Plus500 Review: Market Maker for Easy Entry
Plus500 is a Cypriot broker that offers a trading catalogue of more than 1,000 underlying assets. Trading is based on a market-making model without any commissions. Those interested can start trading with an initial credit of €25 – without having to make a minimum deposit first. This broker rules out margin-call obligations beyond the account balance. New customers receive large deposit bonuses, which can only be paid after a very large number of subsequent transactions. Automated trading and elaborate chart analyses are not offered. Consult our Plus500 experience report to learn whether this broker is for you.
Plus500 Evaluation – Pros & Cons
- Commission-free trading
- No margin-call obligations beyond one’s account balance
- €25 new customer bonuses even without making a deposit
- Large deposit bonuses
- More than 1,000 tradable underlying assets
- Very low margin requirements, e.g. 0.24% for the DAX
- Market making
- Rather broad spreads in part
- Trading platform with few functions
Broker Review: Our Plus500 Experiences
1. Trade Conditions: Market Making with Average Spreads
- Spread DAX: 2.57 Points
- Spread EUR/USD: 2 Pips
- Spread DJIA: 5 Points
- Spread Gold: $0.66
The effective trade conditions are an essential aspect of a qualitative Plus500 evaluation. Compared to other trading houses specialized in CFDs, this broker achieved average results in our test. At Plus500, trading is based on a market-making model. As is the case with most market makers, trading of most underlying assets is commission-free. The broker thus primarily generates its margin contribution via the spreads. According to a sample, these spreads are average for the most important underlying assets of each asset class.
In trading DAX contracts, the spread was 2.57 points at the time of the sample collected specifically for this Plus500 test. For Dow Jones trading, 5 points were due; $0.66 was due for gold contracts and 2.0 pips for trading EUR/USD. “Flagships” would be desirable – a smaller basket of indices, FX main currency pairs, and other underlying assets with very narrow spreads.
Traders who appreciate very large financial levers will likely gain absolutely positive experiences with Plus500: The initial margin is much lower than that of the competition for almost all underlying assets – around 0.34% for the DAX and 0.50% for EUR/USD. Usually, such low margin requirements are only offered by brokers, where the losses can exceed the account balance.
2. Trading Platform Offering: more than 1,000 underlying assets
The tradable underlying assets are a quality criterion for the evaluation of brokers that is frequently overlooked. First of all, a broad catalogue speaks for a strong market position of the broker, since a sufficiently liquid market position would otherwise be impossible or too costly for less frequently traded stocks. Secondly, the success of many trading strategies stands and falls with the number of qualified trading signals – which is naturally related to the range of markets scanned.
The breadth and depth of the underlying assets is a positive aspect of the Plus500 valuation: A total of several thousand underlying assets are tradable, including equities, commodities, indices, currencies, options, and ETFs. Some of the commodities and indices are based on term contracts, which are connected to roll transactions at the end of the contract term or shortly before. Rolling costs may pose a problem – particularly in connection with very large financial levers.
The details of each individual CFD can be accessed via the product list as well as via the trading platform.
3. Order Features of the Trading Platform: Other Market Makers Can Do More
There are three basic order types: Market, limit, and stop. Brokers can offer their customers a much larger number of order types. In stock exchange trading, this is done by linking the three basic order types. The orders are transmitted to the broker by the customer and remain on the broker’s servers until a certain event occurs, after which the order is either deleted or forwarded to the stock exchange.
In the case of market makers, forwarding to the stock exchange does not take place, as the rates are determined in-house anyway. Therefore, brokers are able to provide their customers with a large number of order types and can enter into additional agreements with their customers. Plus500 offers market, stop-limit, stop-loss, entry-limit, as well as trailing-stop orders. In addition, guaranteed stop-loss orders are possible. Therein, the broker guarantees the realization of the agreed SL rates without gaps and slippage. You can tell whether a underlying asset offers guaranteed stops by looking for the respective checkbox in the trading area.
4. Analysis Features of the Trading Platform: Candlestick Charts and Indicators
Just to let you know right away: The analysis functions of the trading platform are a weak point in the Plus500 review. This applies to the download version of the platform as well as to the “WebTrader” and the mobile version. Most traders expect CFD brokers to offer a complete solution for trading, research, and analysis. This requirement is not met by this broker: The platform merely offers candlesticks charts and common technical indicators. A full-screen mode, drawing tools, additional indicators, and an interface for importing trade signals would be desirable.
If you require these tools, you will need to access to third-party offers to carry out charting and analysis there. This makes it all the more remarkable that this broker offers almost no features for fundamental analysis. Databases or fact sheets with key figures, important dates, etc. would be desirable, for example.
5. Regulation, Deposit Guarantee, and Limitation of Risk: Loose Regulatory Environment
The broker has a number of supervisory authorities, including the UK’s FCA. However, Plus500 CY Limited, which is based in Limassol, Cyprus, is exclusively responsible for the operation of the trading platform and its account management. The company is therefore under the jurisdiction of the Cypriot financial services regulator CySEC.
For beginners who are giving an over-the-counter market maker like Plus500 a try for the first time and are still in the experimental phase, this may not be an obstacle – for experienced traders, the regulation in Cyprus is a pretty good reason for deciding against this broker. Despite its EU membership and MiFID, the standards on the island are not comparable with those of the established financial centres.
