Best Australian CFD brokers for 2024

The Significance of Choosing the Right CFD Broker in Australia

Selecting the right CFD broker is crucial for a successful trading experience. A good broker will provide competitive trading conditions, reliable platforms, and strong customer support. Below are some factors to consider when choosing a CFD broker in Australia:

• Regulation and Safety: All Australian CFD brokers must be regulated by ASIC, which enforces strict rules to protect traders. This regulation ensures that brokers adhere to ethical practices, segregate client funds, and provide negative balance protection.
• Trading Platforms: A robust and user-friendly trading platform is essential. Look for brokers offering platforms like MetaTrader 4, MetaTrader 5, or proprietary platforms with advanced charting tools, technical indicators, and risk management features.
• Spreads and Fees: Competitive spreads and low fees can significantly impact your profitability. Ensure the broker offers transparent pricing, including spreads, commissions, and any overnight financing charges.
• Customer Support: Efficient customer service is key, especially when trading volatile markets. Ensure your broker offers responsive support through live chat, phone, and email, available during Australian trading hours.
• Educational Resources: CFD trading requires knowledge and practice. Choose a broker that offers comprehensive educational materials, webinars, and demo accounts to help you build your trading skills.

Now that we understand the significance of choosing the right CFD broker, let’s take a look at the top CFD brokers in Australia.

The Top Australian CFD Brokers Reviewed

1. IG Markets

IG Markets is one of the longest-standing and most trusted names in CFD trading. This CFD company offers Australian traders a wide array of financial instruments. As an ASIC-regulated broker, IG ensures the highest standards of client protection. What sets IG apart is its extensive market access, offering over 17,000 markets, including shares, commodities, forex, and indices. For those looking for flexibility, IG provides multiple trading platforms, including their proprietary web platform, MetaTrader 4, and L2 Dealer for direct market access.

2. CMC Markets

CMC Markets is renowned for its intuitive trading platform, which offers traders in Australia access to more than 10,000 financial instruments. Whether you’re trading forex, commodities, shares, or indices, CMC Markets delivers a seamless experience with its proprietary Next Generation platform. Known for its rich charting tools, over 80 technical indicators, and pattern recognition software, CMC Markets is ideal for technical traders.

3. Pepperstone

Pepperstone is particularly favored among forex traders for its ultra-fast execution speeds and low spreads, making it a great choice for high-frequency and scalping strategies. This  offers two main account types: Standard and Razor, the latter of which provides raw spreads with commissions. For traders focused on forex, they offer spreads starting at 0.0 pips, with an average of 0.1–0.3 pips on major currency pairs.

4. Plus500

For those looking for a straightforward trading platform that doesn’t compromise on functionality, Plus500 is an excellent choice. Known for its user-friendly interface, Plus500 allows Australian traders to access a wide range of CFDs, covering shares, forex, indices, commodities, and cryptocurrencies. One of the platform’s standout features is its simple yet powerful risk management tools, such as negative balance protection and customizable stop-loss orders.

5. eToro

Last but not least on our CFD brokers list is eToro. It stands out in the Australian CFD market due to its unique social trading features, which allow traders to copy the strategies of experienced investors. For those new to CFD trading or without the time to actively manage trades, eToro’s CopyTrader function is a great way to learn and profit by following more experienced traders.

Is CFD Trading Taxed in Australia?

Yes, CFD trading is taxed in Australia. Profits from CFD trades are considered capital gains and are subject to the capital gains tax (CGT). However, if you’re trading CFDs frequently, your gains may be treated as business income, and different tax rules may apply. It’s advisable to consult a tax professional for guidance on how your CFD trading will be taxed.

CFD Trading vs. Traditional Stock Market Investing

CFD trading is quite different from traditional stock market investing, but this doesn’t mean it’s a less appealing option. In fact, many traders prefer CFDs for the flexibility they offer. While the stock market opens and closes at set times, CFD trading can happen around the clock, especially in the forex and commodity markets. This gives traders more opportunities to capitalize on market movements at any time of day.

For example, when trading CFDs on major indices or stocks, the rules may not seem all that different from owning the physical shares. However, with CFDs, you don’t own the underlying asset—you’re simply speculating on its price movement. This means you can trade both upward and downward trends without the restrictions found in traditional stock investing.

