Plus500 were founded in 2008. They're headquartered in Israel with subsidiaries in the UK, Australia, Singapore, Cyprus, Estonia, UAE, and Seychelles. The trading app was founded by six alumni of the Israel Institute of Technology. It lets users trade Contracts for Difference (CFDs), shares and futures (availability based on jurisdiction).
In this guide, we cover how CFDs work and also review Plus500.
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Visit Plus50080% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
At a Glance — Pros and Cons
If you’re looking for a clear-cut overview of the upsides and risks of trading CFDs, then this is the section for you.
Pros
✔️ Trade in both rising and falling markets. Essentially, whether the market is experiencing a downturn (bearish) or an upturn (bullish), your potential to profit hinges on accurately predicting and aligning your trade with the market's movement. Your success depends on whether the direction of your trade correctly matches the market trend.
✔️ No handling of underlying assets. You will not own the actual underlying asset. CFD contracts simply speculate on that derivative. This means, for instance, you can make bulk trades on commodities without taking possession of gold, silver, oil and so on.
✔️ Use leverage. One of the major benefits of trading CFDs is that you can trade on margin using leverage. You can invest a small amount of cash upfront and get a much larger ROI, but there is also the possibility of magnified capital losses.
✔️ Fast and reliable order execution.
✔️ No buy/sell commissions and tight spreads.
✔️ Advanced analytical tools.
✔️ Real-time quotes.
✔️ Fast and secure withdrawals.
Cons
❌️ Amplifies the tiniest of movements. You could lose all of your account funds very quickly. ‘Negative balance protection’ is a very important feature that ensures you don't lose more than what you deposited. It is a regulatory requirement that Plus500 complies with. Also, you can use stop losses to try and limit downside risk.
Plus500 Review — Its History
So who is this company, where did they come from and what have they been up to over the last few years? In this section, we find out.
Some CFD trading platforms do not operate legally and these will not have FSCS insurance or regulatory oversight by the FCA.
Plus500, however, is a well-known player in the CFDs market. The company now has a yearly revenue that is well over half £1 billion in size and steadily growing into 2024.
Plus500UK Ltd authorized & regulated by the FCA (#509909).
| 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. |
The company was founded in 2008 by a group of alumni from the Israel Institute of Technology. They formed the company by pulling together an initial investment of more than £300,000.
The first platform iteration was released for Windows. Then in 2010, the full platform launched as a web browser version, which let Linux and Mac users also trade online. And in 2011, an app was released for iPhone and iPad. A year later, an app was released for Android smartphones and tablets. The company went public in 2013, listed on the London Stock Exchange. And in 2014, a Windows app was launched.
However, the stock took a massive hit in May 2015. Plus500 lost almost half of its value after it froze British trade accounts. This freezing occurred while the British FCA launched an investigation into the its anti-money-laundering controls. The majority of customers were able to gain access to their funds within two months.
In the years after, Plus500 was able to gain regulatory licences to operate in Singapore (by the Monetary Authority of Singapore) and Israel (by the Israeli Security Authority) plus licences from the financial authorities in Australia, New Zealand, South Africa, Dubai, Estonia, and Seychelles.
In 2018, the company launched an Economic Calendar, letting its users track key financial events and trends worldwide. These were fed by the Dow Jones and also provided information on how key instruments were affected by economic events.
Market cap
Plus500 has had a premium listing on the Main Market of the London Stock Exchange since 2018 (symbol: PLUS) and is a constituent of the FTSE 250 index with a current market capitalisation of £1.41 billion (Jan 2024).
In 2021, Plus500 began the process of acquiring Cunningham Commodities and Cunningham Trading Systems, which was completed by the end of that year. Cunningham is a digital trading platform that offers futures for the North American market. That same year, Plus500 opened up a new research and development department in Tel Aviv, Israel.
Plus500's share dealing platform offers over 2,700 financial instruments, complete with market data and dedicated round-the-clock customer support.
In the spring of 2022, Plus500 acquired the Japanese trading company EZ Invest Securities. And today, Plus500 operates at a profit, including in British markets.
