# CFDs anyone?



## tarnor (22 October 2005)

Hi,
    Looking at changing my online broker to one that has a stop loss facility and was also hoping to be able to do some shorts.  I can't seem to find any that allow short selling but have noticed that you can do this with cfd's. Reading a little about cfd's i'm almost sold on the idea and thinking about having a small amount of my capital in cfd playing with the big leverage, just for those times when your onto a sure thing...

Was just wondering if anyone here has been using cfd's and whats been your approach?.. Is thier anything you would of done differrently. how useful is it for short selling etc? Any bad experience etc.. seems you could get burned pretty bad if your not careful...


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## It's Snake Pliskin (22 October 2005)

*Re: CFD's  anyone?*

Tarnor,

Go to the Etrade site and they have information on CFD's. They also have stoploss facilities. 

I'm sold on the CFD trading but have yet to start. Still more research to be done and chosing brokers.

From what I 've read so far, Etrade might be the one I go with.


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## Would Be Trader (22 October 2005)

*Re: CFD's  anyone?*



			
				tarnor said:
			
		

> Hi,
> Looking at changing my online broker to one that has a stop loss facility and was also hoping to be able to do some shorts.  I can't seem to find any that allow short selling but have noticed that you can do this with cfd's. Reading a little about cfd's i'm almost sold on the idea and thinking about having a small amount of my capital in cfd playing with the big leverage, just for those times when your onto a sure thing...
> 
> Was just wondering if anyone here has been using cfd's and whats been your approach?.. Is thier anything you would of done differrently. how useful is it for short selling etc? Any bad experience etc.. seems you could get burned pretty bad if your not careful...




I have been using CFD's since May this year with good results. My advice is to focus not only on the choice of stocks (I've been using ASX 200 only stocks) but even more importantly the use of stop loss and money monogement. As far as brokers is concerned I have been using Sonray (www.sonray.com.au). I have been impressed with their openess and customer service. They edge themselves on any CFD you buy or sell so your win it is not going to be their loss, as it is the case with some CFD's brokers.


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## wayneL (22 October 2005)

*Re: CFD's  anyone?*

There was a great article on CFD's in the currents Shares Mag. Comparing providers etc.

My concerns with CFD's are:

1/ security of capital - access to the providers financial records

2/ transparency of prices - direct access

Both seem to have been answered by the more recent companies to join the fray. 

Maquarrie, IG, and Etrade are who I'd choose from....(and may just be doing)

Cheers


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## mit (24 October 2005)

*Re: CFD's  anyone?*

I admit I haven't read the latest review but Shares Mag has run reviews various times and each one I have read seems to be an advertisement and doesn't list the downsides.

MIT


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## wayneL (24 October 2005)

*Re: CFD's  anyone?*



			
				mit said:
			
		

> I admit I haven't read the latest review but Shares Mag has run reviews various times and each one I have read seems to be an advertisement and doesn't list the downsides.
> 
> MIT




Hmmm, yes. This seems a bit more balanced but as you say, downsides are scarcely mentioned.

On further research I have deleted IG, leaving Macbank and Etrade/Man. I like Macbanks approach...non tricky, straight out and fair dinkum.

But I'll prolly stick with what I'm doing anyway. I'm finding it difficult to better trading yankee futs and stocks. It's just the nightshift which can get to you sometimes.


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## Milk Man (24 October 2005)

*Re: CFD's  anyone?*



			
				wayneL said:
			
		

> Hmmm, yes. This seems a bit more balanced but as you say, downsides are scarcely mentioned.
> 
> On further research I have deleted IG, leaving Macbank and Etrade/Man. I like Macbanks approach...non tricky, straight out and fair dinkum.
> 
> But I'll prolly stick with what I'm doing anyway. I'm finding it difficult to better trading yankee futs and stocks. *It's just the nightshift which can get to you sometimes.*




Not enough light entering through your retinas will make you depressed. Do a search on the winter blues to see exactly what I mean. If your feeling it then maybe make sure youve got real bright light globes in your trading area. Or get some maccas signs; nothing like bright plastic McF..... as Rodney Rude would say  .


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## It's Snake Pliskin (24 October 2005)

*Re: CFD's  anyone?*



			
				wayneL said:
			
		

> Hmmm, yes. This seems a bit more balanced but as you say, downsides are scarcely mentioned.
> 
> On further research I have deleted IG, leaving Macbank and Etrade/Man. I like Macbanks approach...non tricky, straight out and fair dinkum.
> 
> But I'll prolly stick with what I'm doing anyway. I'm finding it difficult to better trading yankee futs and stocks. It's just the nightshift which can get to you sometimes.




