CashMoney, you're ideas are so brilliant... imagine if you can transfer all these ideas into Trading Skills, then you would be a marginally successful trader.
Another idea by cm69
- Thread starter cashmoney69
- Start date
CM - I am going to refer to you as the idea man from now on. 
And that's not an insult, I can appreciate your ideas and continued pursuit of the American dream.
With this idea however, as others have said, you are going to get stuck with the losers real quick. Yes you'll have a contract in place, but you will only be able to collect on that contract after you hire a lawfirm and/or collection agency to collect on the debt, all the meanwhile you have to absorb the loss immediately. The exchange is not going to give you time to go get John Doe's money that he owes you.
In addition, why would I sign up for this? If I am right, I owe you 20% of the gains. If I am wrong I owe the full loss AND 20%?!?!? Where's the benefit to the customer? I understand this works well for you assuming all debts are easily collected on, but I'm trying to understand who the potential customer is here and why they would sign up for this.
And that's not an insult, I can appreciate your ideas and continued pursuit of the American dream.
With this idea however, as others have said, you are going to get stuck with the losers real quick. Yes you'll have a contract in place, but you will only be able to collect on that contract after you hire a lawfirm and/or collection agency to collect on the debt, all the meanwhile you have to absorb the loss immediately. The exchange is not going to give you time to go get John Doe's money that he owes you.
In addition, why would I sign up for this? If I am right, I owe you 20% of the gains. If I am wrong I owe the full loss AND 20%?!?!? Where's the benefit to the customer? I understand this works well for you assuming all debts are easily collected on, but I'm trying to understand who the potential customer is here and why they would sign up for this.
It works off the theory of "Opportunity cost" ( http://en.wikipedia.org/wiki/Opportunity_cost ) .. for someone who wants to get into this business such as new traders/ investors who dont want to:
* wait any longer
* Use OPM because their money is tied up in other things or lack of funds
* want to get a taste of trading/investing without any long term commitment
and like I said, the thought of making big money, in the minds of most people out-weigh the thought of losing. "Deal or no deal" works almost just like this.
Would this be legal?
Again - this is a GREAT idea for you.
I still do not see why anyone would use the service however. Using the Deal or No Deal mentality means the odds are in the house's favor and the end user is at a distinct disadvantage, which it appears that is the case here as well. There's no reason for a person to use the service from what I can tell... I win, you get $$$, I lose, you get $$ AND I still lose all the money that was initially lost.
I'm having a very hard time understanding the advantage and use of this for your end user. I see your above points but with the cost of entry to trading so small to begin with and online brokers just a click away, it seems like you would need some 'hook' - something that would make the user want to consider your service before just opening an account at etrade. This would be all about marketing and positioning the product. There could be a niche out there that would accept the terms of your deal, it's just a matter of figuring out who that niche is and then marketing heavily to them.
As for legality, you would have to get the best securities lawyers money could buy. As mentioned in the thread, finding a way to collect your fee and losses for the account when the trade doesn't make money is not going to be easy.
It would be interesting to see this get off the ground CM, but you are probably going to need some seed/angel money as well. Couple sites to check out - https://www.ideacrossing.org/ http://www.prosper.com/
You're kidding right?
Of course it is not legal. You are acting an unlicensed broker, not to mention the fact that brokers cannot take a percentage of gains. If you want to compare it to a prop shop where traders use the firm's capital, then you need to be registered with an exchange, set up an LLC, register with the state, and all your suckers, I mean customers, will have to pass the 7 and register with the exchange. Next you will be thinking that you can buy a 50k car and sell 1000 tickets for $100 to win it.
"I still do not see why anyone would use the service however. Using the Deal or No Deal mentality means the odds are in the house's favor"
-- People still go to casinos.
"with the cost of entry to trading so small to begin with and online brokers just a click away"
-- Yes, but who's going to be able to trade with a 500 or even 10k dollar account size?... Use opm and get much higher leverage.
...
I understand what you're saying about the end user...if he loses, he pays his losses, then some. The reason for this is to make the trade (for me,because its my money) worth while. most market partisipants will lose, so if I just said "well just pay me back what you lost"..I'd be running in place going no where. Successful traders might like a service like this because their losses are smaller than their profits.
What cm69 describes, is essentially CFD - Contract For Difference (which is somewhat similar to SSF/USF/equity futures - Single Stock Futures).
Various betting and FOREX sites allows CFD trading. Anyone with a credit card, can open such account in minutes. There is a bucket shop, called EasyForex, offering CFDs with 50:1 leverage, this is 10 times more than leverage offered by US SSFs - 5:1.
CFDs are popular in countries with stamp duties (i.e tax on stock sale), like in UK or Ireland.
So cm69 - skip to the next genius idea.
Various betting and FOREX sites allows CFD trading. Anyone with a credit card, can open such account in minutes. There is a bucket shop, called EasyForex, offering CFDs with 50:1 leverage, this is 10 times more than leverage offered by US SSFs - 5:1.
CFDs are popular in countries with stamp duties (i.e tax on stock sale), like in UK or Ireland.
So cm69 - skip to the next genius idea.