform - for an easy learning curve
• Wide product portfolio - for many investment opportunities

Brokers for beginner traders

Beginner traders are characterized by making many trades a day to maximalize their potential return. They will adjust their portfolio several times a day. 

NOTE: Trading frequently, also known as day trading, carries high levels of risk, and can incur high transaction cost with your broker. Each time you make a trade, you are subject to the volatility of the market, and transaction fees may occur. Also, day traders usually use leverage, that carries on further risk to your invested money. Please go to the learning section of this article if you are not fully aware of these risks.

The brokers we chose for a beginner buy-and-hold investor have most of the following characteristics:

• Competitive pricing - to ensure low transaction costs
• Asset classes with high leverage - Forex, and CFDs if possible
• Good educational content - to enable beginners to learn through quality content

Now that it is clear, how, and why the two categories are divided. Let's go, and take a closer look at each of the brokers, to get you up to speed learning, and make the right choice for you today.

Choose the best forex broker, we did the research for you. We tested in-depth only quality online brokers available for European and US customers. We evaluated fees, funding, withdrawal, product portfolios, account opening, trading platforms and more.

As a result, we filtered out the forex brokers with the highest quality and the lowest fees.  

Our top five picks for the best forex brokers in 2018 are:

Head to our country selector to get detailed info on which broker is available in your country.

We have created two forex broker categories: stockbrokers offering forex and forex-only brokers. At the stockbrokers, you can also trade with other instruments like stocks and bonds. At forex-only brokers, you can trade with forex and in some cases CFDs.

BEST STOCKBROKERS OFFERING FOREX

BEST FOREX-ONLY BROKERS

If you are a beginner, be very careful with forex trading. You can easily lose all of your money within a couple of seconds. The best way to start is to open a demo account and start learning. All of the mentioned brokers above offer a demo account. A demo account is where you can try out trading with paper money, without risking your own savings. Improve your learning further at the forex trading 101 chapter.

Not sure which forex broker to choose? For a personal broker recommendation, check out Brokerchooser's broker selection tool. You input your preferences and you get a personal recommendation fitting your needs.

Want to see more options? For comparing all the brokers, visit our comparison page.

Mobile apps have become very popular and this is not a coincidence. They are making your life easier. You can buy flight tickets, book accommodations or even trade on the stock exchange by using them.

There are a lot of trading apps out there so we save your time and selected for you the best free trading apps.

What are trading apps great for?

A trading app has all the functionalities what a web-based trading platform can provide. You can read financial news, find great trading ideas, buy and sell stocks and follow the price of your trades. You can even improve your financial education. However, trading apps are usually less convenient to use.

We see the trading apps as great complementary tools for the web or desktop based trading platform and other financial portals. For example, when you want to find a great stock, you should make fundamental or technical analyses via a computer, but follow the price of your bought stock via a trading app. You also can interact very fast via an app whenever your position needs an active intervention, like selling your stocks.

You can take advantage of a trading app in all three stages of your investment journey: the learning phase, the trading idea phase, and the trading phase.

Withing trading apps we created four subgroups to make your life easier when you select: trading apps, charting and trading idea apps, market data and news apps and learning apps. The trading apps are further divided into three groups based on different trading purposes: stock trading apps, forex trading apps and CFD trading apps.

The best trading apps in 2018 are:

After the short overview of the best trading apps in 2018, let's go ahead and look deeper into them.

We start with the apps best for trading since we believe these are the most exciting for you.

Following a more than a year long preparatory work, a regulatory guideline that is often referred to as the ESMA CFD intervention got recently published. These are new regulatory measures affecting online brokerages operating in the European Union and investors using these brokers as a vehicle to achieve their investment goals.

The press release headline of the supranational regulator is more than telling:

ESMA agrees to prohibit binary options and restrict CFDs to protect retail investors - see the full release here.

Continue reading to get answers to the most important questions related to this 2018 ESMA CFD intervention.

