How I Got Ripped Off By The CFD Traders Edge and Reported Them To the Regulator

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I was searching around the internet the other night and discovered a blog titled “CFD Traders Edge”. As one of Australia’s most recognized and successful professional CFD traders I naturally found the blog incredibly intriguing, however rather worrying. The web site seemed to have been created by a CFD trader like myself living in Australia. A few of the trading strategies and content on the blog was extremely questionable and not reminiscent of methods that would be employed by an expert trader. What I found more interesting was that the trader who created the blog was tweeting his own trades via twitter this not surprisingly raised my eyebrows and several questions.

Tweeting trades is not anything new, however after looking into the trades being tweeted and re-playing the market depth and trade history of the share suggestions (those being tweeted) on my IRESS terminal and matching trade volumes and times to the tweets produced by this trader I found quite a distressing pattern. In a single instance I noticed that just before a tweet advertising a buy signal in a small and somewhat illiquid speculative stock, a large buy order appeared to be executed in the market. At the exact time of the tweets quite a lot of small buy orders followed (most likely from twitter followers) only to be filled by what seemed to be the earlier large buy order now selling. This is a frequent scalping strategy used by skilled traders, however it’s extremely unethical and likely completely illegal when tools including twitter are used to draw in victims (or twitter followers) who are inevitably those that lose out once their orders are filled by the tweeting trader selling back to them subsequent to endorsing a buy signal.

My findings has made me very worried about websites and blog’s such as this which are using advanced social networking tools and systems to ‘pump and dump’ stocks and CFDs so I made a decision to do some further investigation. I promptly found that the trader in question is actively promoting and linked to CFD provider FP Markets or First Prudential Markets. Although it is not uncommon for CFD providers to have in place referral programs, it seems that through his active promotions this trader may just be receiving a commission or rebate from FP Markets for inducing other people to trade in shares which the trader himself has a position in, a very dishonest way of making money indeed.

Being concerned about my alarming discovery I decided to investigate the site and trader behind it further. I contacted some of my friends in the legal profession, who conducted an investigation. I was of course alarmed by their findings, my colleagues informed me that it is actually illegal to promote trade ideas without having an Australian financial services license as this is regarded as general financial product advice, it gets even worse if the trader receives a rebate or remuneration from another person’s trading.

Although quite a disturbing finding I hope that by me sharing this with all traders and investors in Australia and globally it brings about an improved understanding of the true underlying motives of unscrupulous bloggers tweeting their trade ideas and hope that after reading this you will not to fall into the trap of being able to make easy money by simply following someone else’s tweets.

Trading professionally is requires full time devotion and the patience to sit in front of a computer for at least 8 hours a day. A few of the legit websites that I use in my trading are Bloomberg, FX Street, UBS (morning update). I trade with different regulated and respectable CFD providers like City Index, MF Global and IC Markets, my favored choice for index CFDs is City Index and for my DMA CFD and day trading strategies I like to use MF Global or IC Markets as they both have reliable DMA CFD platforms, good product variety and discount commission rates.

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