CFD Trading, Reality Check

[Deactivated] on 03/09/2018 - 01:39
Last edited 03/09/2018 - 01:45

Trading CFD's on Igmarkets, CMC, Plus500 etc come up occasionally on Ozbargain.

I've been warning people for probably 15 years that most people lose their money through these businesses, that they are no better than bucket shops of the early 1900's.
So I finally have some evidence.

Look on the right column of Plus500, at https://brokernotes.co/ig-vs-cmc-markets/
which reads: "CFD Service. 80.6% lose money".
They only contract CFD'S.

Also all three companies state: 65% - 85% of traders lose money trading CFDs.

Similarly the Founder/CEO of Igmarkets was reported in a UK paper years ago, saying roughly the same thing
"Most of their customers lose money overall".
This is their main business in fact, playing against their customers.

My argument has been: You only have to buy a pool of random cfd's and eventually the majority will go your way. Easily a 75%+ winning proposition.
Yet over 80% lose overall.

I hope this helps people to go in to 'flaky trading models' (CFDs) more cautiously.

Financial CFD Investment Shares (financial)

Comments

  • EightImmortals on 03/09/2018 - 06:34

    'flaky' meaning 'leveraged' I presume?

    On the glass half full side according to your figures around 20% of people MAKE money with CFD's. The trick for any would-be punters is to study, study and study and then paper trade for a year or so before losing ANY money.

  • CyberMurning on 03/09/2018 - 08:14

    If 80pct customers losing then how those companies still in business?

    • poboy on 03/09/2018 - 12:11

      They are the trading platform. So they earn money each time a customer buys or sells.

      • CyberMurning on 03/09/2018 - 12:25

        i get it, but i mean the effect of those 80% customers losing, they will eventually get out, therefore the customer number will be less and less. so how they can keep running

        • Ocker on 03/09/2018 - 12:41
          +6

          Simple really, there is a new mug punter born every day chasing a quick buck with little (if any) knowledge of the true risks they are taking.

  • Ocker on 03/09/2018 - 09:21
    +1

    Afraid this post demonstrates a gross misunderstanding of how the CFD market operates. To suggest that the main business of IG Markets is playing against their customers is a joke.
    They and other brokerage houses are generally just the intermediary, offering a market place for punters. No difference to FX trading, share market trading etc.

    • quirki on 03/09/2018 - 14:48
      +2

      That’s a misconception, market makers like IG do take positions against less astute retail customers, they usually only pass on the orders from sharper customers to the LP.

      They may have a direct conflict of interest and also they have no obligation to reveal that to you, it’s buried in the t&cs when you open an account.

      • Ocker on 03/09/2018 - 18:14

        IG, like any financial institution market maker have prop. desks that trade for the house account. Not directly "against" retail positions, such positions are far too small in the big picture.
        Do you think a retail client position of a few million dollars is going to influence the trading decisions of, for example, an inter-bank desk that routinely runs opens AUD/USD positions for several hundred million dollars? Indeed such open positions can, and do, run into billions of dollars.

  • ihbh on 03/09/2018 - 12:42
    -1

    My argument has been: You only have to buy a pool of random cfd's and eventually the majority will go your way

    Nope. Zero sum game for starters - for every dollar someone wins, another loses.

    But with spreads and transaction costs it becomes a negative sum game.

    • Aniseed Steed on 03/09/2018 - 13:44

      And add that to high gearing.

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