This detailed Pepperstone review is aimed at those looking for ways to trade Bitcoin, Litecoin, DASH and Ethereum without actually purchasing any of these cryptocurrencies.
As an agency broker, Pepperstone offers exposure to this highly volatile asset class through a financial derivative called CFD (Contract for Differences).
We have put together this in-depth review and guide to spare you the footwork your own research would entail, offering you a quick glimpse into what this broker is, what it offers, how you can open an account with it and how you can trade their crypto-anchored CFDs.
What is Pepperstone?
Pepperstone is an Australian FX/CFD brokerage launched back in 2010. It is hailed as one of the most trustworthy and serious operations of this kind Down Under. Attesting to its strong standing are a number of industry awards it has picked up over the years, such as the Best Australian Broker and Best Trading Platform awards it received in 2018.
Pepperstone was also found to be the Best Forex ECN Broker by the UK Forex Awards last year – and we’ve barely scratched the surface awards-wise.
As mentioned, Pepperstone is an Agency Broker. What you need to know in this regard is that – unlike a broker-dealer – Pepperstone places orders directly on its clients’ behalf, effectively acting as a middle man between the retail trader and the stock exchange.
Agency brokers owe it to their clients to provide the best execution times and trading conditions.
Besides the cryptocurrency CFDs mentioned above, Pepperstone offers access to around 90 trading instruments, including FX pairs, as well as CFDs covering a range of commodities, indices and other tradable assets.
While our focus is on cryptocurrencies, you have to be aware that Pepperstone’s priorities lie with Forex – the richest section of their market coverage.
Who are Pepperstone?
For someone versed in the ways of the FX/CFD industry, it is no surprise that Pepperstone is a little cryptic in regards to the identities of those running the operation.
Simply defined as a “veteran management team” with lots of FX experience, the Pepperstone crew is obscured by the corporate facade of Pepperstone Group Limited – the company behind the online brand.
Pepperstone Group Ltd is a registered Australian company (ACN 147 055 703), and it is regulated/licensed by one of the most reputable financial authorities in the world: ASIC. The Australian Financial Services License number of the brokerage is 414530.
Besides its Aussie offices, located at Level 5, 530 Collins Street, Melbourne, VIC 3000, the company also maintains a presence in London, Bangkok, and Dallas.
The brokerage is licensed by the UK’s FCA – yet another major mark in the “plus” column, on the reputability-front. FCA licensing also means that the brokerage is MiFID-compliant, which gives it the right to peddle its services in all EEA (European Economic Area) member-states unless expressly forbidden by local laws.
As far as actual user feedback goes, Pepperstone is generally rated positively at various community forums and message boards. Still, there are some complaints from traders, including stop-loss hunting and price manipulation on the part of the broker. Some users have alleged poor response from the support staff too – all well in line with what one may consider the “industry norm” in this regard.
Pepperstone’s stated focus is on offering its users the best trade execution speeds, the lowest spreads and the best customer support.
The broker features an impressive range of trading platforms, covering MetaQuotes’ industry-leading MT4 and MT5, as well as cTrader. Multi Account Management (MAM) options are also available for those handling the trading activities of several clients.
Things to Consider
- Regulation is perhaps the most important factor regarding the trust score of the broker. In this regard, Pepperstone is well covered: while the company behind the operation is not a publicly-traded one, it is regulated in two major financial hubs.
- Pepperstone is not regulated in the US. As such, it cannot legally offer its services to US-based clients.
- The safety of user funds is directly impacted by regulatory requirements. In compliance with these requirements, Pepperstone keeps the funds deposited by its users in segregated bank accounts (separate from its own monies), with the National Australia Bank and Barclays (in the UK).
- Despite the well-regulated nature of the operation, the trading of CFDs entails certain risks, of which individual users need to be fully aware.
- CFDs are leveraged derivatives, meaning that they allow traders to use leverage to increase their profits. Leverage also increases losses though, when losing trades occur. It is indeed possible to lose more than your account balance, therefore, extra caution needs to be exercised in this regard.
- According to the Financial Services Guide made available at the official Pepperstone website, the broker acts as principal and issuer of the provided derivatives.
- Through Pepperstone, you will NOT acquire any actual cryptocurrencies. Rather, you’ll be trading the price fluctuations of the supported assets (BTC, LTC, DASH and ETH), or the difference between the entry- and exit prices of your contracts.
