Don’t get ripped off by advisory CFD brokers

CFDs are a very high-risk product and should only be traded by individuals who have significant trading experience.

If you are new to trading and investing then they are not for you.

Advisory CFD brokers are not as rampant as they used to be, but they are still around in one capacity or another. So here are our three golden rules to avoid being ripped off by advisory CFD brokers.

One of the most common ways traders get taken in by advisory CFD brokers is by greed.  They are contacted and offered trading ideas from a slick sounding city broker from an advisory CFD firm.

There are of course brokers out there that provide an excellent service and really do have their clients best interests at heart.  But the majority of advisory CFD brokers may as well be working in a call centre selling conservatories. Generally, they are commission based and their pay is related to how many trades you as their client enter into.

So, they will be on the phone to you all day suggesting buys and sells, in small amounts with high minimum charges taking small profits.  On paper, they may well have made you a profit but when you factor in commission and financing charges you’ll probably lose.

There is a great phrase that goes around the City:

Why would anyone who drives a Rolls Royce take financial advice from someone that takes the tube to work.

What this means is that it’s your money and you know best what to do with it.  Don’t get drawn into the promise of quick profits.

If you are going to trade CFDs you need to accept that there are risks involved and stick to a set of CFD trading strategies that mitigate risk.

If you want to see the top CFD brokers int he UK that provide an execution only service they see our CFD broker comparison tables.

One thing to bear in mind is that advisory CFD brokers also offer execution only services and will then try to upgrade you to a advisory account on higher commission rates.  They are best avoided altogether.  Most advisory CFD brokers use the services of the execution only ones then mark the commission up for their supposed added value.

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Trading Risk Warning

ALL INVESTING INVOLVES RISK. Investing, Derivatives, Spread betting and CFD trading carry a high level of risk to your capital and can result in losses that exceed your initial deposit. They may not be suitable for everyone, so please ensure that you fully understand the risks involved.
ESMA & FCA Risk Warning – “CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 68-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Capital at risk”