Many people are confused with the difference between Margin trading and Contract for Difference, while there are similarities between the two there are several important differences between the two instruments.
Both forms of trading use Margin. When you open a Margin FX or Stock position you only have to put up a small percentage of the cash up front effectively borrowing the rest of the money for the position from the broker. You may be able to open a $5,000 position with only $500 in your trading account for instance. The same thing happens when you open a position with a Contract for difference provider with the trader being able to open a position worth a $5,000 with only $50 in their account. The difference is when you open a Contract for Difference position you do not actually own the underlying financial instrument in question, you are entering into a Contract with a counter party namely your brokerage. Where as with Margin Trading you are the owner of the underlying instrument though you have borrowed a significant amount of the money from the brokerage in order to take the position. Both Margin Trading and CFD offer different benefits, though it should be noted both pose significant risks.
I am going to lay out a number of bullet points showing the important differences between the instruments:
- Leverage – CFD’s generally give the trader the opportunity to trade with significantly more leverage, this is due to the fact there is no exchange of a physical asset going on. With the extra leverage CFD’s offer greater possible returns as well as the possibility for greater losses.
- Spreads – Margin Trading has the advantage of offering tighter spreads on the instruments offered this is due to the fact that Margin trader is essentially using a broker with Direct Market access who makes their money by charging commission on trades.
- Liquidity – CFD’s (Specifically those offered by Market Makers) generally provide better liquidity than Margin Trading. There may be times when Market conditions mean there is very limited Market liquidity meaning trade size may be limited. As CFD’s do not require the trader to own the underlying instrument they wish to trade.
- Stop Losses – Again Margin Trading customers can generally not use Guaranteed Stop losses due to the fact there is no guarantee that a trade can be closed at a particular market price.
- Account Size – You will generally find Margin Trading requires new traders to deposit a significant amount of money in order to be able to trade the financial markets. While Contract for Difference providers will accept customers depositing as little as $5, though this would involve taking on a significant amount of leverage with every trade.
Margin Trading is probably better suited to traders with significant capital at their disposal. Though you will find many professional traders who operate both Margin and CFD trading accounts to take advantage of the benefits offered by each form of trading.
This is an infographic to describe world forex trading activity. It shows the top 15 traded currency pairs, volumes and buy and sell percentage rates. This is designed to aid new traders in getting a general overview of the forex market, which should allow them to make better use of their trading platform and maximise their potential. This infographic has been provided by Vantage FX UK who are a forex trading brokers based in London UK. Through them you can open a demo account to practice forex trading so you can acquire new skills and knowledge about forex which should give you a greater insight into the world of forex trading and may lead to you opening a live account with them so you can start trading almost immediately. Check them out today if you’re interested in opening an account or if you’re just looking for some trading education and tips.
Vantage FX UK are a forex trading brokers based in the city of London. They provide both Live and Demo accounts to forex traders, both new and experienced, as well as giving trading tips and advice.
- Regulatory Authority: Regulated under MiFID in Greece by the HCMC.
- Instruments: Limited Commodities and Forex.
- Leverage: Up to 200:1
- Unique Features: AAAFx is ultimately owned by ZuluTrade and therefore is often considered the best brokerage to open a ZuluTrade account with.
- Minimum Deposit: $300
AAAFx offers MetaTrader 4 as there sole trading platform. MetaTrader 4 is one of the best known trading platforms out there and is popular with many traders who like its professional like functionality. MetaTrader also provides support for Expert Advisors which allows individuals to engage in automated trading. The AAAFx version of MetaTrader 4 works just as one would expect it too. However as AAFx is ultimately owned by ZuluTrade it provides unprecedented support for automated trading through the ZuluTrade platform, with their being no commissions or charges for such trading. Some also consider AAAFx to offer the lowest amounts of slippage for those who are using the ZuluTrade platform, it should also be noted that many of ZuluTrade’s most popular signal providers also use AAAFx to place their trades.
There is nothing at all remarkable about the AAAFx platform apart from its provision for those who are using the ZuluTrade platform. The main reason why anyone would chose to trade with AAAFx is that they wish to take advantage of ZuluTrade’s social trading platform. The fact that AAAFx is run by the same company who ultimately operate ZuluTrade means the platform has the best integration with the brokerage.
