Contracts for difference (CFDs) are a means of accessing foreign stock markets without ever buying any shares or commodities yourself.
If you want to profit from rises and falls on US stock prices or the Dow Jones as a whole, finding the best US CFD share trading account can help you maximise your returns.
But how do you trade US CFD shares? And what should you take into account when searching for the best CFD broker?
How do you trade US CFD shares?
Simply, a US share CFD is an agreement between two parties to settle the difference between the opening and closing prices of a US stock during the term of the contract.
The value of the CFD settlement is the difference in price multiplied by the number of underlying stocks.
For example, if you correctly predict a rise in a US stock price you will profit by the change in price during the term of the contract multiplied by the number of underlying stocks that you traded. Get it wrong, and this is the amount you'll be liable for.
One of the main advantages of using a CFD US share trading account over buying the shares directly that you can do it ‘on margin’.
This means that rather than needing 100% of the purchase price of the shares as you would with a normal transaction, US share CFD brokers UK will let you trade with around 7-10% of the value of the underlying US shares.
What to look for when you compare US CFD share trading platforms
There are dozens of companies offering a US CFD share trading account. So, it’s important that you compare the benefits of the various accounts in order that you find the right one for you.
When you compare US CFD share trading platforms you should establish what commission the broker charges you on a trade. Some charge a percentage of the value of the shares (typically around 0.2%) while others charge a flat fee of between 2 and 5 cents per share.
It is also a good idea to compare the range of trading options a broker offers.
The best CFD broker will generally offer both online and mobile trading as well as a ‘virtual’ account where you can practice your trading strategies without using your own capital.
You should also establish whether the broker pays interest on any money held in your trading account. Some brokers pay no interest at all while others pay a varying amount.
Finally, while your priority may be to trade US CFD shares it is worth considering a broker who offers other markets such as UK shares or commodities as there may be times when you want to trade CFDs in these assets.
Look for the CFD share trading account that offers the best combination of access to markets, loss limiting tools and competitive fees.
