Malaysian Traders Keep Getting Burned by CFDs

Malaysian traders are wasting serious sums on CFDs and the trend continues to repeat itself. Each week there is a new report on some person who thought that they had sorted out the market only to wake up the following morning to see their account balance vanish. The worst part? Most of these merchants are aware of the dangers and convince themselves they are different from all the other failed traders.

Malaysian traders are not intimidated by entry barriers which are pathetic. There will come a time you will be allowed to trade forex pairs under leverage of 100x by depositing 500,000 ringgit, being approved in just a few minutes. The platforms appear to become simple with their polished interfaces and demo accounts, which appear to make profits at some rate. Then reality sets in when real money comes into the picture.

The Malaysian regulatory environment is a nightmare as far as losses are concerned. Retail traders are not permitted to enter into online CFD trading contracts in Bank Negara and this causes them to do business offshore. These are companies based on Cyprus, Seychelles or Marshall Islands where the Malaysian authorities have no power to assist in case of any failure. When a broker just freezes withdrawals or plays with spreads, traders find that the only recourse they have is sending angry emails which are never responded to.

Leverage wipes out accounts faster than anything. Leverage of 500:1 is viewed as a chance by new traders to turn minimal deposits into riches. They are not aware that the same leverage wipes them out with a 0.2 percent move aimed against their position. The brokers know this. Their operation model is relying on it. European regulators have statistics indicating that the majority of retail CFD traders lose money about 75-80% with Malaysian traders likely to do even worse considering there is no local oversight.

These platforms should have predatory marketing strategies. Advertisements of young Malaysians and luxury cars are saturating social media proclaiming that after having found this single easy way to trade, they leave their job never to go back. Using WhatsApp groups, there are images of huge returns circulated that are either fabricated or selected out of thousands of losing trades. The trading gurus charge 5,000 ringgit on seminars which they conduct on the weekend where they teach simple technical analysis which anyone could learn for free on YouTube.

This manipulation of the platform always takes place. Unaccountable spreads increase just before big news events. The price spikes that are recorded to cause a stop loss occur on no other chart of the broker. There are also withdrawal requests followed by the unpredictable “verification procedures” that turn into months-long ordeals. A Penang trader objected when his broker accused him of breaching the terms of service after trading too well that the amount of his balance was 50,000 ringgit drained at the hands of his assailant.

The mental injuries are not limited to losses made. Gambling addictions are developed by traders without any cognizance. They pursue bigger positions with a loss, lend funds to deposit, and deceive the family where the savings have been stolen. The relationships and sleep habits are destroyed by the daily anxiety about keeping the positions. Boards full of mind and soul pits of divorces and hearts breaking over CFD misfortunes.

Good traders also do not remain profitable in the long run very often. Those who manage to construct working approaches are immediately rejected by brokers on their trades or receive the ban on their accounts. The market conditions vary and render once-profitable systems useless. The heightened emotional strain of being on alert makes humans exhausted beforehand to err either way by making very expensive errors.

Malaysian government at times issues alert on the unlicensed investment schemes, and it is still very lax. The Securities Commission keeps a list of unlicensed entities, although new ones appear faster than regulators can respond. Thousands of Malaysians have lost their money by the time the authorities give out the warnings.

There is the tax situation that makes everything further complicated. Online CFD trading profits are technically taxable income, but losses cannot be used to offset other income. Traders who are lucky this year would pay taxes of thousands then the following year lose all their money and there are no available tax benefits.

Any investor, who admits to this type of investment, must be aware that CFDs are designed to transfer funds from retail traders to brokers. That is not cynicism, that is the business construct. House advantage in casinos may seem high as compared to structural disadvantages of the CFD traders. Casinos at least provide free drinks while taking your money.