AAAFx offer different Spreads to individual and institutional clients. The Spreads on offer for both individual and institutional clients are pretty competitive for the major currency pairings, with the institutional spread for EUR/USD being 0.9 pips and the Spread being 1.9 pips for individual customers. While these Spreads are pretty competitive they are still not the very best around but do allow their customers to trade major Forex pairings with pretty reasonable spreads. However when it comes to some of the more minor Forex pairings the Spreads really begin to bloat with some spreads being particularly huge. So it appears that AAAFx would be a pretty good option for those who only want to trade the major Forex pairings. The Spreads on all other instruments at AAAFx can be outdone elsewhere.
Personally I haven’t had any problems with the customer service at AAAFx, but I feel that it is my duty to state that their are a number of reports regarding slow withdrawals with accounts held with AAAFx. Though at the same time their are as many reports of people being extremely happy with the service provided by AAAFx. As far as I can tell there are no suggestions of anything sinister going on at AAAFx. AAAFx has a number of different contact numbers and ways to get into contact with them, meaning if you do have a problem with their service it is very easy to get into contact with them. The only thing that can go against AAAFx is the fact they have been accused of using Spamming techniques to promote their service, though this may be down to over eager affiliates or poor quality SEO services bought from Pakistan and India.
AAAFx is the trading name of AAAFx Competitive Trading Solutions Ltd. who are registered and regulated in Greece by the HCMC. As Greece is a member of the European Union this means that AAAFx is bound by MiFID allowing it to operate throughout the whole of the European Union. It also guarantees that AAAFx are regulated at least to the degree set out in MiFID, meaning that individual consumers funds are protected up to 30,000 Euros. However the fact that AAAFx is based in Greece may raise some causes for concern especially due to the fact that Greece is not well known for financial regulation and due to the fact the Greek economy is in a pretty perilous state.
Overall, those considering trading with ZuluTrade should seriously consider using AAAFx as their brokerage. Those who are just looking for a general brokerage might be better suited elsewhere.
Plus500, is one of the few regulated trading platforms not to offer MetaTrader as trading platform instead offering their own proprietary trading software the Plus500 Windows Trader. Today we are going to take a look at the Plus500 Windows Trader which is the mainin Contract for difference trading platform at Plus500. However, it should be noted that Plus500 also offer a web based and mobile platform alongside their Windows Trader application.
Once you have installed the platform which shouldn’t take you long as the platforms total build is only around 25mb. You will be presented with a login screen after logging in you will be presented with the screen above. The various instruments available to trade at Plus500 can be found be scrolling through the left hand menu or using the search bar. The search bar is particularly useful as it makes finding the instrument you want to trade a much easier task.
Adding technical indicators to charts is easy and is simply a task of clicking on the Indicator tab and setting up the technical indicators you desire. While adding indicators to a chart is simple reading them off the Plus500 Windows Trader is not quite as simply. This has to be one of my biggest gripes about both the Plus500 Windows and Web Trader. I find reading the technical indicators much more challenging than on competing platforms which use MetaTrader or other alternatives.
Another annoying thing about the Plus500 platform is that prices are only updated every second or so which can be quite a bit slower than other platforms. This also means that your liable to be re-quoted when you try and open a position in a new instrument, especially if that instrument is volatile. The fact that Plus500’s data isn’t the quickest in the business is part of the reason they ban scalping on their platform. This means people who want to open positions for a very short period of time will do be able to do so at Plus500 and should look elsewhere for their trading needs.
All the various account management stuff you may need to do, can be done through the Platform without much difficulty. However customer support isn’t particularly readily available to sort out your problems.
The main benefit of the Plus500 platform is that it allows you trade a unprecedented number of different Stocks trading on a number of global exchanges all from one place. However the platform is let down by its poor charting abilities and the fact that individuals cannot scalp which will put a lot of traders off. It saving grace is the large number of instruments available to trade and the fact it offers so less readily available ETF’s and Stocks.
