One of the drawbacks of CFD share trading is that it is less regulated than stock trading. This fact is not a deal-breaker because high-quality CFD brokers exist, and you can locate them if you know where to look.
First, you should always trade with regulated brokers. For example, TMGM is regulated by the Financial Markets Authority (FMA).
Second, the broker should be transparent about costs. They should list information about commissions, fees, and bid/ask spreads.
Third, the broker should offer leverage. One of the main advantages of CFDs is that you can increase the size of your position by borrowing capital from the broker. When trading CFD shares, leverage ratios are typically lower than they are for forex CFDs. However, you should be able to find margins of 1:10 to 1:20. At TMGM, we offer 1:20 leverage for share trading (when you use the MT4 platform).
Fourth, the broker should offer shares from the world's most important financial markets. CFDs allow access to global markets, so you want a broker with blue-chip listings from Asia, the US, Australia, and other major world markets — like TMGM.
Other features are also important. For example, the top brokers offer demo accounts that you can use to learn the nuances of trading CFD shares and test new strategies before risking real money on them.
Frequently Ask Question
When starting, you should select a platform (MetaTrader 4 and IRESS are excellent options) and ensure you know how to place orders, read charts and indicators, and use risk management tools.
So, if you are an active trader with limited capital, CFDs are better than stocks for your goals.