You probably shouldn’t trade on Plus500

Plus500 AlternativesPlus500 is one of the most popular CFD trading platforms in Australia.  It’s definitely the one I see most advertised online.  But is it actually a good place to trade stocks and other assets?  Here are some of the reasons why I don’t think its a good fit for most people and why you should look into a better alternative.  If you’ve been thinking about signing up to Plus500, make sure you read this first.

Plus500 is CFD Trading and Not Real Stocks

On Plus500 you aren’t trading real stocks.  Instead you’re trading CFDs.  These are basically just a contract that tracks the price of the underlying asset.  While it will behave the same as a stock in terms of price, there are some additional risks.

The biggest risk on Plus500 is leverage…

Plus500 Leverage/Margin

Trades on Plus500 are leveraged.  This means you’re using a smaller amount of capital to control a larger amount of an asset.  This is risky.  Trading with leverage, or margin means that you’re position could be liquidated if the price moves against you.

While leverage can be a powerful tool for professional traders – for amateurs it’s dangerous.  It can also be really tricky to understand.  Most people shouldn’t be margin trading.  Leave that to the pros.

Contracts will Close

When you buy a stock, you now own that stock.  You can hold it for as long as you like.  On Plus500 your positions will close.  Each contract you trade has an expiry.  Your trade will close out automatically when the contract expires.  If you’re currently down, you’ll lose money.  You can’t hold onto the contract and hope the price will recover.

This means that Plus500 isn’t good for long term investing.

Is Plus500 Good For Long Term Investing?

No.  Plus500 positions expire.  Remember it’s a CFD, so when the contract expires the position will close.  If the position is at a loss when the expiry hits you will lose money.  When you own a stock it doesn’t expire.  That means you can ride out market downturns for longer term investing strats.

Plus500 for Crypto

You can trade Crypto on Plus500, but I also think its a bad place to do this.  Remember on Plus500 you’re just trading a contract.  You aren’t actually buying the underlying asset.  Because crypto is so volatile, I think its smarter to just buy and hold.  Trading is just too risky.

Can you buy shares on Plus500?

You can trade share CFDs on Plus500 but when you buy shares you don’t actually own them.  You are just trading a contract.  So if you’re looking to invest in shares for the long term, then Plus500 is definitely not for you.  Plus500 could be used for day trading, but that is much more complex and not for the average investor.

Is Plus500 Worth it?

I don’t think Plus500 is worth it for most people.  If you’re an experienced trader, then it might be a good platform for you.  But if you’ve never traded before then I would highly recommend you look elsewhere.

Better Plus500 Alternatives

If you are looking to trade shares – then there are platforms that are better Plus500 alternatives.  If you’re just looking to buy and hold shares, then look for a broker or invest via micro-investing.

eToro

In my opinion eToro is a better alternative to Plus500.  Here’s why:

  • You can trade without leverage – this means you won’t be liquidated when markets are volatile.  Trades work just like regular stock trades.
  • Real Stocks – eToro has real stock trading for U.S listed stocks.  That means when you buy shares like Apple, you’re buying the underlying asset.  Where on Plus500 you are just trading a contract.
  • No holding fees – on non-leveraged positions, you aren’t charged any overnight or weekend fees.
  • No Expiry – there are no expiry dates on stock contracts.  This means you can buy a stock like Apple, and hold onto it for months and profit from longer term gains
  • CopyTrading – you can copy the trades made by more experienced traders.

You can find out more about etoro here.

Commsec vs Plus500

Plus500 and Commsec are very different platforms.  On Commsec when you buy shares you actually own them.  On Plus500 you are just trading contracts.  So if you’re looking to buy ASX listed shares, then Commsec would be a better option.  For international shares I would recommend Stake or eToro.

Other Options:

  • On Stake you can trade U.S listed stocks without commissions.
  • On IG you can trade CFDs like Plus500 but you can also trade real stocks.

Practice Trading

If you are looking to start trading, then I recommend you start with a practice account.  You can open a practice account on Plus500.    I recommend eToro as a good place to practice trade.  Just because they have social features where you can interact with experienced traders.

If you’re looking to learn about trading, then EasyMarkets offers a pretty good education section including a full trading course.

Let me know in the comments what your experiences with Plu500 have been.  Have you managed to have success trading on Plus500?

This post is for educational purposes and should not be considered as investment advice. This post is based on individual experience and journalistic research.

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