A Forex rebate scheme is a scheme which offers potential traders the possibility of being refunded some the spreads they are charged by brokerages. The schemes are members of affiliate programs for the brokerages they promote meaning they collect a share of the revenue made by the brokerages you sign up to. They then share this revenue with you making money for themselves while also giving you cash back. For instance the xemarkets affiliate scheme offers it’s members up to 50% revenue share for each customer they sign up. So then the Forex rebate scheme will then share this revenue with the customer who signed up through there link a certain percentage of the revenue earned from the affiliate program. Meaning the original customer gets pay out when a certain amount of income has been generated from the affiliate program.
Many of these schemes are completely legitimate and will pay you a share of the earnings the broker makes from you. The amount of rebate you will receive varies between various brokerages due to the fact that different affiliate schemes offer different revenue share. Signing up to rebate scheme will not harm your rights with the brokerage and can help you earn extra cash or at least reclaim some of your losses. There are a number of different Forex rebate schemes out there.
Made To Trade
Here at Made To Trade, we have begun to run our own Forex rebate scheme for information on the scheme and the different brokerages we support on the scheme send an us an email at: firstname.lastname@example.org. We can offer significant rebates for a number of different brokerages, we can also offer advice on which brokerage would be best for you. While we do not offer they widest range of brokerages around we pride ourselves only working with European Regulated Brokerages, as well as providing a personal service to those who want to get Forex rebates from a selection of regulated brokerages.
Cash Back Forex
Cash Back Forex, are one of the oldest Forex Rebate websites on the internet and offer Forex cash for a wide selection of regulated and unregulated brokerages. Some of the rates offered by CashBack Forex are among the best in the rebate business and they claim to be able to beat the rates offered by their competitors. Meaning that Cashback Forex offers one of the better Forex rebate schemes available on the internet.
Social Trading is very hot at the moment with all the major CFD providers coming out with their own social trading platforms or providing support for other social trading platforms such as ZuluTrade and Tradeo. I decided to investigate whether social trading works or whether it doesn’t live up to the hype. For this I decided to open demo account at the most popular social trading network ZuluTrade.
I started by opening a ZuluTrade demo account with £5000 play money. I then proceeded to pick four different signal providers with a good track record and limited Draw Down, in the hopes of minimizing risk. After having made my various picks I waited and let the signal providers make there moves. Apart from this I used the default settings suggested by the providers and ZuluTrade.
According to ZuluTrade if I had followed the signal providers I had chosen from 2010 until now my £5000 play account would have grown have doubled in size and been worth over $10,000 now. It wasn’t until the next day did any of my signal providers open any positions, however things got off to a good start with the said signal provider opening three positions all of them being reasonably profitable.
After this I simply left the four signal providers I had chosen to do their work and trade the Forex markets. After 14 days about half way through the month the traders I had followed had made me £250 from my initial £5000 deposit. From the below graph it appears that my account hasn’t had a negative day, which is really quite impressive. In half a month I had made a 5% return which is very impressive over such a short period of time.
After 21 days, my demo account was up by £458 a return on investment of 9% with still another 7 days to go, it seems possible to get a return on investment of over 10% a month by copying some of the best traders on ZuluTrade. It seems that if you pick your signal providers wisely you can make some serious profits with ZuluTrade without having to micro manage your account to much.
I therefore recommend that people at least try out the 30 day demo account and decide whether ZuluTrade is suitable for them. I would personally contend that ZuluTrade is the best social trading platform currently available and seems superior to eToro and Tradeo’s offerings. Obviously there are still considerable risks involved with trading at ZuluTrade, however for some I am sure that using ZuluTrade would be a great option.
Over the past couple of days CySEC has come out with a number of announcements regarding fines charged to a number of CySEC regulated brokerages, with the most notable being the 50,000 Euro fine given to eToro and the 100,000 Euro fine given to the operators of UFX Markets. But today CySEC has made a public statement in which it defends the actions of the past couple of days:
‘CySEC wishes to stress that a settlement agreement DOES NOT in any way give a safe harbor to anyone from his obligations to comply with the relevant legislation. Following a settlement agreement, CySEC carries out new inspections to make sure that compliance has been achieved.
