Author Topic: Beware of commission-free brokers!  (Read 328 times)

BWS

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Beware of commission-free brokers!
« on: July 24, 2020, 02:35:44 PM »
I dont wish to be alarmist, but I wanted to get the attention of anyone new to trading who is looking for a broker.

I was watching football on TV and there was an advert for commission-free forex brokering. I cant remember the company, but it prompted me to do some research.

Commission-free brokering is nothing new, most forex traders will only pay the spread when they trade. However there are some new brokers around who, while trumpeting the commission-free aspect, tend to forget to tell users about the spread. Their marketing is aimed at young, inexperienced kids to whom this might appeal, and has been criticised for making trading look like gambling.

A US broker, Robinhood, who hope to launch in the UK, has recently made headlines after a 20 year old client committed suicide because he thought he had run up debts of $730,000 trading options with them.

Other brokers offer fractional share dealing, allowing users to buy 5% or 10% of a share - some US share prices run into $1000's per share so would be unaffordable. The problem with this is twofold. First, because brokers have to aggregate multiple orders themselves, clients rarely get the price they expected. Second, trading part-shares is not permitted so when you decide to sell, you can only do so via the same broker and at whatever price and spread he chooses to offer you.

Because they are operating on tight margins, these brokers offer little or no trading advice or learning on their platforms. They also bombard users with messages telling them they should trade, encouraging over-trading.

So, please remember that there is no such thing as a free lunch, especially where brokers are concerned.

« Last Edit: July 24, 2020, 02:48:55 PM by BWS »
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eddieb

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Re: Beware of commission-free brokers!
« Reply #1 on: July 25, 2020, 10:26:02 AM »
Very informative post Ben.
May I  add, beware of brokers offering 'bonus money' incentives to join them.
The terms and conditions these companies set usually include clauses stating minimum numbers of trades or minimum number of lots you have to trade before you are allowed to make a withdrawal.
This means that you could be with them for months  steadily growing your account from a few hundred to maybe several thousand but they won't allow you to withdraw a single penny because you took a 'free' $100 bonus when you joined
Disclaimer. Posts are just my thoughts,  not recommendations.  Do your own due diligence before trading

eddieb

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Disclaimer. Posts are just my thoughts,  not recommendations.  Do your own due diligence before trading

Sharkie

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Re: Beware of commission-free brokers!
« Reply #3 on: July 27, 2020, 07:35:28 AM »
I've seen that Robin Hood outfit, a pal of mine showed me it.
Its very colorful, almost child-like. Their "learning" section is a joke, but I  guess they don't really want clients knowing what they are getting into.
The authorities should take another look at this business model and reconsider authorising them
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Magyar

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Re: Beware of commission-free brokers!
« Reply #4 on: July 29, 2020, 04:04:59 PM »
It must be legal but it isnt very pleasant. They know that they are targeting young and vulnerable so they are not nice people.

ElvisChute

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Re: Beware of commission-free brokers!
« Reply #5 on: July 30, 2020, 04:12:41 PM »
I've seen that Robin Hood outfit
Same here Sharkie, they seem big in the States.
The shame of it is that people losing money here will never return to trading and see how its properly done.
I dont know much about Robinhood but I bet its owned by some conglomerate or multi-billionaire
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Caesar

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Re: Beware of commission-free brokers!
« Reply #6 on: September 04, 2020, 08:10:14 AM »
I understand that Robin Hood have withdrawn plans to launch in the UK. No reason given
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ElvisChute

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Re: Beware of commission-free brokers!
« Reply #7 on: September 13, 2020, 02:45:24 PM »
I understand that Robin Hood have withdrawn plans to launch in the UK. No reason given
A lot of bad publicity over here, thousands of people lost their accounts last week when Tesla crashed over 20%.
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BWS

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Re: Beware of commission-free brokers!
« Reply #8 on: October 04, 2020, 03:37:32 PM »
I understand that Robin Hood have withdrawn plans to launch in the UK. No reason given
A lot of bad publicity over here, thousands of people lost their accounts last week when Tesla crashed over 20%.

I suppose at least most of them will only have tiny amounts of money invested.
I can't imagine any serious investor using Robin Hood
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Sharkie

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Re: Beware of commission-free brokers!
« Reply #9 on: October 06, 2020, 06:51:56 PM »
I understand that Robin Hood have withdrawn plans to launch in the UK. No reason given
A lot of bad publicity over here, thousands of people lost their accounts last week when Tesla crashed over 20%.

I suppose at least most of them will only have tiny amounts of money invested.
I can't imagine any serious investor using Robin Hood
I see Trading 212 offer something similar, using an app on your mobile.
Anybody tried them?
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ElvisChute

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Re: Beware of commission-free brokers!
« Reply #10 on: October 07, 2020, 08:24:12 PM »
I see Trading 212 offer something similar, using an app on your mobile.
I've seen adverts for OFX. Never even heard of them before.
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