- The broker observes strict AML/CTF policies. Upon registering an account with it, you agree that you will provide all the information and cooperation required for full compliance.
- Pepperstone charges certain fees for the trading services it provides. These fees can take the shape of spreads (the difference between the bid and ask prices), margin payments, contract roll fees, and swap fees. On swap-free accounts (like the Islamic Account option), administration fees are charged.
- The trading conditions (spreads, commissions etc) depend on the trading platform/account type for which you register.
- Be aware that due to the overall high volatility of the asset class, the costs and trading conditions associated with cryptocurrency CFDs will be rather adverse.
- While Stop-loss orders can be used to limit the “bleeding” when the market moves against your contract, such orders are executed at the nearest available market price, thus they may not cut the losses at the exact specified levels.
- Requotes, slippage and hanging orders are real possibilities under highly volatile market conditions (as showcased by the above-mentioned user complaints). We all know how volatile the crypto markets can get.
How do CFDs work?
As mentioned, as a cryptocurrency trader, you will make use of derivates called CFDs. You can only trade cryptos through such derivatives at Pepperstone, there is no other option.
A CFD is an OTC derivative the value of which fluctuates according to that of the underlying asset. This asset can be a commodity, a currency pair or, indeed, a cryptocurrency.
At no point during the validity of a CFD does it entitle you to ownership or any rights whatsoever to the underlying asset.
The CFD is a contract between you, the trader, and Pepperstone, the brokerage. If the price of the underlying asset evolves in favor of your contract, upon closing this contract, you will receive profits equaling the difference between the closing and the opening price, minus all fees and costs incurred by the contract.
If, on the other hand, the price evolution goes against your contract, you’ll be required to pay out the resulting difference, plus the associated costs/fees.
While some consider CFDs little more than gambling, the exposure this instrument offers to assets such as cryptos can be very beneficial for traders who know their crypto TA and fundamentals well. They are great for (skilled) speculation, and through them, traders can put very small amounts onto the line. The minimum required deposit at Pepperstone is just AUD 200.
Unlike simply HODLing cryptos, CFD trading allows speculators to generate profits in falling markets (of which we have seen plenty lately).
How to Open a Pepperstone Account?
- Trade crypto, forex, gold, silver & commodities using CFDs.
- A top regulated broker that cares about compliance.
- Buy & Sell CFDs for Bitcoin, Bitcoin Cash, Ethereum, Litecoin & Dash.
- No commission charged on crypto related trades.
- Offers crypto leverage up to 5:1.
- Deposit Methods: credit card, broker to broker, bank transfer, Skrill, Bpay, Fasapay, Neteller, POLI, QIWI Wallet & Union Pay.
Access The World’s Markets With Pepperstone
The broker has made a Demo Account option available. Taking advantage of this option is recommended for beginners. It lets users grasp the way the trading platforms work, without risking any real money in the process.
Before you go down the 4-step registration path of a Live Account, you have to make up your mind about a couple of important things: the trading platform you want to use, and the account type that best suits your needs/financial means. These choices determine far more than what interface and TA tools you’ll get to use. The trading conditions and ultimately: your trading costs, also fully depend on them.
As far as trading platforms go, the broker offers MT4, MT5 and cTrader. Every one of these platforms is available in browser-based as well as downloadable versions.
MT4 is arguably the most powerful trading platform. It comes with superb charting capabilities, it is fully customizable and it is peerless technical analysis-wise. The version that can be downloaded for free, off the Pepperstone website, features 85 preinstalled technical indicators. Users are welcome to add their own.
The same goes for EAs (Expert Advisors) which can be programmed for automated trading, with the help of custom scripts. The broker even offers a VPS service so traders can keep their EAs running around the clock, without the need to keep their own computers on.
MT5 offers more time frames for charting, and it is generally more coding-friendly, supporting object-oriented programming.
cTrader features detachable charts, automated trading, as well as back-testing options for various trading strategies.
Third-party platforms such as ZuluTrade are also supported for social trading.
While crypto CFDs are usually only available on one of the supported platforms, in Pepperstone’s case, they are allegedly present across all the detailed trading platforms.
MT4 and cTrader feature negative balance protection, in the shape of a built-in stop-out system, which is triggered automatically.