Take the S&P 500 as an example: trading this index via CFDs lets you open long (buy) or short (sell) positions based on market trends. You could make gains in either direction, as long as you predict the right movement. If you are an experienced stock trader, you might find CFDs particularly appealing due to the ability to use leverage, allowing you to control larger positions with less capital. However, leverage also increases your risk, so careful risk management is crucial.

Why CFDs offer more flexibility

One key benefit of CFD trading is the ease with which you can diversify your portfolio. Since you’re not buying actual assets, you can easily open positions across multiple asset classes—forex, commodities, stocks, or indices—all within the same trading platform. This kind of flexibility can be a huge advantage, especially for short-term traders or those looking to hedge their positions in traditional investments.

Additionally, since CFDs allow for trading outside of regular market hours, traders have more control over when they enter or exit trades. For instance, if a major economic event occurs overnight, you can quickly react to price movements without waiting for the market to open. This 24-hour availability makes CFD trading particularly attractive for traders who follow global news or want to take advantage of sudden price fluctuations.

CFDs jargon – The key terms used in cfd trading

Much like in the world of traditional investing, CFD trading comes with its own terminology that you need to familiarize yourself with in order to be successful. Understanding these key terms will make it easier to navigate the CFD markets and communicate with other traders.

Leverage

Leverage is a major feature in CFD trading, allowing you to trade positions much larger than your initial capital. For example, if a broker offers 10:1 leverage, you can control a $10,000 position with just $1,000. This can amplify profits, but also increases potential losses, making risk management crucial.

Margin

The margin is the initial deposit required to open and maintain a leveraged CFD position. It acts as collateral to cover any potential losses. The margin requirement depends on the asset you’re trading and the broker you’re using, typically expressed as a percentage of the total position size.

Spread

The spread is the difference between the bid (buy) price and the ask (sell) price of an asset. This small gap represents the broker’s fee and can vary depending on market conditions. In highly liquid markets like forex or major stock indices, the spread is often tighter, while less liquid assets may have wider spreads.

Stop-Loss

A stop-loss order is an essential risk management tool that automatically closes your position when it reaches a predetermined loss level. By setting stop-loss orders, you protect yourself from losing more than you’re willing to risk on a single trade, which is especially important in volatile markets.

Overnight Financing

When holding CFD positions overnight, you may incur financing charges. This is because you’re trading on margin, and the broker effectively lends you money to hold the position. The cost of this overnight financing depends on the asset and the current interest rates.

CFD Trading Strategies

Successful CFD trading often depends on adopting the right strategies. Here are some commonly used strategies by Australian CFD traders:

Scalping

Scalping is a short-term strategy where traders look to profit from small price movements. This approach involves opening and closing multiple positions within a day, taking advantage of minor fluctuations in price. Scalpers typically use low time frames like 1-minute or 5-minute charts and focus on assets with high liquidity such as forex or indices.

However, high-frequency trading like scalping requires low spreads and fast execution, which is why brokers like Avatrade and FP Markets are popular among scalpers in Australia.

Swing Trading

Swing trading is a medium-term strategy that capitalizes on market ‘swings’ or price fluctuations over days or weeks. Traders using this strategy often rely on technical analysis and chart patterns to identify potential reversal points. This strategy is suitable for traders who don’t have time to monitor the markets constantly but want to take advantage of larger price movements. Brokers with advanced charting tools, such as CMC Markets, are ideal for swing traders.

Day Trading

Day traders open and close positions within a single trading day, aiming to profit from intraday price movements. They rely on technical indicators, news events, and economic releases to make quick decisions. This strategy requires a solid understanding of market dynamics and constant attention. Platforms like MetaTrader 4 and 5, offered by brokers such as Pepperstone and IG Markets, are commonly used by day traders in Australia.

Hedging

Hedging involves opening positions to protect existing investments from adverse price movements. CFD traders often use this strategy to offset potential losses in other markets. For instance, a stock investor might use CFDs to short an asset they already hold in their portfolio, protecting against a decline in price. This strategy requires careful risk management, and brokers with guaranteed stop-loss features, such as Fusion Markets, are often favored by hedgers.

What to Look for in an Australian CFD Broker?

When choosing a CFD broker in Australia, it’s important to consider the following factors to ensure you are trading with a reliable and suitable platform:

Regulation

Ensuring that the broker is regulated by ASIC is crucial for protecting your funds. ASIC-regulated brokers must adhere to strict guidelines, which provide additional layers of security for traders. All the brokers listed above—IG Markets, Pepperstone, CMC Markets, Plus500, and eToro—are ASIC-regulated, meaning they operate under Australia’s stringent financial laws.