I've chosen E-trade. They have all the stop loss facilities which may be of importance when leveraging and direct pricing.


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## wayneL (25 October 2005)

*Re: CFD's  anyone?*



			
				Snake Pliskin said:
			
		

> I've chosen E-trade. They have all the stop loss facilities which may be of importance when leveraging and direct pricing.




Etrade has the advantage of being able to trade FPO's and options from the same platform, I gather. Both Macbank and Man/etrade look to have a great product. 

MAcbank will apparently talk turkey with high volume traders with regards to commisions.

I like the webiress platform etrade is using  a lot, but I still like the way macbank does business...its a tossup.


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## It's Snake Pliskin (25 October 2005)

*Re: CFD's  anyone?*



			
				wayneL said:
			
		

> Etrade has the advantage of being able to trade FPO's and options from the same platform, I gather. Both Macbank and Man/etrade look to have a great product.
> 
> MAcbank will apparently talk turkey with high volume traders with regards to commisions.
> 
> I like the webiress platform etrade is using  a lot, but I still like the way macbank does business...its a tossup.




I considered Macquarie, but Etrade opens up a bank account with the ANZ giving 5.25% interest for over $100,000. I only get 4.75%(or there abouts) with HSBC. Macqauries cash trust only gives 5% I think. The bank account is opened up for me and then I just transfer funds and start going for it. Plus you have the security of knowing your money is kept with a big four bank, rather than some small CFD provider who may not be transparent.

Yes macqaurie will talk to any trader who trades a lot to reduce fees etc. this doesn't apply to me at the moment.

Regards
Snake


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## tarnor (27 October 2005)

*Re: CFD's  anyone?*

Thanks alot for the information all, very helpful.. etrade would be a good way to go for me since i want to ditch my current broker anyway(st george). The article in Shares was useful also..

My main reason for wanting access to cfd's is for shorting stocks, I guess the available stocks to short would change with each cfd providers..  But would be basically similar?? because this might be an important factor to consider also..


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## tigeroz84 (5 May 2006)

*Re: CFD's  anyone?*



			
				Would Be Trader said:
			
		

> They edge themselves on any CFD you buy or sell so your win it is not going to be their loss, as it is the case with some CFD's brokers.



Hi all, a newbie here. I've been reading posts on CFDs but can't seem to understand why your wins become the CFD providers' losses and thus they will make it difficult for you to execute trades etc? Can you please explain what the CFD providers do with the shares whenever you take up either long or short CFD positions? Thanks


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## chemist (5 May 2006)

*Re: CFD's  anyone?*



			
				wayneL said:
			
		

> On further research I have deleted IG, leaving Macbank and Etrade/Man. I like Macbanks approach...non tricky, straight out and fair dinkum.




What have you got against IgMarkets? their commission is the lowest if you deal in volume.

cheers,
chemist


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## wayneL (6 May 2006)

*Re: CFD's  anyone?*



			
				chemist said:
			
		

> What have you got against IgMarkets? their commission is the lowest if you deal in volume.
> 
> cheers,
> chemist




Commission is only one aspect, however the point is now redundant as far as I am concerned. I have decided against trading CFD's.


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## Bobby (15 May 2006)

*Re: CFD's  anyone?*



			
				wayneL said:
			
		

> Commission is only one aspect, however the point is now redundant as far as I am concerned. I have decided against trading CFD's.




Just need to know your thoughts of why (  redundant ) regarding CFDs.

Bob.


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## Dollarman (15 May 2006)

*Re: CFD's  anyone?*

Hi Yep have been looking@cfds-Thinking of going to day semins.Mac bank
and perpetual hold them.has any1 experiensed?Yes no one seems to talk about downside.me interested in hoe much interest rate bites in. :


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## wayneL (15 May 2006)

*Re: CFD's  anyone?*



			
				Bobby said:
			
		

> Just need to know your thoughts of why (  redundant ) regarding CFDs.
> 
> Bob.




Hey Bob,

Was looking into them for trading the ASX, but being resolutely nocturnal, I went back to the US. 

I prefer options and futures for that market. Nothing against CFD's in any way. ( although I am highly suspicious of certain providers  )

Cheers


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## RichKid (15 May 2006)

*Re: CFD's  anyone?*



			
				wayneL said:
			
		

> Hey Bob,
> 
> Was looking into them for trading the ASX, but being resolutely nocturnal, I went back to the US.
> 
> ...