Still, Pepperstone admits that not even this system can guarantee that balances will not go negative.
The broker offers 4 account types: the Standard, the Razor, the Swap Free one and the Active Traders Account.
Of these, the Razor makes the most sense for the rank-and-file trader, on account of its attractive trading conditions.
The Standard Account is an STP one, offering interbank spreads from 1 pip, and zero commissions.
The Razor account is the one offering the most attractive spreads. On popular assets such as the EUR/USD pair, these spreads start from 0 pips and do not exceed 0.8 pips. The account charges a AUD 3.5 commission though, for every 100k traded.
The Swap Free Account foregoes swaps, but it charges steeper spreads: on the EUR/USD, its spreads are in the 1-1.2 pips range.
The Active Traders program is for high-volume and institutional investors. It consists of cash rebate based on trading volume, but it also features a Qantas Frequent Flyer reward program.
Once you make up your mind about the trading platform/account type that best suits your needs, all that’s left to do is to click the red Live Account button, and to fill in the forms presented in a 4-step process.
For Live accounts, this will be a rather lengthy undertaking, as the user is required to provide a bevy of personal information first, followed by his/her trading preferences (account/platform choice) and scores of rather intrusive details about his/her employment status and financial situation.
An appropriateness test – probably meant to determine the trader’s level of proficiency – is also part of the process. Those who fail the appropriateness test will not be allowed to apply for a Live trading account.
The process wraps up with the actual ID verification.
Once you complete the verification process, you can fund your account through one of the supported payment methods. As soon as the funds land in your Live Account, you are ready to place your first trade.
How to Buy and Sell at Pepperstone?
Given the superb functionality of the Pepperstone trading platforms, Buying and Selling is a walk in the park at the broker.
All one really needs to do is to select the asset he/she wants to trade, and then hit the New Order button, or use the one-click trading feature on the MT4 platform.
A window then pops up, where information pertaining to the order execution type, trading volume and SL/TP can be entered, and the actual order can be created.
With cTrader, this works in a slightly different manner. One can launch a new order by right-clicking the chart, clicking the Create New Order option in the pop-up menu and then setting the variables concerning SL and TP as well as the volume and order type.
The order is finalized with the green Place Order button at the bottom of the Create New Order window.
Interestingly, we have noticed that cryptocurrencies, as an asset class, are only available on cTrader, despite the fact that Pepperstone has stated that crypto CFDs can be traded on all supported platforms.
Order management is just as simple on cTrader as new order creation. In the order/position management section (under the charts by default) positions can be reversed, doubled or closed at the click of a button. Orders can be canceled in a similar manner, under the corresponding tab. Price alerts can be set and the trading history can be viewed there as well.
The one-click trading feature allows for the instant opening of positions. It requires SLs and TPs to be dragged and dropped onto the chart.
When you are buying BTC for instance, you are going long (betting that the price of the underlying asset will go up). When you are selling, you’re shorting (betting that the price will go down).
By all accounts, the security of funds deposited by traders at Pepperstone is top-notch. All financial transactions are protected by state-of-the-art, banking-grade encryption, and – as mentioned – the funds deposited by traders are kept in segregated bank accounts with reputable financial institutions.
Being regulated, the broker offers its clients protection conferred by the FSCS (Financial Services Compensation Scheme).
Despite some users stating otherwise, Pepperstone support is great. The support staff can be contacted through live chat, phone, and email. Response times are excellent through all support channels and the support staff seems to be knowledgeable (though sometimes a bit short professionalism-wise) and eager.
The Pepperstone website lists scores of local phone numbers and emails for support.
The broker’s support department has picked up the “#1 in Customer Service and Overall Client Satisfaction” award.
- A well-regulated broker with a solid standing, Pepperstone is keen on compliance, and as such, it is a very secure destination for the funds deposited by traders.
- The trading conditions offered by the Razor account are indeed very attractive.
- Though its market coverage is heavily FX-biased, and somewhat limited, Pepperstone offers access to no fewer than 5 cryptocurrency CFDs.
- The trading platform selection of the broker is superb. It also offers an impressive number of third-party trading tools and social trading features.
- Low minimum deposit requirement.
- Limited selection of crypto (and other) CFDs.
- Cryptos only tradable through financial derivatives.
- A fundamental conflict of interest stemming from the principal status of the broker in its dealings with traders.