When you are considering a new CFD provider, one of the most difficult things to assess is the platform performance. When looking at trading platforms, you naturally look at ease of use, but the platform performance in real world conditions is very important. In fact, in my opinion when deciding on a broker to use, price should not be topmost of one’s agenda. The priorities should be a) reliable platform, b) reliable backup plan should platform go down, c) speed that system deals. Here, I’m not saying cheap is bad and expensive is good, I’m just saying research other factors not just costs…
To be clear, some elements of platform performance will not be due to the broker or anything under their control. You are responsible for the Internet connection that you use, and its reliability and speed are material factors in how well the trading platform is allowed to perform. A fast connection is important, and a reliable connection is paramount. If you live out in the country and cannot get a hardwired service, you need to plan for the day that the satellite service or the wireless Internet goes down. With satellite Internet, it can be as simple as violent weather disrupting the signal, and I used to experience this even when the weather seemed perfect – I was told it happened because the ground relay to the satellite, hundreds of miles away, was in a storm.
Assuming that your Internet is running normally, then platform performance can still vary and obviously impacts your trading. Usually most platforms perform well for regular trading when trading is steady, or the markets are less volatile although you might still want to check how many clicks are needed to exit a position if you intend to be trading quickly. Problems arise when everyone wants to enter orders, say when some terrible news event has occurred making traders flee from their long positions en masse. And these are the times you will be grateful for a reliable and robust trading platform.
People who trade CFDs have reported problems with some trading platforms that are currently available, including delays in the execution of buy and sell orders. This means market conditions might change and you could lose out.
Now to some extent you will find it impossible to assess this until that fateful day, when it may be too late. But you can try and get some indication of the platform efficiency by using a demo account for a few weeks and most platform providers offer this free of charge. Be careful that the demo is connecting to the live side of the datacenter if you want to base your judgement on this, as some demo accounts may use delayed data feeds.
Another method is to do a bit of research among the CFD trading community online and talk with other traders about their findings on the platforms they use. In this respect, be wary of any unknown contacts, particularly over the Internet, as it has been known for trading providers to give themselves good reports.
The platform performance will be impacted by the connection between you and the broker, but can also be degraded if the broker does not have a good connection to the exchange to enter your trades. If you have a market maker broker who is under pressure from panic selling, you are likely to find that the spreads increase if he cannot hedge the orders placed quickly enough. If you have direct market access through your broker, then you will encounter any delays yourself, with slow response to orders.
Moreover, when you place a buy or sell order with a CFD broker through their trading platform, there may be a time lag between when you place your CFD order and when that order is executed (this is referred to as ‘execution risk’). If the market for the underlying market you are trading moves in the time between when you place the order and the execution of the order, this could also result in your trade being executed at a worse price than when the order was made, especially if markets are very volatile.
Finally, although it may not always save you, make sure that you have telephone numbers for your provider, and that you can trade over the phone. Try to get a direct number for the dealers, as well as the main number, and keep it taped up by your computer for emergencies.