afraid to use CFD

[thetrader75]

I had been trading for a few months with Plus500.

I opened an account with another broker and finally, when I left Plus500 and was about to switch, while doing some researches, and enquiring in some forums, I ended up to this website www.fineco-bank.com . I got scared and am now reluctant to put my money to any broker now. I investigated deeper and seemed to me that what is written in there is likely to be true.

May anybody of you reassure me? Is there any experienced guy who can argue against what it is stated in that webpage?

 

[cantagril]

Whatever the writer says about their intentions, it's pretty obvious that they think they've been scammed by Fineco Bank whilst also trying to make the case that all CFDs are fraudulent. The writer made a choice to trade CFDs and has convinced themselves that they have been scammed. To me this seems unlikely but I can see how they've come to this conclusion.

It's not clear whether your problem is with CFDs or Fineco Bank...or both. If it's Fineco Bank then just stick with Plus 500, if it's CFDs then either trade something else (SB, Futures, Options) if it's both then you could either do some more research ...or just stop trading.

 

[tomorton]

There isn't any easy way to find out who has put this website up or what qualifies them to say anything about this company or about CFD's or about trading in general.

Its true that most people who open a trading account end up losing money but that is a result of how they trade, not whether they trade via CFD's or options or spreadbetting or any other means of access.

When selecting a CFD provider, make sure it is regulated by a legitimate regulator such as the UK FCA. his will ensure that your funds are protected and the firm is competently and honestly run.

 

[thetrader75]

There isn't any easy way to find out who has put this website up or what qualifies them to say anything about this company or about CFD's or about trading in general.

Its true that most people who open a trading account end up losing money but that is a result of how they trade, not whether they trade via CFD's or options or spreadbetting or any other means of access.

When selecting a CFD provider, make sure it is regulated by a legitimate regulator such as the UK FCA. his will ensure that your funds are protected and the firm is competently and honestly run.

Thanks for your replies.
Besides the bad experience that guy had , it's the CFD nature that he exposes that makes me doubtful about CFDs. In other forums somebody confirm that.
Whether a platform is regulated or not, if all that about CFD is true, playing with CFD is not really trading at the end of the day... that is just my mere point of view.
Maybe I should just stick to shares, where I can own assets and do real trading and not gambling, as stated.

 

[tomorton]

Thanks for your replies.
Besides the bad experience that guy had , it's the CFD nature that he exposes that makes me doubtful about CFDs. In other forums somebody confirm that.
Whether a platform is regulated or not, if all that about CFD is true, playing with CFD is not really trading at the end of the day... that is just my mere point of view.
Maybe I should just stick to shares, where I can own assets and do real trading and not gambling, as stated.

Trading through CFD's very definitely is trading. Same with spreadbetting, a variant on CFD's almost unique to the UK.

CFD's are not banned across some jurisdictions because they are a scam, they are banned because the regulators there are simply trying to protect the established markets and the big market participants. The main objective of financial regulators is to regulate the financial industry and maintain its confidence levels so as to ensure investment, not to protect consumers.

As an example, suppose you want to take a long position on Brent. According to this anti-Fineco CFD guy, doing this through a CFD would not be trading because there is no asset to back up the CFD. But if you avoid using CFD's would you expect to suddenly have a lorry arrive at your doorstep with 50 barrels of Brent? Of course not. The backing for the CFD is money, the asset is the contract. Same in forex - if you go long EUR/USD, you will not receive a brief-case full of EUR at the end of the day - but you're still trading no matter what access arrangements.

 

[thetrader75]

What you say it makes sense.
Actually with Revolut I do buy currencies which stay in my bank account account.
However, let's suppose I trader Oil Future Contracts instead of Oil CFD. At the contract expiration, which is earlier than Contract expiration date for big traders, my contract could be closed at the market price, so no actual barrel has to be delivered (or given if I was short). Then, if the market goes far opposite my position, I would not burn out my account, as it would happen with a CFD: I would just have a contract that I paid a lot but it has still some value and have in my account the rest of my money.
Then, when I close a CFD position, there is no another counterpart trader who buys/sell swhat I sell/buy, right? So my losses are just taken by the platform and my gains are just given by the platform... It's not like a casino?

 

[tomorton]

With CFD's or SB, you have no direct single counter-party. If you "buy" Oil, your long exposure to the oil price is added to the firm's other clients' long exposures and they net that off against their clients' short exposures so that the risk to the firm is zero: if its not exactly zero simply from clients' opposing exposures, the firm has access to banking arrangements that will allow them to hedge what is not covered by their clients.

This means you don't have counter-party risk and you can always close your position, as long as the market is trading and liquid, regardless of what the other traders are doing.

 

[thetrader75]

With CFD's or SB, you have no direct single counter-party. If you "buy" Oil, your long exposure to the oil price is added to the firm's other clients' long exposures and they net that off against their clients' short exposures so that the risk to the firm is zero: if its not exactly zero simply from clients' opposing exposures, the firm has access to banking arrangements that will allow them to hedge what is not covered by their clients.

This means you don't have counter-party risk and you can always close your position, as long as the market is trading and liquid, regardless of what the other traders are doing.

Thanks for your reply but it sounds a bit strange.
When I check the Crude Oil Future volume, I see in day time from roughly 500 to 8000 barrels per minute, in the evening it goes down to few units, even less than 10 barrel per minute.
When I open a large position with share order, it takes minutes or hours to fulfill my order, as the broker has to match my order with other counterparts around the price I've placed the order for, then I see my position split in different parts at values slightly different from each other.
If I place an order 10,000 barrel in a CDF in evening time, when the Future volume is very low, my order is immediately fulfilled exactly at the price I requested. Possible there is another trader who is doing the reserve operation than me, at the same large quantity at the same exact time? It's unlikely probable.
Also I doubt that any business would hold even for moment long orders at different values from many clients creating an exposure to be balanced against short positions... even if they did, how come the volumes at evening time are few units?
Maybe I pay over caution, but until it is all clear to me, I prefer to keep away from CFD.
Thanks anyway for your opinion!

 

[tomorton]

Being in the UK I am completely used to a high standard of regulatory protection from brokers, CFD providers and spreadbetting providers alike. Whatever market access is used, these might be some important features -

• segregated bank accounting for clients' and the firm's funds
• client deposit protection up to £85k
• negative balance protection
• ban on the firm trading against clients
• disbarring of company directors convicted of contraventions
• timely prosecutions and significant fines on firms breaking their requirements

As far as casinos are concerned, I'd rather gamble in a casino in the UK than almost anywhere else - different regulator but still tough.

 

[Oualid_El]

Not all cfd's are fraudulent, I've been trading CFD's for more than 4 years now and I haven't encountered any problems with them, I tried two brokers during that period of time and both were good but i just made sure to make good research to know where i'm putting my money when i first started.

 

[hatemypips]

I had been trading for a few months with Plus500.

I opened an account with another broker and finally, when I left Plus500 and was about to switch, while doing some researches, and enquiring in some forums, I ended up to this website www.fineco-bank.com . I got scared and am now reluctant to put my money to any broker now. I investigated deeper and seemed to me that what is written in there is likely to be true.

May anybody of you reassure me? Is there any experienced guy who can argue against what it is stated in that webpage?

Most probably it's a scam, go to FPA and read reviews there, definitely a red flag for me. There are much better brokers discussed there on t2w, just check broker section.