True, but it should be appended it's fairly straightforward matter to hedge the net exposure in the underlying so that they don't go broke because a customer won a big trade.
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Do CFD providers lose money when customers make money? Any problem if you're profitable?
- Thread starter learner88
- Start date
True, but it should be appended it's fairly straightforward matter to hedge the net exposure in the underlying so that they don't go broke because a customer won a big trade.
You buy a stock from a market maker and your win is their loss. So would you still trade stocks?
Or US stock market consists of bucket shops?
You go to casinos and gamble your money and your win is their loss. So do all US casinos are bucket shops?
Excellent examples - particularly, compare to a MM - the key difference is really just (lots of) layers of regulation and financial structure.
As for CFD platforms, the primary questions just boil down to: Is the entity on the other side fradulent and/or naive regarding risk management? Either is less likely if adequately regulated. And further less likely if they've survived for decades already.
Crypto has been the hottest scam arena for a while, and some of the problems have been reminscent to the worst examples of the CFD space. Can anybody be be trusted to manage their books opaquely? Presumably no. So someone wanting to do additional DD on a CFD provider can look into to what extent that is the case.
All large CFD providers hedge by buying/selling the underlying.
You go to casinos and gamble your money and your win is their loss. So do all US casinos are bucket shops?
Of course casinos are like bucket shops, they absolutely hate card counters making too much money. Will ban you if you make too much.
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Your definition for bucket shops is wrong.Whether they are bucket shops depends on whether they do fraudulent and illegal activities. Not that whether they do business with you.
If you lose too much money to a casino, you have right to refuse to continue gambling with the casino. And if a casino loses too much money to you, it has right to refuse to continue gambling with you. It is completely legal, which has nothing to do with a bucket shop.
If you lose too much money to a casino, you have right to refuse to continue gambling with the casino. And if a casino loses too much money to you, it has right to refuse to continue gambling with you. It is completely legal, which has nothing to do with a bucket shop.
Your definition for bucket shops is wrong.Whether they are bucket shops depends on whether they do fraudulent and illegal activities. Not that whether they do business with you.
The definition of 'bucket shop' varies, from unethical to outright illegal.
Although the common aspect is taking the other side of some customer orders instead of sending all orders to market. Thats when the conflict of interests happen.
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Give me one advantage of CFDs over futures and stocks with DMA?
I'm curious...
One major advantage CFDs have over futures is flexibility in position sizing. Traders with small accounts find the position size of even 1 futures contract too large for their appetite. This makes it difficult for managing risk. CFDs allow for much smaller position sizes.
Most customers of CFDs lose money. Be aware of this statistic should anyone wants to start an account with a CFD broker. To be fair, I expect the same statistic for futures traders.
The definition of 'bucket shop' varies, from unethical to outright illegal.
Although the common aspect is taking the other side of some customer orders instead of sending all orders to market. Thats when the conflict of interests happen.
The way you see the world is simply immature.When you buy a futures contract, you take the other side of someone' order, are you unethical? Are you a bucket shop since you have conflict interest with someone else? If you prohibit unethical action in market then you prohibit market itself.
A market maker takes other side of customer's stock order and is unethical and a bucket shop?
In a prop firm challenge the firm takes the other side of a trader's order, is a prop firm unethical and a bucket shop?
Even in a supermarket, when you buy something, the store takes the other side of your order, is the store unethical and a bucket shop ?
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The way you see the world is simply immature.When you buy a futures contract, you take the other side of someone' order, are you unethical? Are you a bucket shop since you have conflict interest with someone else? If you prohibit unethical action in market then you prohibit market itself.
A market maker takes other side of customer's stock order and is unethical and a bucket shop?
In a prop firm challenge the firm takes the other side of a trader's order, is a prop firm unethical and a bucket shop?
Even in a supermarket, when you buy something, the store takes the other side of your order, is the store unethical and a bucket shop ?
The market maker and exchanges have consistent rules, regardless if the other side is a winner or loser. They don't even know these days who the other-side is with everything being electronic.
Many bucket shops have different rules for winning and losing customers. eg. Will give worse fills to winning customers compared to losing customers. This is widely known (that they have A and B books etc) and not even up for debate.
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