Many CFD brokers make money from trading against their clients and profitable clients make them lose money. This is similar to how casinos operate. Casinos ban profitable customers. Do CFD brokers do the same thing? Has anyone have personal experience or know of people who were banned?
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3"Many CFD brokers make money from trading against their clients and profitable clients make them lose money" Where did you get this? I think your understanding of both CFD brokers and Casinos is incorrect.– D StanleyAug 8 at 13:27
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2 Answers
Casinos ban profitable customers.
This is not true.
The business model of a casino is not to beat everybody. It relies on the fact that for every game, the odds are tilted to the house. Yes some players might beat the odds and win big, but in the long run the house always wins. In fact, casinos tend to celebrate winners to get more people to come to the casino thinking that they might be the next "big winner".
Casinos do ban cheaters, but it's obviously because they cheat, not just because they are winning.
It's actually similar for CFD brokers. Their business model is not to be on the right side of the bets, but to profit on the bid/ask spreads over time. They can hedge their risk overall in various ways, either by trading the opposite side of a CFD with other clients, or using derivatives to hedge their exposure. They're not profitable by being "lucky".
EDIT:
To be fair to a comment, card counting at blackjack is not technically cheating but it frowned upon because it skews the odds against the house.
However, I also wanted to add a personal anecdote the other way in a financial market.
When ICE was getting established as an internet-based trading platform for energy commodity trading, I knew a traded who had traders on the NYMEX floor at the ready, and would look for arbitrage opportunities between the exchange floor and the ICE platform. He would make so many trades on ICE that they didn't care that he was personally profiting, because it increased their overall volume. Since they wre just a platform, they were not harmed by the arbitrage, so it made no difference to them.
The same could be applied for CFD brokers, who are not taking active positions but are either matching up trades or using derivatives to hedge their exposure. that don't care if you make money overall or not; they profit by enabling trades and increasing volume.
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3I shouldn't quibble because I think this response is mostly correct, but casinos do ban blackjack card counters despite the fact that It's not considered cheating. They use their discretion as a private establishment to ban customers they consider undesirable. Apparently a good card counter can have too much of an impact on the overall stats for the casino. Nov 20 at 19:33
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True, although that can be a fine line, and most (if not all) ban the use of devices to facilitate counting (which they do consider cheating). Nov 20 at 19:44
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Card counting without a machine in NOT a fine line, it is strictly legal tactics while playing the game and this has been confirmed in court. Nov 20 at 19:54
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The use of confederates, as is often shown in popularizations of card counting, is also considered cheating. Nov 20 at 20:01
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I agree with Stanley Brokers has no interest to hold profitable traders , they put all your positions monitored for 3 months . They try all to get rid of you if you are very profitable trader.
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2Do you have documentation or examples of this happening? I have never heard of anyone being banned from a trading platform for being successful unless they are cheating. Nov 20 at 19:45