To make sure you choose the best online broker for your needs we went ahead and did a thorough research for you. Without such research picking a broker based on ad-hoc preferences is just a guess game. The evaluation criteria contain but is not limited to fees, funding process, withdrawal methods, offered products, ease of account opening and the trading platforms each offer.

After testing 16 online brokers, 6 brokers made it to the top which we highly recommend for you. This selection contains Brokerchooser's four highest-ranked stockbrokers, the highest-ranked forex broker, and the highest-ranked CFD broker.

And now, without further ado… The top 6 picks for the best online brokers in 2018:

Regarding the selected brokers, only Interactive Brokers is available for US clients. 

If you want to check precisely which broker is available from your country, visit our country selector.

All selected broker's portfolio contains CFD products. They are complex and very risky, thus not suitable for everyone. You can easily lose all of your invested money. If you don't have clue what a CFD is, start by reading more about CFD trading. Just a short FYI for US customers: CFD trading is banned in the US.

Not sure which one to choose? For a personal broker recommendation, check out Brokerchooser's broker selection tool. You input your preferences and you get a personal recommendation fitting your needs.

Want to see more options? For comparing all the brokers, visit our comparison page.

What is an online broker?

Thirty years ago if you wanted to buy a stock, you had to pick up the phone and call your broker, who executed the transaction in return for a commission. Brokers were like in the Wolf of Wall Street movie. They were checking the stocks' prices while holding telephone and shouting.

Everything changed after the internet appeared. Nowadays if you want to buy Apple shares, you open online an account, deposit money, and make the order through the brokers' online platform. These brokers are the online brokers.

Online brokers help you buying and selling securities, like stocks. After making your order, the online broker executes it immediately. Everything is online.

Choose the best discount broker, we did the research for you. We tested in-depth only quality online brokers available for European and US customers. We evaluated fees, funding, withdrawal, product portfolios, account opening, trading platforms and more.

As a result, we filtered out the online brokers with the lowest fees and the highest quality.  

Our top eight picks for the best discount brokers in 2018 are:

Head to our country selector to get detailed info on which broker is available in your country.

We have created three online broker categories: discount stockbrokers, discount forex brokers and discount CFD brokers. The three groups substantially differ in several areas, like fee structure, so it makes sense to create the three peer groups. This categorization will also help you to easily find a cheap stockbroker, forex broker or CFD broker.

The best discount broker for beginners is DEGIRO. It has an easy-to-use trading platform and very low fees.

BEST DISCOUNT STOCKBROKERS

BEST DISCOUNT FOREX BROKERS

BEST DISCOUNT CFD BROKERS

CFDs are complex and very risky products, thus not suitable for everyone. You can easily lose all of your invested money. Start by reading more about CFD trading if you don't have a clue what a CFD is. Just a short FYI for US customers: CFD trading is banned in the US.

Not sure which one to choose? For a personal broker recommendation, check out Brokerchooser's broker selection tool. You input your preferences and you get a personal recommendation fitting your needs.

Want to see more options? For comparing all the brokers, visit our comparison page.

What is a discount broker?

A discount broker by definition is a brokerage company that executes your buy and sell orders at a low trading fee. Discount broker's fees can be lower since they don't provide extra services like full-.service brokers. These extra services include research, personal investment advice, tax planning or robo-advisory.

Discount brokers were appearing with the wider penetration of the internet and the online broker services. Brokerage companies started to provide their service online and fully automatized. This was the rise of the online trading platforms. An online trading platform is basically a website, where you can insert your own orders and you get only a customer support, no investment advice. 

The distance between the full-service brokers and discount brokers has been narrowing in the last 5-10 years. Discount brokers started to provide extra services as well, like research, while full-service brokers started to lower their fees.The full brokerage and wealth management industry is under a fee pressure thanks to the more and more cost-effective online broker companies.

Nowadays, the new discount brokers are the free-trade brokers. These provide commission-free trading and charge an extra fee for ancillary services, like after hour trading. The biggest free-trade online broker in the US is Robinhood. In the UK, Freetrade is planning to launch its trading app this year. Stay tuned, we will come out with a Robinhood and Freetrade broker reviews soon.