What exactly is CFD trading and how does it differ from owning stocks?

CFD stands for "Contract for Difference." When you trade a CFD, you are not buying the physical asset (like a share of Apple or a bar of Gold). Instead, you are entering into a contract with the broker to exchange the difference in the asset's price between when you open and close the trade.

This allows you to profit from prices moving up (going long) or prices moving down (going short). The main difference is ownership. With stocks, you own a piece of the company and may get voting rights. With CFDs, you are purely speculating on price. A key feature of CFDs is the availability of leverage, which means you can trade with more money than you actually have in your account, magnifying both potential profits and potential losses.

As a beginner, which platform do you recommend to start with?

If you are new to trading, it is advisable to choose a platform where the interface is very easy to use, has lots of educational resources, and offers a safe way to practice with a risk-free demo account. Plus500 and Mitrade both provide a great place to start due to their easy-to-use and clear interfaces. Plus500 offers a demo account that has live quotes so that you can practice trading without having to take the risk. Mitrade has a strong focus on cost transparency, as well as having risk management tools (e.g., stop-loss) integrated in their platform, this is very helpful so that you are developing good habits right away when trading. eToro provides an avenue for beginner traders who learn more by watching and copying other traders, through its CopyTrader™ feature. As with any other broker, the best approach is to open a demo account and start getting familiar with the platform, and until you are familiar with the platform, only trade with very low amounts of real money.

What are the main fees I should watch out for?

The main fees to watch for are that, if you know where to look, will give you a clear view of the fees associated with trading CFDs. The primary fee that every trader will know about is the spread, which is the difference between the price at which you buy and the price at which you sell. The majority of brokers (such as Mitrade and Plus500) do not charge a commission for trades, but charge based on the spread you trade against. Therefore, brokers that have lower spreads will offer you lower costs. The next key cost is overnight funding fees, (also referred to as swap rates), which will be charged if you hold a leveraged position after a certain time (usually 10 PM GMT). The overnight funding fee can be an important factor for many swing traders to consider when determining their profit and loss in a CFD trade. Finally, some CFD brokers (such as Oanda and Mitrade) may charge inactive account fees if your account has not been active for an extended period of time (6-12 months). In summary, for a day trader, tight spreads are crucial, while a swing trader must factor in overnight costs, what is most important for a day trader is the spread being tight, while a swing trader must account for the overnight costs of holding a position overnight. Always research and review a broker's fee structure; brokers that are transparent about their fees will generally respect your capital.

How does leverage work in trading?

Leverage is a tool that allows you to multiply your exposure to a financial market without committing the full amount of capital required. For example, if a broker offers 1:100 leverage, you only need to put down $10 (the margin) to control a trade worth $1,000.

If the market moves 1% in your favor, you make 1% on the $1,000 (which is $10). Since you only invested $10, you have effectively doubled your money (100% profit). However, leverage is a double-edged sword. If the market moves 1% against you, you lose $10, wiping out your entire margin deposit. This is why high leverage (like Oanda's 1:888) is strictly for professionals, while lower leverage (1:30 or 1:100) is recommended for standard retail traders.

What is "Copy Trading" on eToro?

Copy trading lets users automatically follow the trades of more experienced traders. As such, eToro has a feature that lets users see the profiles of "Popular Investors," including a historical view of their performance, their risk score, and their portfolio composition.

When you allocate funds to copy a trader (e.g., $200), all of the trades they make will be represented in your account according to the same proportions as your investment. So, if they purchase Bitcoin, you will purchase Bitcoin; if they sell Google (GOOGL) , you will sell Google (GOOGL). This method is great for users who would like to get exposure to the markets but do not have the time or knowledge to analyse charts all day long. However, users should remember that just because traders show good performance in the past, it does not guarantee that they will produce the same results in the future. In essence, copy trading delegates your trading decisions to another investor, so it's crucial to choose carefully.

Can I trade cryptocurrencies like Bitcoin on these CFD platforms?

Definitely, you are able to do this through many platforms including Plus500, IG Markets, Mitrade and eToro, all of which provide a number of CFDs to trade on top 10 coins, including BTC and ETH, quoted vs USD or other fiat currency. OANDA also provides TradingView integration, so you can access this as well.

The key point is that trading a cryptocurrency CFD means you do not own the underlying asset. You cannot withdraw it to a private wallet; you are simply speculating on its price movement. This model has advantages—such as the ability to short-sell, use leverage, and trade on a regulated platform—and disadvantages, like being unable to use the asset for payments or for long-term storage off-exchange. The extreme volatility of crypto markets, combined with CFD leverage, makes these very high-risk instruments.

Do I have to pay taxes on CFD profits?

In most jurisdictions, yes. Your CFD profits will usually count as taxable income or capital gains. It completely depends on your country's rules and if you're seen as a casual investor or a pro trader. For example:

• UK: CFDs are subject to Capital Gains Tax. (Spread betting there is tax-free).
• US: CFDs are basically off-limits for most regular traders.
• Australia & Europe: Profits are generally taxable.
• The big takeaway? Never assume. Tax laws are complex and change. Your broker won't do this for you. At the end of the tax year, download your full trading statement from your platform. After that, you will need to go to a local accountant or tax professional that understands how to report your investment income. Failing to report accurately can lead to penalties.

Can I trade on my mobile phone?

Yes, mobile trading is now the standard. All the platforms reviewed here—Mitrade, Plus500, eToro, IG, and Oanda—offer highly rated mobile apps for iOS and Android. These aren't just "lite" versions; they are fully functional trading terminals.

You can execute trades, set stop-loss and take profit orders, deposit funds, and view real-time charts directly from your phone. Apps like Plus500 and Mitrade are specifically praised for their mobile User Interface (UI), which includes features like price alerts (Push Notifications) that tell you when an asset hits a certain price, ensuring you never miss a trading opportunity even when you are away from your desk.

What is a "stop-loss" and why do I need it?

A stop-loss is the most critical risk management tool in a trader's arsenal. It is an automatic instruction you give to your broker to close a trade if the price moves against you by a specific amount. For example, if you buy Gold at $2,000, you might set a stop-loss at $1,950.

If the price crashes while you are sleeping or not looking at your phone, the system will automatically sell your position at $1,950, limiting your loss to a manageable amount rather than letting it run to zero. Platforms like Mitrade and IG allow you to set these easily. Some even offer "Guaranteed stop-losses" (for a small fee) which guarantee your exit price even if the market gaps (jumps) suddenly due to news volatility.

10. How do I choose the best platform for me?

To choose the right platform, identify your primary goal. If you are a beginner wanting to trade on your phone with low costs, start with Mitrade or Plus500. Their interfaces are forgiving and clean. If you want to leverage the wisdom of the crowd and let others trade for you, eToro is the undisputed king of social trading. If you are a technical analyst obsessed with charts, Oanda (with TradingView) or IG Markets (with MT4) are better suited for your needs. Finally, confirm the minimum deposit and, most importantly, ensure the broker is properly regulated in your country before signing up.