I should say that I have massive respect for Plus500 from a marketing point of view. They obviously looked at the online trading industry and thought to themselves, “this is ripe for disruption” and to be fair they did disrupt the CFD trading (not the financial spread betting) industry.
Before Plus500 came along, most CFD platforms asked you to deposit a minimum of £5,000 to open an account. You had to prove that you had the relevant experience to trade high-risk derivative products, pass credit checks and wait at least a week before compliance, accounts and sales had checked your account and allocated you an account number. And in some cases, you didn’t even get an account number until you’d BACS’d money over to fund your account.
What Plus500 did was create a basic trading platform that offered the major instruments that people wanted to trade. After all, the majority of revenue generated for CFD trading platforms is from the top ten traded instruments like FTSE, Wall Street, EURUSD, Gold and Oil.
Then they made the account opening process the most simple it could possibly be. Instead of having to get a notarised copy of your passport and post in bank statements, Plus500 clients could open an account online and start trading with real money in about 5 minutes. For other brokers, it was still taking a week. They could do it because normally new clients have to provide ID when opening an account to prevent money laundering. Because the rules at the time were generally geared towards withdrawals, not deposits, you didn’t have to provide ID until you wanted to take money out. Plus500 eventually got ticked off for it and had to start front-loading ID checks. But it completely turned the industry on its head making it very simple for anyone to open a trading account. Cough cough the mega marketing machine that is eToro.
Soon after that, all the other trading platforms tried to catch up but legacy technology still makes them a lot slower than Plus500 to this day.
But, whilst Plus500 have disrupted the CFD industry, it’s not necessarily for the good. Trading is a high risk, most people lose money. Just because you can do something, should you?
I know that things that are bad for you are often enjoyable, this isn’t a debate about whether or not CFDs are good or bad. I have been in the CFD industry for 20 years and I think they are good, but then I have always dealt with professional clients, hedge funds, and traders who understand the risk. CFDs can be used to hedge portfolios, increase diversification, build a stake in a company without declaring it, making money when the markets fall by shorting stocks.
The debate is more about who they are appropriate for, and CFDs are not appropriate for everyone.
Should you trade CFDs with Plus500? If you are a sophisticated or experienced trader, I’m afraid not, in my mind it is a basic platform for basic traders, which isn’t necessarily a bad thing, or is it…