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Should You Invest In a Currency or The Broker?

by CFD Guru Team   ·   

Why would you invest in currency/commodity and not in the broker? – You should not. 

OK, Let’s say for example that you think you can make money on $EURUSD or $GBPUSD trading, even if you can generate satisfied long term returns, you will be highly leveraged and at risk. 

So here is a scenario, Brexit. 

I have no idea what will happen with the Brexit, quite honestly, I don’t think that even the MPs know, so why should I bet with leverage (most associated trade with currencies) on the currency movements of the $GBPUSD ? 

Instead, I can invest my money in the BROKERS who charge you & me for making the bets (this is how eToro, $PLUS, $IGG.L , $ETFC, and many other brokers make most of their money). 

As a rule of thumb, volatility is the best friend of the CFD broker as they are generating more money when you trade more frequently, buy and sell assets, be $OIL $BTC or $SPY . 

So I am long on the broker, not on the underline asset, those companies (and I, as a shareholder of the company) will make money if there is Brexit or not, if the $GLD price going up or down or if the situation in the middle east means that the $NATGAS and $OIL prices are changing dramatically. 

I am basically betting that other fellow investors will think that they can make money from macro events and beat the market, some of them will, but the vast majority will not, we all familiar with the saying that in the end, the casino is winning.

But investing in the broker is even better than the casino, a company like $PLUS is a cash machine with huge operating margins, low-cost structure, and unlimited growth potential (in the regions where they are regulated and allowed to offer their services).

So for those reasons (and the fact that I can’t predict the future) I am long on the broker (plus500 in this case) and not on the underline asset. 

eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFD assets.

 

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

 

This content is intended for information and educational purposes only and should not be considered investment advice or investment recommendation.

 

Cryptoassets are unregulated and can fluctuate widely in price and are, therefore, not appropriate for all investors. Trading cryptoassets is not supervised by any EU regulatory framework. Past performance is not an indication of future results.