It is noted that the amounts due from settlement agreements are calculated as revenue (income) to the Treasury of the Republic and are not calculated as an income for CySEC.’
This statement seems to be hitting out against people who have made two of the following criticisms of CySEC recent behavior:
- That CySEC has been imposing such fines in a way to make up for a loss of governmental revenue to the body, something which LeapRate appeared to accuse CySEC of.
- That CySEC is offering safe harbor to brokerages which are breaching regulation in return for cash in the form of fines. Meaning that questionable brokerages are operating with their licences intact.
CySEC’s response deals with these criticisms in two ways, firstly regarding the issuing of fines they state that fines issued by CySEC are not calculated as revenue for the organisation and are instead counted as revenues for the government. While Cyprus may be in dire straights I doubt the government has put any pressure on CySEC to clamp down on brokerages for financial reasons.
The letter also responds to accusations that Cyprus is acting as a safe haven for brokerages and thus allowing them to flout MiFID regulations. Again Cyprus denies these accusations stating that the recent organisations which have been fined, will have new inspections undertaken to ensure that they comply fully with the regulations in the relevant respects.
One possibility for the actions undertaken by Cysec in the past couple of days may be governmental pressure. The government of Cyprus is in need of a bailout of around 17 billion Euros, with Germany stating that they want to see some change with how Cyprus is regulated in general. Whether the government is applying more pressure on regulatory bodies now the country is in Europe’s spotlight may be one possibility or it may be simply a case of CySEC toughening up its act.
On the 12th of February 2013, London Capital Group in accordance with London Stock Exchange takeover codes has announced that it is a takeover target for three firms; Cantor Fitzgerald Europe, GAIN Capital (better known as Forex.com UK), CityIndex Ltd. (who operate CityIndex and FinSpreads). The three firms in question have approached the London Capital Group regarding a possible takeover. The announcement has spurred on a flurry of trading in shares of London Capital Group and has seen Slater Investments Ltd. and Legal & General both take on stakes in excess of 1% since the news has been released.
A possible takeover by any of the three entities mentioned could lead to all of the companies gaining a much bigger market presence in the over-the-counter derivative marketplace. London Capital Group already represents one of the bigger CFD & Spread betting providers in the UK providing White Labels for a number of different companies including tradefair as well as running both Capital Spreads and ProSpreads.
Previous to this announcement London Capital Group had a poor 2012 and post a small loss of £200,000. As well as posting poor share performance however since the announcement of a possible takeover the share performance has rallied somewhat. For developments regarding the takeover keep an eye on the regulatory news posted by London Capital Group.
Last month we announced that Banc De Binary had entered into talks with the US regulators regarding the regulation of Binary Options in America. Back then we expressed doubts over whether Banc De Binary could become regulated by the CTFC offering Binary Options in the format they currently offer on their platform and it appears that CTFC replied the same kind of answer that we expected them to give. Back then they announced they wouldn’t be accepting anymore US Clients but in this latest statement their position seems to have taken another change:
“BDB’s representatives issued a press release on January 25, 2013 regarding its operations in the United States. BDB retracts the press release. The release was inaccurate in several respects. BDB has been advised by the CFTC that it is not permitted to market binary options to United States persons. Thus, BDB will not take orders from United States persons. BDB intends to abide by all laws regulations and hopes to obtain permission to do business in the United States. Until then, BDB will not be permitted to offer its products to United States customers. Please check back on our website periodically for updates. Thank you for your patience.”
It appears that Banc De Binary will no longer accept any more orders from customers in the United States, I presume this means that US Clients will only be able to withdraw money from their accounts and will be prevented from placing anymore trades. It appears that the CTFC were pretty resounding with their rejection of Banc De Binary’s inquiry regarding regulation and they have therefore decided to completely exit the US marketplace before they are possibly brought to court like other firms such Instaforex.
In exactly what way the original press statement was inaccurate isn’t really properly answered in Banc De Binary’s further statement and just makes Banc De Binary appear rather foolish. It thus appears that Nadex type offerings are going to be the only type of Binary Options offered in America for the foreseeable future.