That family office that blew up in the last two weeks did not have it.
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CFD trading and potential losses
- Thread starter mav120
- Start date
That family office that blew up in the last two weeks did not have it.
So EU CFD trading is like an option that does not expire? Just pay the financing costs? Do you have to pay financing costs if you do not leverage? I have heared that the customers who make money are the ones who do not use leverage. So the 86% of customers who lose as posted on the website are the ones using leverage.
So EU CFD trading is like an option that does not expire? Just pay the financing costs? Do you have to pay financing costs if you do not leverage? I have heared that the customers who make money are the ones who do not use leverage. So the 86% of customers who lose as posted on the website are the ones using leverage.
Nonpro customers have their asses covered by ESMA (assuming compliant CFD provider) regarding negative account balances. Family offices presumably sign up as professionals, if nothing else because ESMA mandates leverage restrictions on nonprofessionals.
There are different types of CFDs, the by far most common used e.g. here in Sweden are CFDs that simply emulate/repackage underlying futures. Why would anyone use that rather than the futures themselves? Some of the CFD platforms (I'm just familiar with IG and Oanda) have an attractive access to different markets (e.g. trade CFDs on different futures markets, and equities from different countries in the same account), plus the ESMA guarantee makes it slightly less scary. Trading with an opaque bucketshop is generally shitty though.
As for leverage, if you're on a margin account CFD platforms are generally shitty and charge you even when using <= 1x leverage, and don't pay you anything for keeping money in an account with them.
When it comes to winner/loser statistics, if you aggregate clients into groups "using leverage" and "no leverage" it doesn't surprise me that the former is a big loser, since most amateurs trade without adequately knowing anything about optimal Kelly, nor have an edge (or destroy a weak edge in market beta by overleveraging). Of course, doesn't mean leverage is inherently bad just because amateurs misuse it.
So EU CFD trading is like an option that does not expire? Just pay the financing costs? Do you have to pay financing costs if you do not leverage? I have heared that the customers who make money are the ones who do not use leverage. So the 86% of customers who lose as posted on the website are the ones using leverage.
Unfortunately you will have to pay financing cost even with no leverage. At least I believe most brokers charge it. However, the brokers do pay you financing charges as well. At least Oanda does for certain instruments, where their underlying futures contracts / interest rate differences are in your favor.
And yes, you are probably right about leverage and losses. There is probably a very high correlation between leverage and blowing up their accounts
If you are trading with a broker that provides negative balance protection, your losses are limited to your initial deposit only.