The best brokers to invest in CFDs

Investing in CFDs it offers you the possibility of achieving great benefits with relatively small investments. But, as with everything related to money on the internet, it is not always easy to distinguish reliable platforms from malicious ones, which are engaged in committing scams and scams.

In Estafa.info we want to help you solve that problem. If you want to know which is the best rated CFD broker in our test, we opted for eToro .

In addition, below we offer you a table with the best CFD brokers available in New Zealand according to our opinion.

Warning: CFD currency transactions carry risks.

Below, we explain the criteria and factors that we looked at to make the table, so that you yourself can also evaluate the reliability of any CFD broker that you find surfing the net. For brokers in general, we recommend our entry on the best online brokers of 2021 with the safest options to invest your money.

What are CFDs?

Acronym CFDs they refer to the so-called Contracts for Differences , and they come from English, specifically from the words Contract for difference . The operation of this type of investment is simple. If you invest in CFDs, what you are doing is trading the price difference of an asset between the opening moment and the closing moment of the contract. In other words, if you buy an Iberdrola CFD when it is at $ 10 and sell it when it reaches $ 11, you will have earned one dollar, but to do so you will not have needed to block the $ 10 that the Iberdrola share cost when you made the purchase, but a much lower guarantee, which can usually be 10%, that is, you will have earned one dollar, investing one dollar, with a 100% return, for a variation of the asset of only 10%. It should be borne in mind that CFDs are a speculative financial instrument and, therefore, do not grant political rights over companies (the holder of CFDs cannot vote at shareholders' meetings), but on the other hand, they offer you important advantages when investing.

Advantages of CFDs

First of all, this type of investment will allow you to position yourself short and long , so that you will be able to obtain profitability, both when the price of the asset goes up, and when it goes down . In the latter case, they are especially useful due to the simplicity of their operation in contrast to other products that allow trading downwards. In addition, being a speculative instrument, they do not have an expiration date , which is undoubtedly another great advantage over other futures products.

As you may have noticed in the previous example about Iberdrola, another fundamental feature is that we are talking about a leveraged financial product . This means that with a small amount of money, we can move large sums of capital, which allows us to diversify optimally in the same way that large investors do. Of course, the fact of being a leveraged product carries a great financial risk, which should always be taken into account, as it could lead you to lose all your investment. However, they are a great tool to manage risks, since through CFDs, hedging strategies can be carried on the value of traditional assets risking very little money thanks to the aforementioned leverage. In addition, you should know that CFDs are derivative products that are not listed on an organized market, which means that special care must be taken with the CFD broker that is chosen to operate, this must offer the maximum guarantees of being a reliable and fraud-free company.

Although we said that with this investment the political rights associated with shares are not enjoyed, contrary to what happens with warrants and futures, with CFDs you will receive the associated dividends to the asset in which we have invested. Specifically, the full amount if you acquire a selling position and 80% of the dividend if you get a buying position.

Finally, another of the great advantages of CFDs, as with the binary options trading , is that you they allow to operate with a great diversity of assets which most small investors either do not have access to, or it is as if they did not have it due to the large amounts that need to be invested so that commissions do not eat the profitability. CFDs, being a leveraged product, allow you to move a lot of money and, therefore, you can invest in foreign currencies, commodities or foreign shares, in a much more efficient way than through traditional products such as stocks or ETFs, with which you would need tens or hundreds of thousands of NZD to offset broker fees.

How to trade CFDs

To trade CFDs the first thing you need is to choose a good CFD broker that it is of your trust and gives you all the necessary guarantees to deposit your money with peace of mind. Once this is done, you will only need to understand well how the operation of this financial instrument works. Here we explain it to you.

Let's take an example with a round figure, $1000, and a well-known stock like Banco Santander. If the bank's shares are trading at $10, with your $1000 you could traditionally buy 100 shares (100×10= 1000). CFDs, being a leveraged product, offer you the option to buy many more.

If you CFD broker request a 10% guarantee (the guarantee depends on the brokers and the assets you want to buy) with your $1000 you would be buying contracts for $ 10,000. In this way, you would only need to invest $ 100 to move the $ 1000 with which you wanted to trade initially, staying another $ 900 in liquidity, to face other investments, or simply have them available.

