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50:1 or 500:1? Print
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Wednesday, 21 December 2016 10:09

HomeThe FCA is at long last catching up with US regulators and proposing changes to what has become the wild west amongst questionable spread betting, CFD and Binary providers.

The main area of concern for the FCA is to save private punters from themselves and the temptions of "Get rich quick" marketing promotions that are just great at getting the brokers rich quick! Why? Because the majority of spread betting and binary punters lose money. Punters losses can result in bumper 'broker' profits as most of these providers are not brokers at all, they take the other side of your trade. 

The FCA have now proposed:

 Limit leverage to 25:1 for punters with less than 12 months experience. and 50:1 above 12 months.

Ban 'Free' cash Bonus Promotions 'enticements to trade' and publish agregate customer profit and loss.

So will this help reduce punters losses? It's a no brainer. Take a look at the collapse in share prices of IG group and CMC Markets when the FCA probe was announced. The market expects the providers super profits to fizzle away once this comes into force.

The FCA have started the consultation phase to which anyone can contribute here: https://www.fca.org.uk/cp16-40-response-form

 

 

 

From the blog

How to be a professional trader

How to be a professional trader

The world we inhabit is dominated by the 80-20 principle.

Vilfredo Pareto changed the way we looked at many things, specifically micro-economics which he linked to social factors which went on to become popularised in recent years. Pareto observed the "law of the vital few". Approximately 80% of the effects come from 20% of the causes.

Nowhere is this more apparent than a glance at the small print at the bottom of every spreading betting website. They are now required to publish how many clients lose - you guessed it, around 80% of their customers lose money.

So, what of the remaining 20% or so?

There are is no shortage of horror stories from the 80%. Many have been there. This article describes the spiral into despair which results from marketing hype and personal hubris, the Superman effect, following modest successes. 

Reality? A recent research report from Psyquation indicated that fewer than 20% become profitable after two years and only 1.2% are successful enough to make trading their career. Sobering stuff for those new to the game, but is it gambling? Thanks go to long term investor Gary Scott for the article below:

Trading and Investing is gambling.

Until we admit this, we cannot invest like the pros. However, once we recognize that every investment is a bet, can we become a professional investor instead of a stock and bond gambler?
The fact is professional gamblers are not really gamblers. They are investing pros who cash in on the imbalances of gamblers. They invest in bets instead of stocks and bonds.

Read more...

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