Some financial commentators and regulators have expressed concern about the way that CFDs are marketed at new and inexperienced traders by the CFD providers. In particular the way that the potential gains are advertised in a way that may not fully explain the risks involved. For example, the UK FSA rules for CFD providers include that they must assess the suitability of CFDs for each new client based on their experience and must provide a risk warning document to all new clients, based on a general template devised by the FSA.

The Australian financial regulator ASIC on its trader information site suggests that trading CFDs is riskier than gambling on horses or going to a casino. There has also been concern that CFDs are little more than gambling implying that most traders lose money trading CFDs.

There has also been some concern that CFD trading lacks transparency as it happens primarily over-the-counter and that there is no standard contract. This has led some to suggest that CFD providers could exploit their clients.

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This topic appears regularly on trading forums, in particular when it comes to rules around executing stops, and liquidating positions in margin call. This is also something that the Australian Securities Exchange, promoting their Australian exchange traded CFD and some of the CFD providers, promoting direct market access products, have used to support their particular offering.

They argue that their offering reduces this particular risk in some way. If there were issues with one provider, clients could switch to another.

Some of the criticism surrounding CFD trading is connected with the CFD brokers' unwillingness to inform their users about the psychology involved in this kind of high-risk trading. Factors such as the fear of losing that translates into neutral and even losing positions [24] become a reality when the users change from a demonstration account to the real one. This fact is not documented by the majority of CFD brokers. Criticism has also been expressed about the way that some CFD providers hedge their own exposure and the conflict of interest that this could cause when they define the terms under which the CFD is traded.

One article suggested that some CFD providers had been running positions against their clients based on client profiles, in the expectation that those clients would lose, and that this created a conflict of interest for the providers.

Australasian

CFDs, when offered by providers under the market maker model, have been compared [26] to the bets sold by bucket shops , which flourished in the United States at the turn of the 20th century. These allowed speculators to place highly leveraged bets on stocks generally not backed or hedged by actual trades on an exchange, so the speculator was in effect betting against the house.

Bucket shops, colourfully described in Jesse Livermore 's semi-autobiographical Reminiscences of a Stock Operator , are illegal in the United States according to criminal as well as securities law. From Wikipedia, the free encyclopedia.

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Financial contract where seller pays to buyer the difference between current value and its value at contract time. Main article: Margin call. This section possibly contains original research.

Cfd trading vs forex

Please improve it by verifying the claims made and adding inline citations. Statements consisting only of original research should be removed. October Learn how and when to remove this template message. London: Essvale Corp. ISBN OCLC London: Times Online.

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3. Forex vs Stock market: Is there "the best" market to trade CFDs in?!

Retrieved March 15, London: The Telegraph. August 13, The new trading for a living : psychology, discipline, trading tools and systems and risk control, trade management. Elder, Alexander, Hoboken, New Jersey. Securities Exchange Act of U. S: Securities and Exchange Comissio.

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July 25, Archived from the original PDF on January 23, London: Telegraph. Retrieved Archived from the original on November 30, December 6, The Telegraph. January 9, March 6, Tidal lagoons PDF. House of Commons Library Report. UK Parliament. Retrieved 12 July Retrieved 29 March Archived from the original on 23 April Retrieved 30 March Archived from the original on 21 March Retrieved 18 November Archived from the original on 29 November Derivatives market.

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