Risks of CFDs

But just as your investment multiplies, so do the risks. If Banco Santander shares move 10% in the opposite direction to your position, you will lose your investment. Keep in mind that with traditional stock investing, in order to lose all your money, the shares would have to go down from $10 to $0, but with CFDs, it should only go down from $10 to $9 (or up if your position was selling). To avoid this very dangerous risk, CFD brokers offer the possibility to put a limit on losses in exchange for the payment of a higher commission. Therefore, if you don't want surprises, you should always trade with a stop loss. In addition, there are financial platforms that close their clients' positions when they have lost all the collateral money. But, it's not always like that! Other brokers accumulate your debt beyond what they asked you for as collateral and will ask you to disburse the total losses you incur, something that of course will not happen if you put the stop loss because your position will be closed automatically.

In short, before trading, find out well how to set a loss limit and do not invest the money you do not have. If you follow these two simple tips you will be able to see that with CFDs you can get simply impressive profit figures, with relatively small variations of the assets in which you invest. Exactly as in the example of Iberdrola.

Criteria for evaluating a CFD broker

For evaluating a CFD broker and choosing a suitable one for trading, several factors should be analyzed. Undoubtedly, the first thing that should be checked is if the online broker is suspected of being a scam . If there is the slightest suspicion of any kind of scam, it is best to opt for some other CFD broker available on the market. The second fundamental factor is its service offer , i.e. answer the question What can I invest in with this investment platform? In addition, factors such as availability of the customer service , if they exist mobile applications and other less important factors, such as offers and promotions.

How to tell if a CFD broker is a scam

Therefore, the most important factor in choosing the best CFD broker to trade with is security. Here we explain how to answer the popular question of whether a particular investment platform is a reliable company or, on the contrary, is a scam

1. Regulations: CFD brokers are aware that users worry a lot about the possibility of being scammed. Therefore, a reliable website will always boast of the strict regulations it follows and the security requirements it is forced to comply with. The main detail that you should check is in which regulatory authority a particular broker is registered. In addition, to invest in New Zealand, it is advisable that you are also registered with the CNMV.
2. Physical address and contact details: Companies that are engaged in scams, do not share their physical address. Since they are not going to attend to your complaints, they are not interested that you can send them to them.
3. Encryption of information: It is useless for us that the company is absolutely trustworthy, if it does not take the appropriate security measures and allows third parties to get our data when we make transactions. For all actions with money, the web must encrypt the information with an SSL encryption.
4. Terms and conditions: In this case, each company has its own conditions and it is very important to know them well, especially if we are going to access some kind of promotion, since sometimes it is difficult to withdraw the money later. A legit company will offer you their terms and conditions on their website in an easy to find way.
5. Methods of entry, withdrawal and requirements: Brokers are forced to verify your identity before allowing you to withdraw the money. In fact, if they do not, it is a suspicious practice that is against the law.
6. Customer service: The work of clarification and help in the face of user problems carried out by this service makes a broker with good customer service much more desirable than another that does not have it and in the end it is safer for its clients, because unnecessary misunderstandings will not occur.

By analyzing these factors, you will be able to get a clear idea of how reliable a broker is. In Estafa.info we are happy to help you decide, but we also think it is important that you have the necessary knowledge to make your own decision.

Other factors for choosing a CFD broker

We have already commented that one of the main attractions of brokers that operate with CFDs is that they allow us to diversify in a way that we could not imagine if we simply accessed the stock and ETF market, as is usual in commercial banks. That is why the supply of assets in which you can trade is a very important factor to take into account.

Before opening your account at any financial broker, check which assets you will be able to invest in. Perhaps the possibility of investing in the New Zealand stock exchange is the least attractive for you, because you can do that from your bank or from any investment service that you have contracted. On the contrary, being able to invest in commodities such as gold, silver, oil or copper is a very attractive diversification possibility. The same goes for the possibility of foreign exchange investing. There are many brokers to invest in forex but not everyone allows it. When analyzing the investment assets that a given platform offers you, don't just look at the number of them. It's no use having thousands of assets if they all belong to the same sector. Check that the supply of assets allows you to diversify. Of course, the basic sectors are new technologies, industry, raw materials and consumption, but there are other more specific ones such as pharmaceuticals that sometimes give great opportunities.

Finding

Investing in CFDs is very interesting because it offers the possibility of obtaining high returns and diversifying in a much more optimal way than through traditional investment. On the negative side is the risk associated with a type of investment based on leverage, with which you should always be cuiVegas Palmso.

In addition, there are deceptive websites that pretend to be reputable brokers, but which are really nothing but online frauds. To help you choose the right CFD broker for you and, above all, fraud-free, Estafa.info he has prepared complete reviews and analyzes, which we invite you to read. We recommend that when making your choice of CFD broker you take a look at the table at the top of this page so that you can get a small overview of the best CFD brokers.