This also applies to the deposit guarantee scheme. Plus500 states that customer deposits are kept in segregated customer accounts at banks, as required by law. Usually, this is followed by the remark that these are banks from the UK or Germany. This is not the case here. Customers must therefore expect their money to actually be invested in Cyprus. The broker's membership in the Cypriot investor compensation fund (ICF) is a small consolation.
Yet, the binding exclusion of additional margin-call obligations beyond one’s own account balance, which is defined in the terms and conditions, is a big plus. Given the abovementioned weaknesses regarding the regulation, platform, and conditions, this protection mechanism is particularly important.
6. Automated Trading: Algo Trading is not an Option
Automated trading has been gaining in importance for years, and the better the brokers and software developers are able to reduce their programming skills, the more people will want to take advantage of automated trading. Thus far, Plus500 does not rely on Algo trading and everything related to this approach.
There is no development environment via which mechanical trading systems can be programmed or subjected to a retroactive test. Personal/ individual trading signals are also not made available. There is no API for importing signals from external sources. Only alerts can be set up – the users of the platform are automatically informed when a certain market price has been reached.
The complete renunciation of automated trading is only a con for those who wish to use algorithms as their approach to trading in the long run at least. The same applies to social trading, which also does not play a role in this case. A changed attitude of the company in regards to these important subject areas would certainly be desirable.
7. Account Opening and Minimum Deposit: €25 Bonus without Making a Deposit
The biggest plus in the evaluation of this broker is that new customers can give Plus500 a try without having to deposit real money or having to limit themselves to a mere demo account. The broker provides new customers with €25 of real money as an initial credit without a separate customer deposit being necessary. The bonus can be claimed without a waiting period and before the legitimation check has been completed. Thus, the new-customer bonus can immediately be used for trading.
This is a big plus for two reasons. Firstly, an “unlimited” credit reduces the initial hurdles. Secondly, anyone can check to see whether the attractive advertising promise made by this broker is actually true: Plus500 claims to be offering a demo account that includes the market rates of the broker’s live trading servers. Since virtually everyone is given access to a capitalized real-money account (even though this only includes a small initial balance), this makes for transparency.
The opening of an account is extremely easy, since the verification of legitimacy can also be carried out after the new customers have already started trading. The parallel opening of a demo and real money account is not necessary: Switching between the two accounts is possible via the respective window.
8. The Broker and Its Competition: Significant Customer Growth
Plus500 Limited is listed on the London Stock Exchange. The company is one of the largest in the industry and is a well-known sponsor: In fact, 500Plus is the main sponsor of the Spanish club Atletico de Madrid.
In the fiscal year 2014, the company achieved revenues of $228.9 million, which constitutes an increase of 99% compared to 2013. When these figures were announced, the company thought of itself as “well-positioned” and expected further growth for the fiscal year 2015 as well. The pronounced growth was not least due to the increasing volatility in the markets at the end of the reporting period. The company's EBITDA rose by 116% to $154.4 million, the EBITDA margin reached 63.6%, and the broker’s net profit increased by 102.6% to $102.5 million.
In 2015, the software company Playtech almost took over Plus500. However, the transaction fell through due to delays in the assessment of the acquisition by the FCA.
9. Additional Services and New-Customer Offers: Large Bonuses for Very Active Traders with Large Deposits
Since it is primarily beginners that are giving market makers like Plus500 a try, a substantial training offering would certainly be desirable. Unfortunately, the broker largely refrains from such training programs. Customers with little or no trade experience are therefore dependent on offers by third-party suppliers, which are available in sufficient numbers, however.
Especially for financially strong beginners, the very high deposit bonuses for new customers are a rather positive aspect of the Plus500 test. Depending on the customer’s initial deposit, an additional €30 to €7,000 are credited to their trading account as a bonus.
The restrictions customary to deposit bonuses apply in particular with regard to the withdrawal of the bonus balance. This can only be initiated when a fixed number of T-points (dealer points) have been collected. In order to be able to request a bonus of €200 to be disbursed, for example, 200 T-points are required. For each €1,000 turnover in the DAX-CFD, 0.29 points will be credited.
10. Customer Service and Website: No Hotline, No Training Programs
There is no telephone customer support – customers can only contact the broker via an e-mail form. The “FAQ” section of the trading platform refers to a subpage with explanations regarding the terms and procedures.
Apart from the renouncement of substantial training programs, the broker’s website has done well in the test. In particular, the most important aspects of the general terms and conditions, such as the exclusion of a margin-call obligation, can quickly be found. The catalogue of underlying assets has been structured clearly: Without having to log in, the details for each individual contract can be called up via the trading platform.
The broker assumes that its target group would like to start trading as quickly and easily as possible. As has already been criticized in this Plus500 experience report several times, further trading platform and training opportunities are thus lying idle, which seems to be wanted nonetheless.
Conclusion to the Plus500 Test
One of the most striking features of the Plus500 test is the new customer bonus of €25, which is also granted without the customer making a deposit and thus allows interested parties to conduct a mini real-money test of the spreads and the trading platform as a whole. Not only in this regard, the broker primarily wants to use these very low hurdles to attract beginners, who are just getting started and do not want to be immediately confronted with questions about automated trading, social trading, and DMA market models. Anyone that is well-positioned within this target group should give Plus500 a try – yet, advanced traders and real trading experts will shy away from this broker given the market-making model, the Cypriot regulatory environment, and the somewhat above-average spreads.
Our Plus500 Rating as a Test Score: C+