“Open today your account with a minimum deposit of just £100!”
Have you seen that on the internet? Many online CFD trading pages invest a lot of money in marketing to get these juicy offers across the internet universe right in front of your eyes. But is it really that easy?
Can everybody make a lot of money from just £100?
Well, the keyword there would probably be everybody. Think about this: Money flows, so with the exception of central banks making money—for one person to make money, another person has to let that money go, correct? Therefore, technically it is not possible for everybody to make a lot of money. Some people think that trading online is simple when, in reality, you need to have a deep knowledge of many underlying factors to be successful.
What are some additional costs that are often not mentioned clearly with the £100 deposit offer?
Economic Cost of Online CFD Trading
Besides the money you deposit, there are other costs to consider, like spreads and margin.
On top of that you need to add commissions when you do online CFD trading at any of websites out there. For example, if you bought 2,500 units of a Canadian company with a commission of $0,02 per share, at a price of 70.35 you would have to make the following calculation:
2,500 (units) x $0,02 (commission/unit) = $50.00 commission.
And this doesn’t take into account the minimum commission for some trades.
You may want to have a Guaranteed stop loss order, to protect you from market volatility, in which case you will have to pay extra.
Add to the list the holding costs. That is the price you pay to have a position open overnight and the costs differ between holding positions for cash, treasuries and commodities, Forex, share CFDs, or indices.
In addition, you may have to pay a monthly fee for market data, which will enable you to decide your strategy.
And don’t forget this doesn’t factor in the money you can actually lose, since it is a high risk product. Some who eventually made money admit to having lost hundreds or thousands in their starting years.
Other Costs to Consider
Apart from the economic costs of online CFD trading, if you don’t have the training and years of experience necessary, you rely on guesswork; and this—according to some experts—equals to professional gambling. And gambling can have serious repercussions in your social and family life. It can cause isolation, health problems due to constant stress, and leads to burnout, anxiety and/or depression.
So is it worth the risk?
Well you who should weigh your priorities, develop a plan and make rational moves. Even though some who made money think that you can advance little by little if you imitate the moves of big companies, remember that this should not be treated as a game and that you also need to invest time and effort in learning the trade. This time and effort will come from other activities, but you may in time feel that the benefits far outweigh the costs.