Spreads and Fees

CFD trading fees usually come in the form of spreads, the difference between the buy and sell price of an asset. Choosing a broker with competitive spreads can help reduce trading costs, especially for frequent traders. Additionally, some brokers charge commissions on trades or overnight holding fees for leveraged positions. Brokers like Pepperstone and FP Markets offer low spreads, particularly in forex markets.

Trading Platforms

The trading platform you use will significantly impact your trading experience. Look for platforms that offer a user-friendly interface, advanced charting tools, and seamless order execution. MetaTrader 4, MetaTrader 5, and cTrader are among the most popular platforms for CFD traders. Pepperstone and IG Markets provide multiple platform options, making them versatile choices for various trading styles.

Asset Variety

Some brokers offer access to a wide range of CFD markets, including forex, shares, commodities, indices, and cryptocurrencies. If you plan to diversify your portfolio, ensure the broker provides the specific markets you’re interested in. CMC Markets, for example, offers over 10,000 financial instruments, making it a great choice for traders who want to explore different markets.

Leverage Options

Leverage allows you to control a larger position than your capital would typically allow. However, it increases both potential profits and losses. Australian traders have access to leverage under ASIC regulations, but it’s capped at 500:1 for retail traders in forex and lower for other asset classes. Make sure the broker offers flexible leverage options suitable for your trading strategy.

Final Thoughts

CFD trading in Australia offers a flexible and potentially lucrative way to gain exposure to various financial markets, from forex to shares, commodities, and even cryptocurrencies. However, it’s crucial to choose the right broker, adopt a well-thought-out trading strategy, and understand the risks involved, especially when using leverage.

Whether you’re a beginner looking to start your trading journey or an experienced trader seeking advanced tools, the Australian CFD market provides a wide range of brokers and platforms to suit different needs. Always ensure that your chosen broker is regulated by ASIC, and don’t hesitate to take advantage of educational resources, demo accounts, and risk management tools to enhance your trading experience.

CFD Trading Australia FAQs

What is CFD trading, and how does it work?

CFD (Contract for Difference) trading allows traders to speculate on the price movements of various financial assets without owning the underlying asset. When you trade CFDs, you enter into an agreement with a broker to exchange the difference in the asset’s price from the time you open the position to the time you close it. If the price moves in your favor, you make a profit; if it moves against you, you incur a loss. CFDs are typically leveraged, meaning you can control larger positions with a smaller amount of capital, but this also increases both potential profits and losses.

Is CFD trading legal in Australia?

Yes, CFD trading is legal in Australia and regulated by the Australian Securities and Investments Commission (ASIC). ASIC ensures that brokers adhere to strict rules to protect traders, such as holding client funds in segregated accounts and providing transparent pricing. However, CFD trading is a high-risk activity, especially due to the use of leverage, so it’s essential to trade with a regulated broker and use proper risk management techniques.

Can I trade CFDs with leverage in Australia?

Yes, leverage is available for CFD trading in Australia, but ASIC has placed limits on how much leverage retail traders can use to protect them from excessive risk. The maximum leverage allowed is 30:1 for major forex pairs and lower for other assets like commodities, shares, and cryptocurrencies. While leverage can amplify profits, it also increases the risk of significant losses, so traders must use it cautiously.

Are CFD trading profits taxable in Australia?

Yes, profits from CFD trading are taxable in Australia. They are considered part of your assessable income and must be declared on your tax return. If you’re trading as a business or frequently, your profits may be taxed as business income. On the other hand, if you trade occasionally, they could be classified as capital gains. It’s advisable to keep detailed records of your trades and consult a tax professional to ensure you meet your tax obligations.

What are the risks associated with CFD trading?

The main risks of CFD trading include leverage risk, market volatility, and liquidity risk. Leverage can magnify both profits and losses, making it possible to lose more than your initial deposit. Market volatility can lead to rapid price changes, sometimes resulting in significant slippage. Additionally, in illiquid markets, you may find it challenging to execute trades at your desired price. Proper risk management, such as using stop-loss orders and trading with regulated brokers, can help mitigate these risks. Also, traders should always be prepared for potential losses.