CFD trading is a popular and potentially profitable form of trading. However, it is also complex and relatively high-risk, so we strongly advise you to do your research if this type of trading is of interest to you. While CFD trading has some similarities with other more traditional forms of trading and investing, it also has some crucial differences.
Australian traders considering getting involved in CFD trading may have several questions. Is CFD trading for me? Which CFD brokers are the best ones for Australian traders? And how can I be sure they’re legitimate and trustworthy? Today we’ll address those questions and ensure you have all the information you need to start CFD trading Australia.
What Are CFDs?
CFD stands for contract for difference, and trading via CFDs allows a trader to speculate on the price of an asset and potentially profit from the trade if they successfully predict the price movement. A CFD is a derivative that enables you to trade the price movements of the financial markets without owning the underlying asset. The CFD gives you exposure to the asset’s price movements and the chance to profit from them without buying the asset itself.
CFD trading is legal and popular in many countries, including Australia, although it should be noted that there are some countries where it is prohibited, most notably the USA. Although it is a widespread form of trading with forex traders, it is also possible to trade CFDs in many other assets, such as commodities, stocks and shares, indices and cryptocurrencies.
Most CFD traders in Australia and elsewhere use leverage when trading CFDs, allowing them to access more capital than they have. The Australian Securities and Investments Commission (ASIC) imposes some restrictions on how CFDs are regulated in Australia, specifically on how much leverage Australian brokers can offer their clients.
These restrictions protect traders and include leverage being restricted to 30:1 on major currency pairs, 20:1 on minor currency pairs, major indices and gold, 10:1 on other commodities and minor indices, and 5:1 on shares and other assets. Finding cryptocurrencies to trade as CFDs is not as easy as with other assets. However, if you find a broker offering crypto CFDs in Australia, the leverage it can offer will be restricted to 2:1.
Are CFDs Safe?
CFDs are inherently high-risk, and high leverage levels can lead to sudden losses. However, CFDs are safe to trade with a reputable broker. You need to understand the risks and ensure you know how to use leverage sensibly. We advise you not to trade with more than you can afford to lose, as all trading can be risky. There are other low-risk investments that you can make alongside CFD trading to provide you with a well-balanced portfolio.
To trade CFDs safely in Australia, look for a reputable and trustworthy broker fully licensed and regulated by the Australian Securities and Investments Commission (ASIC). Brokers in Australia, or those offering services to residents in the country, should be overseen by ASIC, as this provides traders with a certain amount of security and protection.
ASIC ensures that brokers operate safely, following all best practices for the industry. For example, ASIC brokers are not permitted to offer gifts, bonuses or incentives to open a CFD account or deposit more money into an existing margin account. ASIC brokers must also guarantee that if the funds left in your CFD account are less than 50% of the margin required to cover your open positions, one or more of your positions will be closed. In short, regulations in Australia aim to limit the total amount of loss any CFD trader can accumulate across their open positions.
If you are going to trade CFDs in Australia, you should do so as safely as possible. You can do so by ensuring that the broker you use is ASIC regulated and by educating yourself to fully understand how CFDs work and the risks involved in CFD trading. Then you can develop good risk management and trading discipline, making you less likely to sustain large trading losses. Those new to CFD trading may want to use a demo account to try out their trading strategies before investing any real money. Indeed, this can be useful even for more experienced traders if they want to experiment with new trading techniques, tools, and strategies.
The Benefits of Trading CFDs in Australia
CFD trading comes with various benefits, such as using leverage to use more capital than you have on deposit. In Australia, that leverage can be as high as 30:1 (that is, 30 times the amount you have) when trading major currency pairs, which is probably part of the reason why CFDs are popular among Australian forex traders. CFD trading at a reputable ASIC-registered brokerage also tends to mean you have access to a variety of markets, asset classes and instruments, along with the ability to open long or short positions, usually with fast and easy order execution.
CFDs are taxable in Australia, but this also means that should you be unlucky enough to make an overall loss on your trading, it may be an allowable tax deduction. As most Australian residents know, taxes can be complicated, and penalties for getting things wrong are severe, so consult a tax professional if you’re unsure of the tax implications of any profits or losses from CFD trading.
An advantage of trading CFDs in Australia, as opposed to some other countries, is the regulation offered by ASIC. Brokers who are ASIC-registered should follow strict guidelines put in place to protect customers, and complaints can be lodged with ASIC if a broker behaves illegally or inappropriately.
How to Choose a Safe CFD Broker in Australia
There is a choice of CFD brokers available to those trading in Australia, some are based in the country, and some are based elsewhere but are licensed to operate in Australia. There are also unregulated offshore brokers that market their services to Australians, but we advise you to avoid them, especially if you are a new or inexperienced CFD trader. Check that the brokers you are considering are legitimate ones regulated by ASIC by going directly to the ASIC website to see if the broker is listed.
Be aware that there are some fairly sophisticated scam brokers out there, so check that all the details on the ASIC website match the information on the site of the broker you are considering. Some scam brokers will imitate or clone a reputable, regulated broker site and change just a few details, such as the phone number and email address, so you think you are on the website of a legitimate broker.
When it comes to CFD trading, Australian brokers all offer something a little different. When you have established that the broker is safe and regulated, look at the details of the site and trading platform to make sure it fully meets your needs and requirements. Look around and check out the education and training offered, the customer support channel, the ease of use of the site, and the mobile app if you will be using it. If you are new to CFD trading, pick a beginner-friendly brokerage that will help you get started and provide all the support you need in the early days of trading.
The Safest CFD Brokers in Australia
While there are plenty of safe CFD brokers in Australia, there are also some scammers and brokers who don’t have a very good reputation. Here at ForexFraud.com, we regularly examine and review various CFD brokers to ensure that they follow the rules and offer their clients the best service, including safe and fair-trading conditions. Here is a table of the CFD brokers in Australia that we recommend.
| Broker | Features | Min Deposit | EURUSD Spread | ||
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 Your capital is at risk
US Clients: No Regulated : Yes
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– Flexible leverage up to 500:1 |
$200 | From 0.1 | ||
 Your capital is at risk
US Clients: No Regulated : Yes
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$200 | From 0.1 pips | ||
 Your capital is at risk
US Clients: No Regulated : Yes
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– 40% New Member Bonus
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$100 | Fixed |
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Europe* CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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 81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
US Clients: No Regulated : Yes
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– FCA (FRN 509909), ASIC, FMA, and FSCA Regulated. |
100GBP/AUD/EUR/USD | variable |
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81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
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 Between 74-89 % of retail investor accounts lose money when trading CFDs
US Clients: No Regulated : Yes
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$200 | NDD 0.09 / Standard 0.69 |
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Between 74-89 % of retail investor accounts lose money when trading CFDs
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 76% of CFD traders lose money
US Clients: No Regulated : Yes
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$50 (varying by Country) | from 1 |
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76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
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If you are an Aussie trader considering CFD trading, Australian brokers can provide everything you need to get started. You will have the peace of mind that comes with knowing you are dealing with an Australian firm regulated by the Australian governing body.
Ensure that the broker is regulated by ASIC and has positive reviews online. Don’t forget to assess the factors that matter to you as a new CFD trader, such as what education is on offer or whether a demo account is provided. Before you start, ensure you fully understand how CFDs work, as they are complicated instruments. Take a close look at both the benefits and drawbacks of CFD trading, and make sure you have the right risk management strategies in place to ensure your CFD trading activities are as safe as possible.