The contract for Difference or CFD is an alternative trading instrument that enables traders to access a variety of assets such as commodities, indices, stocks, forex, and even cryptocurrencies. If you are considering investing in CFDs, here are some tips that will help you find the best CFD provider in Singapore.
Licensing
The first and most important thing is to check whether the CFD provider is licensed to operate in Singapore. Just like other financial institutions, CFD providers are regulated by the MAS (Monetary Authority of Singapore) to ensure they comply with the strict financial regulations in the country. For instance, CFD providers are required to put customers’ funds into a separate trust account that is under the custodian of a third party.
If the CFD provider becomes bankrupt, the customers’ funds held in the trust account cannot be used to settle liabilities. In CFD trading, a broker can become insolvent, and therefore it is always vital to ensure the safety of your investment is guaranteed.
The type of CFD provider
There are two types of CFD providers: The Market makers and Direct market access (DMA) providers. The two types of CFD providers offer their customers different advantages and features. For market makers, they charge lower commissions to their clients and have lesser capital requirements compared to direct market access providers. Market makers also offer a wider variety of stocks and indices than their counterparts.
Check their margin requirements
CFD trading is based on leverage. Therefore, it’s vital to check the margin requirements of the CFD provider before investing in their products. CFD broking is a highly competitive market. It is, therefore, rare to find significant differences in margin requirements among CFD providers in SG. Most of the times, the margin requirements for shares, indices, and forex are the same for all brokers. However, you may find price differences in commodity CFDs such as silver and gold.
The type of products offered by the CFD provider
CFD contracts enable you to trade in a variety of products such as shares, commodities, forex, stocks, indices, and bonds. The type of CFD products offered by brokers vary. It is, therefore, essential to look out for CFD providers with your preferred asset type.
For instance, most of the DMA providers specialize in local and regional assets, and probably a few international offerings. On the other hand, most of the market makers allow traders to access assets from various markets around the globe. Also, some brokers offer a limited variety of products, while others offer a wide range of CFD products for customers to choose from.
It is essential to mention that when choosing a CFD provider in SG, lack of variety should not be a significant issue. Some brokers specialize in a few products, while others offer a full range of products. You can choose a CFD provider as long as you are comfortable and familiar with the products being offered.
The type of analytical tools offered by the broker
The best investment decisions are made based on facts and figures. There is no better way of getting the correct data than with the right tools. Some of the tools offered by CFD brokers help traders to access information and resources to make sound investment decisions. Examples of such tools include charts for pattern recognition, technical analysis, and news updates.
The uniqueness of the CFD provider
The CFD market is full of brokers who specialize in different products. Most of the brokers have also devised systems and strategies which they use to invest in CFD products. While looking for a CFD broker, it is, therefore, essential to search for a provider that suits your needs.
What might be the best broker you may not be the right fit for someone else. In some instances, it is impossible to get everything you need in one broker. You may, therefore, need to work with more than one CFD provider to achieve your goals.