You're kidding, so back to the last empire Wayne? As the night sets in you set out....into the depths...you must have been a bat or owl or something in a previous life ??  Guess it'll be good for mod work as I prefer not to have the night shift...so be warned folks, 24hrs surveillance on ASF!


btw Wayne, which ones did you think were the most reputable CFD spruikers when you did your research? Things will probably change once Comsec comes on board, the market dynamics would be different.


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## Bobby (15 May 2006)

*Re: CFD's  anyone?*



			
				wayneL said:
			
		

> Hey Bob,
> 
> Was looking into them for trading the ASX, but being resolutely nocturnal, I went back to the US.
> 
> ...




Hullo Wayne,

Thought you gave up the nightime stuff, but its your choice of how to make a  $ buck ( your good at it ! ) understand .

Yep out of the 8 major providers,  there is some that worry me   !!

Take care Bob.


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## phoenixrising (15 May 2006)

*Re: CFD's  anyone?*

Man are upgrading their software (webiress)

Including shortly,

CFD's on Japan top 500 TSE

CFD's on top Hong kong 200 SEHK

NZ top 20 on NZX

Singapore top 50 on SGX

US and Europe later in year

SFE Futures SPI 200 + SFE listed futures (requires separate account)

Cheers


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## wayneL (15 May 2006)

*Re: CFD's  anyone?*



			
				RichKid said:
			
		

> You're kidding, so back to the last empire Wayne? As the night sets in you set out....into the depths...you must have been a bat or owl or something in a previous life ??  Guess it'll be good for mod work as I prefer not to have the night shift...so be warned folks, 24hrs surveillance on ASF!




eeerrrr... I think I was a bat...sorta









			
				RichKid said:
			
		

> btw Wayne, which ones did you think were the most reputable CFD spruikers when you did your research? Things will probably change once Comsec comes on board, the market dynamics would be different.




Well it's just my opinion on what I thought was important (and price wasn't the main consideration) but is was out of MAN/etrade or Macbank. 

One of the main considerations was financial security/ transparency of financial affairs.

Cheers


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## Ageo (18 May 2006)

*Re: CFD's  anyone?*

Hi Wayne and others (Thought id move into a forum that is active hehe).


I mainly trade options but have recently looked into CFD's. More of a fact trading index CFD's like the aussie200. Now i have been paper trading with no intraday charts just basically going long and short with the click of a refresh button in the Trading room  website and i can tell you now it is very easy to make 1 point per day (you can make more but greed will end up eating you). I have now made 7 points in the last 2 days (about 2 hours of trading all up). Now 1 point equals $1 per move so 100 contracts would only require you to put up $5250 (100 x 5250 asx200 price = $525,000 x 1% (1% margin is only required to trade CFD's of indicies).

So for risking $5250 i made $700 in 2 days (100 contracts x 7 points).

Of course the same happens if you lose points, so thats why i developed a system where my goal is to only acheive 1 point per day and then have the day off. To make 1 point per day is pretty easy and thats without and intraday charts, Technical Analysis etc..

1 point per day = around 20 points per month (very achievable) so on 100 contracts ($5250 margin) that would equal a return of $2000 for the month which is almost 50% return on your risk. So if you want you could go for 10 points per month and still earn fantastic results. Now Imagine the same principal 20 points per month, you trade 1000 contracts ($52,500 margin) you return $1000 per day or $20000 p/m. Imagine 10000 contracts? 

With the right tools (intraday charts, T/A etc..) you can earn 1 point positive within 10min and have the rest of the day off). The reason it can be risky is because people can become greedy which sometimes means trying to make more and instead having a loss for the day. Apparently with http://www.cmcmarkets.com.au the commissions are free with index CFD's and $10 for shares. There is a free seminar on the 27th of May in Sydney which myself and a few others will be attending. There online software makes it very easy to buy and sell fast without fuss.

The good thing with CFD's is if its 1 point down i close for a loss of 1 point and then basically wait and see if it will move a few more points down which basically then triggers me to place a short (down) position. The beauty is that weither its going up or down if you jump onto a short trend and make 1 point positive that means you can have the day off. To me it makes alot of sense hence its leveraged @ 1:100 which if you use it wisely like any leverage can be very very powerfull.