Review of Plus500 — Contracts for Difference Explained
The most important thing to understand about Contracts for Difference (CFDs) is that they exaggerate even the tiniest movements. Using CFDs without first understanding traditional trading is like trying to sprint before you can even crawl.
A CFD is indeed a type of financial contract that allows traders to speculate on the rising or falling prices of fast-moving global financial markets, such as shares, indices, commodities, currencies, and treasuries. The key aspect of a CFD is that it involves the exchange of the difference in the value of a particular asset from the time the contract is opened to the time it is closed. The settlement is in cash rather than the physical delivery of the asset, making it a popular instrument for short-term trading.
Contracts for Difference (CFDs) and futures contracts both allow trading on leverage, which means using a small amount of capital to gain exposure to larger market positions. The key difference lies in their structure and usage. CFDs are flexible, over-the-counter trading instruments that enable investors to speculate on the price movement of various assets without owning the underlying asset. They are popular among retail investors for short-term trading.
Futures, on the other hand, are standardised contracts traded on exchanges, where buyers and sellers agree to trade an asset at a predetermined price on a specific future date. Futures are commonly used for hedging risks and have specific contract sizes and expiry dates. Both CFDs and futures involve trading on margin, amplifying both potential profits and losses.
Advantages of contracts for differences
You get all of the perks of securities or commodities, without needing to own or handle them physically or to invest the full cost upfront.
ROI
While Plus500 offers futures trading in the US, the CFD platform offers the advantage of speculating with the price of any chosen instrument such as commodities and shares, without having to own them, which could mean making room in your pantry for a tonne of copper and 12 cattle.
In Britain, the maximum leverage for retail investment is 30:1. So in the UK, leverage can be as high as 300 per cent of the size of the position. Brokers need to make sure that investors have a specific minimum account balance. Once this threshold is met, they offer more amplification than traditional trading.
Fewer margin requirements
You may find that contracts for differences request a lower requirement of capital to be funded into a brokerage account. Oftentimes, traders can begin using these contracts with as little as a grand deposited with a broker. In some cases, users may even be awarded cash dividends.
Disadvantages of CFDs
Leverage
“Negative balance” protection is a regulatory requirement Plus500 complies with. This prevents your account from going into debt — it will block you from losing more money than you have deposited into your account.
You should also consider using stop losses. These are essential components of a risk-managed trading system. It limits how much each trade can incur in losses so that no single bad trade totally wipes you out.
Liquidity/segregation
In jurisdictions where CFDs are permitted, specific regulations are in place to protect investor funds. These laws mandate that a CFD provider must keep client funds separate from their own company funds. This segregation is crucial to ensure that the client's money is not misused.
However, it's important to note that while these regulations prevent the direct merging of a provider's capital with client funds, they may not prohibit the aggregation of funds from different clients. This means that your investment could potentially be pooled with that of other clients, which might be used to facilitate or settle other trades.
Another critical aspect to consider is the liquidity risk associated with CFD trading. This risk becomes particularly pronounced in markets where there are a limited number of participants available for trade execution. In such scenarios, entering or exiting positions can be challenging, potentially impacting the trade execution and pricing.
Plus500 Review — Account Set Up
Plus500 UK offers a variety of trading account types. You can begin exploring the platform by utilising its demo account, which provides a realistic trading experience.
The demo account now features enhanced flexibility, allowing users to set their balance to a preferred amount without needing to contact customer support or reset their account history.
At Plus500, you can adjust your demo account balance up to €40,000, or an equivalent amount in your account's currency. This enhancement enables a more tailored trading simulation, allowing you to align the demo experience with your intended investment scale.
Additionally, there is an option to completely reset your demo account, including all transaction history. This allows for repeated experimentation with various trading strategies, providing a fresh start each time.
The demo account offers real-time market connectivity, giving you a glimpse of potential outcomes in a fully funded scenario. However, be aware that the demo may offer a more favourable trading environment compared to actual trading with real funds.
To open a live trading account, a minimum deposit of £100 is required. Applicants must be at least 18 years old and provide valid identification, such as a driver's licence, government-issued ID, or passport.
Upon registration, you will receive an email containing a verification code to complete the sign-up process, typically taking 1 to 2 days. Additionally, account verification may involve confirming a code sent via SMS to your phone.
