Plus500 As My First CFD Broker?

[AdamTheAnalyst]

Hi there,

I am opening a CFD account in the next few days after about 2 years of studying, seminars and demo accounts, i'm ready to take the plunge and start trading on the side (I have a full time job in IT Security that provides stable income, this is just on the side with a view to building up the account over the years). Here is a little bit about my set up:

I have £1000 risk capital to start with (starting small and dipping my toe in) and plan to risk between 2%-5% of my total capital on any one trade (or correlated trades). (Risk being defined as the difference between my open and stop loss, rather than the capital required to keep the pos open). This small position size prices me out of the fixed fee CFD brokers like City Index and prices me out of brokers that force minimum holdings of 100/1000 shares etc. I also trade smaller capitalisation CFD's like CMS Energy, so need a broker that can offer these as well as the FTSE 100 and S&P 500 stocks. I also trade global economic situations and sector situations so need access to currencies (just the majors) and EFT's from the same account.

Plus500 with their spread only fees seems to fit my trading set up and preferred position size and I have been using their demo account for around 4 months now as they cover all the stocks, ETF's and currencies I trade.

This leaves me with 2 questions, If your with Plus500 at the moment or have been in the past - can I reduce the leverage available to me within the platform? You can't do this in the demo account so your stuck with huge leverage on positions that i won't feel comfortable with, and I don't want to finance an account only to cash it out the next day because I can't reduce the leverage.

Second question would be in your opinion is Plus500 a good broker for what I'm trying to achieve, or is there any better ones out there for me? (UK resident trading in GBP as a base currency)

Thanks For Your Time,

Adam

 

[Hate2Lose]

Hi there,

I am opening a CFD account in the next few days after about 2 years of studying, seminars and demo accounts, i'm ready to take the plunge and start trading on the side (I have a full time job in IT Security that provides stable income, this is just on the side with a view to building up the account over the years). Here is a little bit about my set up:

I have £1000 risk capital to start with (starting small and dipping my toe in) and plan to risk between 2%-5% of my total capital on any one trade (or correlated trades). (Risk being defined as the difference between my open and stop loss, rather than the capital required to keep the pos open). This small position size prices me out of the fixed fee CFD brokers like City Index and prices me out of brokers that force minimum holdings of 100/1000 shares etc. I also trade smaller capitalisation CFD's like CMS Energy, so need a broker that can offer these as well as the FTSE 100 and S&P 500 stocks. I also trade global economic situations and sector situations so need access to currencies (just the majors) and EFT's from the same account.

Plus500 with their spread only fees seems to fit my trading set up and preferred position size and I have been using their demo account for around 4 months now as they cover all the stocks, ETF's and currencies I trade.

This leaves me with 2 questions, If your with Plus500 at the moment or have been in the past - can I reduce the leverage available to me within the platform? You can't do this in the demo account so your stuck with huge leverage on positions that i won't feel comfortable with, and I don't want to finance an account only to cash it out the next day because I can't reduce the leverage.

Second question would be in your opinion is Plus500 a good broker for what I'm trying to achieve, or is there any better ones out there for me? (UK resident trading in GBP as a base currency)

Thanks For Your Time,

Adam

Unfortunately, with the capital you’re starting with, you don’t have much choice. The better brokers charge commission on CFDs – those that don’t charge have to make their money elsewhere, and it’s usually by ‘creaming off’ a bit by giving you questionable fills. End result: they win, you lose. Like a bookie.

Stick to those that offer DMA and charge commission, if you can. However, if you’re starting with £1k and don’t want the leverage, you don’t really have that luxury. Perhaps when you’ve built up a bit of a pot you can move on to a DMA broker. Just be weary of your fills in the meantime, and be prepared to question Plus500 if it doesn’t look right.

You could control the leverage, even if they don’t ‘allow’ you to do so via a platform feature. One way to define leverage is that you don’t put the full amount of capital required ‘up front’. So, by putting in more capital than the minimum margin requirement, you’re effectively de-leveraging. I often hear of people that have a sound strategy, but they receive margin calls and can’t hang on. This means that they’ve over-leveraged.

For example, let’s say you want to take a £10,000 position in XYZ PLC. You are only required to put in £500 to take the position (20x leverage). You could choose to put in the whole £10,000, meaning that the share price could fall significantly and you’d still be ‘in the game’. You effectively aren’t using any of the leverage, no risk of margin call, yet you still avoid the stamp duty. Alternatively, you could put in £5k to take the same position – the stock would have to fall roughly 50% (crude calculation) to put you in a margin call. And so on.

Anyway, hope it helps and good luck!

 

[AdamTheAnalyst]

Cheers Hate2Lose,

I know i am after DMA in the long run, its just a case of running my account up to that size.

I know what you are getting at with leverage, its not that i dont want it, its just 200:1 in currency is way too high, the question was more if i could lower it within the platform like you can with Cityindex etc. I have never thought about risk management in terms of putting the whole cash balance up front, i'm going to play around with this in Excel.

Cheers for your help on the matter.

 

[Hate2Lose]

Cheers Hate2Lose,

I know i am after DMA in the long run, its just a case of running my account up to that size.

I know what you are getting at with leverage, its not that i dont want it, its just 200:1 in currency is way too high, the question was more if i could lower it within the platform like you can with Cityindex etc. I have never thought about risk management in terms of putting the whole cash balance up front, i'm going to play around with this in Excel.

Cheers for your help on the matter.

No worries.

I think that’s wise re the 200:1 leverage. Too much. I learnt the hard way!