Adrian


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## professor_frink (18 May 2006)

*Re: CFD's  anyone?*

hi ageo, welcome to ASF! what your talking about doing is pretty well the same as trading futures. have you looked into what the spreads are like? If your looking to scalp out a couple of points here and there, then the spread could be a killer, especially when your not paying comms, as that's where they'll make a profit, so check that first.


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## Ageo (18 May 2006)

*Re: CFD's  anyone?*

Hey Frink, i will have to check out the spread on it so thanks for the heads up. With futures thow i thought its only traded on commodoties and can you have the  same leverage capabilities as CFD's?


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## professor_frink (18 May 2006)

*Re: CFD's  anyone?*

you can trade indexes and lots of other things too(although alot of things trade overseas). With the spi here(which is the futures equivalent of the asx 200) you'll have to fork out roughly $5500 a contract(not sure of the exact amount), and you'll make/lose $25 for every point it goes up or down.

edit: check the sfe's website to find out what the margin is currently.


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## Ageo (19 May 2006)

*Re: CFD's  anyone?*



			
				professor_frink said:
			
		

> you'll have to fork out roughly $5500 a contract(not sure of the exact amount), and you'll make/lose $25 for every point it goes up or down.
> 
> edit: check the sfe's website to find out what the margin is currently.




You see fork with $5500 (actually whatever the asx200 is x 100) i can trade 100 contracts which is $100 per point move. According to your figures its 4 times more leverage. I just have to see how much it costs.

Ill get the details and post it here


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## professor_frink (19 May 2006)

*Re: CFD's  anyone?*

The next question you should also be finding out after you find out how wide the spreads are, is how many contracts you can reasonably trade at any one time. Do you know if you can easily scalp 100 at a time?

You don't want be putting yourself in the position where you can't get your whole order filled at once if your only looking to make 1 or 2 points at a time.
Following on from that, how are you going to control your losses? where will your stop be placed? If your looking to make 1 point, how are you going to keep your losses smaller than your wins? 

Just make sure you have good answers for all of these questions, not for my sake, but for your own, because playing with futures or cfd's can be a risky game if your not sure of what your doing.
lots of leverage in trading is alright if you know exactly what you are doing, but if you don't it's going to be a fast track to the poor house.


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## Ageo (19 May 2006)

*Re: CFD's  anyone?*

Frink i have some answers!, i spoke with a representative and they assure me that if i come onboard with them and sign its commission free on index and sector CFD's (i said i want it in writing before i commit myself to anything)  so thats a thumbs up.

2nd, yes i can trade 100 or 1000 contracts and make 1 or 2 points here and there. He said his single clients do that where is instituitions do 60-100 points over a month and of course with the aussie200 the liquidity is enough to handle big contracts (over 100,000) and once if get to that point i might move onto the Nikkei or Dow for more liquidity.


3rd Well basically my plan is to have real time intraday charts monitoring the movement and as soon as it moves even .1 of a point against me i close to minmize my loss. But once i have achieved 1 point in the positive (i.e 10 points - 9 points loss = 1 point positive) then ill call it a day. Greed is not my game here, consistency and compounding. Because i know that its easier to take 1 point positive than 2 points or more. Eventually ill be happy to make 1 point on 10,000 contracts etc..

Apparently they make interest off my margin money, but CMC is a global company so im sure it has its reasons. 

P.S Your orders gets filled within 2 seconds of placing it (live tutorial showing it). If i have problems with liquidity ill just move onto other indicies with higher volume.

I can place a limit stop order (which is no good for overnight but good in throughout the day) but it has to be 5 points minimum away. So ill use that as my backup if for whatever reason it moves too quick for me to close. The trading platform thow that they offer is super fast and takes seconds to perform a trade.


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## chemist (19 May 2006)

*Re: CFD's  anyone?*



			
				Ageo said:
			
		

> ...I mainly trade options but have recently looked into CFD's. More of a fact trading index CFD's like the aussie200. Now i have been paper trading with no intraday charts just basically going long and short with the click of a refresh button in the Trading room  website and i can tell you now it is very easy to make 1 point per day (you can make more but greed will end up eating you). I have now made 7 points in the last 2 days (about 2 hours of trading all up)....