An interesting feature is ‘Market Alerts', which, when activated, delivers live market updates directly to your phone. These alerts can be customised based on market type, security, commodity, issuer, and other criteria.
Plus500 offers a wide range of trading products. Plus500Futures caters to futures trading, while Plus500CFD provides access to ETFs, stocks, forex, and more, all tradable exclusively through CFDs.
Top 4 risk management tools
This platform provides four key risk management tools: negative balance protection, close at profit/loss, guaranteed stop, and trailing stop. ‘Negative balance protection' is a crucial regulatory requirement that Plus500 adheres to, ensuring that clients cannot lose more money than they have deposited in their accounts.
Negative balance protection
Negative balance protection means that you are not able to owe the broker more money than your account funds contain.
Because using CFDs means you are trading money that mostly isn’t yours, it’s possible for a trade to speed into the red, taking all of that money down with it. Trades can happen so quickly that the money used to create the account doesn’t cover your losses.
But the negative protection feature should automatically end your position in the event that your account goes to 0. This is called a margin call. Theoretically, it should not be able to lose more than you deposited into your account. This is an extremely important feature to have in place, as a failsafe for the worst-case scenario.
Close a profit/loss
That said, you should be using some kind of stop-loss. That brings us to our second risk management tool.
‘Close at Profit’ is a type of stop limit and ‘Close at Loss’ is a stop loss. Together, these can be incorporated into your trades when you are creating a new position, or to adjust a pre-existing position. Use these risk management tools ahead of time, to set a specific price point at which your position will close. This is to protect your profit, should it arise, and also limit your loss, in the event that the trade sours and goes bad.
So, you are limiting your profit while also securing it, and stopping too great of a loss. Keep in mind that the actual price point that the broker manages to execute your closing order may be different to the one that you set.
If the market is really moving quickly, or the broker has a large gap between when you issue the order and the execution of your order, this can cause slippage. Slippage is where your trade closes at a different price than the one set.
Guaranteed stop
A ‘guaranteed stop' is a risk management tool designed to strictly limit potential losses on a position. It ensures that your position will close at the specified price, regardless of significant market fluctuations, eliminating the risk of slippage.
However, the availability of a guaranteed stop depends on the instrument being traded. To check if it's available for your chosen instrument, look for the checkbox option in the platform. This appears after selecting ‘close at loss' and is contingent on the instrument's compatibility with the tool.
It's important to note that a guaranteed stop can only be applied to new trades and cannot be added to existing orders. Once set, it cannot be modified, although you can remove the close at loss order during a trade.
Using a guaranteed stop incurs an additional spread charge, which is non-refundable. The details of this charge will be provided before you confirm the trade. This order can only be set at a specific, pre-defined distance from the current trading value of the instrument.
Trailing stop
The ‘trailing stop' is designed to secure profits. It remains active as long as the market moves in your favour and automatically closes the position if the market moves against you by a pre-set number of pips.
‘Pips' stands for ‘price interest point', representing the smallest unit of price movement. With a trailing stop, your ‘close at loss' order automatically adjusts as the market moves favourably. Imagine it as a flexible link between the market movement and your order. However, if the market trends against you, the close at loss is triggered.
While there is no charge for using a trailing stop, it's important to remember that Plus500 cannot guarantee closure at the exact close at loss level due to potential slippage.
Review of Plus500 — Charts and the Interface
Plus500 has a bunch of YouTube videos teaching how their platform works. They’ve been posting videos since 2009, attracting over 200 million views in that time. They post frequently, multiple times per month.
Topics covered include financial terms like moving averages, platform tools like trailing stop losses (which were covered in the section above), speculative videos such as where the USD is heading and commentary on the UK economy.
Traders can also find weekly webinars that discuss market trends and technical analysis. The webinars host market analysts and experts courtesy of the Corellian Trading Academy.
Plus500 Review — The Verdict
The weighting of your investment is much larger than your actual upfront investment. It could be larger than the amount you have in your balance. Plus500 platform is only recommended for traders who already have professional-level experience in handling the traditional markets. This platform potentially offers a way of amplifying tiny movements.
| 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. |
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