CFD trading – like binary options trading and Forex trading – is a kind of market maker. Through it, traders can access and trade in various different assets and capitalize on the fluctuation of their prices.
While that is the central idea to the whole scheme, there are a whole bunch of other factors that help it along that also have the capacity to be exploited and manipulated in order to extort money from the traders. These shady operations are usually the work of unlicensed and unregulated brokers who lure customers in with false hopes and promises.
That said, even a fully licensed and regulated broker is not an absolute guarantee for obtaining trustworthy services. It is merely a sign of approval from a governmental authority to reinforce its competence and ability to deliver justly on your investment. In order to ensure the game you are playing is not rigged against you, you must investigate as deep as you can into the industry.
Scams in trading stocks
The usual complaints associated with stock trading are the little things like commissions, fees and services. However, the online community is also awash with hundreds upon hundreds of nasty accounts of customers who feel betrayed by their broker and seek to warn others about them. The brokers in question are not exclusive of high repute and global recognition for trustworthy services.
That said, it is just as important to take this stories with a grain of salt since a lot of customers are not particularly articulate about the alleged scam that occurred and may not have fully understood the official terms & conditions involved before lodging their complaints.
Scams in CFD trading
CFD trading is generally considered to be a relatively riskier form of trade and is not legal in the United States while Forex trading is. The main reason for that is it in the interests of most of the futures and stock trading industries to keep CFD trading out of the competition.
It was certainly not out of compassion for traders to spare them from making a reckless mistake and losing big time on their funds. Without CFD trading in the picture, any lost funds would likely be theirs.
The answer to the question of whether or not CFD trading itself is a scam is a no. CFD trading is simply a derivative form of trading that allows traders to trade in numerous markets on a global scale using a single account accompanied by its own unique features.
It is on the riskier side of the different trading forms as it carries the option of using leverage. You can leverage your account up to hundreds of times over what it is actually worth, but you will be taking an enormous financial risk there.
The idea is to take calculated and controlled risks so that you have a greater possibility of using this form of trade in an efficient and safer manner without risking too much of a financial downfall.
It is best advised to invest in CFD trades that are under the value of your own account so that you will not be using leverage so it will be less likely in the event of a loss that you would lose more than your initial investment. Using leverage, you stand in a position to win a lot of money as well as lose it and in CFD trading, the final outcome is notoriously difficult to predict until the time the trade expires.
So Is CFD Trading a Scam?
So can these forms of trading be classified as scams? Definitely not. As long as you know how they work and calculate well the risks involved, you can be assured fair play in your online trading activities.