I used to make a fortune watching Sale of the Century too. Real life is more difficult.

cheers,
Chemist


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## Ageo (19 May 2006)

*Re: CFD's  anyone?*

Chemist forgive me for asking but are you trading CFD's? and if so how long?


thanks


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## mit (19 May 2006)

*Re: CFD's  anyone?*

Ageo,

Good luck    . Don't be impatient. Try it with 1 contract first for at least a month and get the hang of it. The only problem is that the spread (2pips) is twice the size of your daily budget. So if you have a bad day then your losses mount up quickly. A quick scenario:

Aussie 200 is 5086/5088. You buy at 5088. To make a 1 pip profit the market must move 3 pips to 5089/5091. If you have a tight stop of 1 pip and get stopped out (Not that they let you have stops that tight) you are 3pips in the red. The next trade will have to make six pips to bring you back to a 1 pip profit. 

If you have a bad day it wont be long until you are 30pips down which is a months profit.

MIT


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## professor_frink (19 May 2006)

*Re: CFD's  anyone?*

another thing I just thought of- do you know if the 'aussie 200' they offer directly mirrors the XJO? if so you can do some paper trading on the XJO first.

If so and you've got a program like quotetracker and an online broker already, you can get free charting to do some more testing on.

*Did they tell you what the average spread is? This is crucial for this type of trading*

My final warning- if your going to do this don't jump in the deep end and do 100 contracts straight up. Start small and work your way up if your good at it.

edit: thanks for posting the spread info mit- I now know why this hasn't been mentioned as a serious alternative to futures


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## mit (19 May 2006)

*Re: CFD's  anyone?*



			
				professor_frink said:
			
		

> another thing I just thought of- do you know if the 'aussie 200' they offer directly mirrors the XJO? if so you can do some paper trading on the XJO first.
> 
> If so and you've got a program like quotetracker and an online broker already, you can get free charting to do some more testing on.
> 
> ...




4 pips on the overnight market. It doesn't follow the XJO exactly. I don't know if it follows the spi (corrected for fairvalue) but I have heard that it doesn't. My feeling is that you trade the Aussie200  as practicing on the SPI or XJO is different.

The big advantage is the small contract size. If you were to trade 25 contracts or more then you'd be crazy not to use futures due to the cost of the spread.

MIT


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## professor_frink (19 May 2006)

*Re: CFD's  anyone?*

good point mit. at least the spread on the spi is usually only a point. It could be used as a traing ground for the spi to get someone used to daytrading if very small positions are used.

Ageo, you still may be able to trade the aussie 200 intraday, but maybe looking for larger intraday swings might be the way to go.


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## Ageo (19 May 2006)

*Re: CFD's  anyone?*

Hey Guys, thanks for the heads up Mit


i just said the aussie200 because its aussie but im open to other indicies, commodities etc...

As for trading of course ill start very minimal and test it for at least a month to have a very good idea and become comfortable with it, and as my experience increases so does my contract size.

Mit can you please confirm this which is confusing:

Aussie200 5086/5088 and i buy at 5088 now your saying if it moves 1 point (pip is short?) then im still only .5 of a profit so i need for it to move 2 or 3 points actually to make a 1 point profit (vica versa)? if thats right could you please explain indepth the reason (sorry the last post is still a bit hard to understand).

One last thing, is there a instrument that trades instead of 3 pips just 1 pip?


thanks heaps


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## professor_frink (19 May 2006)

*Re: CFD's  anyone?*

by pip he means point.
 If the spread is 5086/5088- you pay 5088, meaning you are automatically down 2 points before the trade goes anywhere.
 the index the needs to go up 3 points for the bid to rise to 5087 so you can get out with your point profit. If it moves down by 0.25 of a point and your stop is triggered, then you will lose 2.25 points on the trade. Not a very good risk/reward senario.


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## Ageo (19 May 2006)

*Re: CFD's  anyone?*

Thanks for the heads up Frink, is there a spread in any index, commodotie or share thats 1 pip?


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## robots (19 May 2006)

*Re: CFD's  anyone?*

hello,

be careful trading indices like aussie200 with CFD or spread bet providers as they can have massive shifts in there price around opening and closing times (of the spi), why I dont know

I had to have around a 200 point stop loss with IG to overcome this

a stop loss will not protect you 100%, as with the last couple of days, if the SPI opens below your stop loss that will be the price your closed at

futures brokers will often set up a day and seperate night stop loss

thankyou
robots


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## professor_frink (19 May 2006)

*Re: CFD's  anyone?*



			
				Ageo said:
			
		

> Thanks for the heads up Frink, is there a spread in any index, commodotie or share thats 1 pip?




If your asking if there are cfd's with this, I don't know for sure but I doubt it. The spi from what I've seen is normally 1 point. It should provide more than enough leverage for what you want to do.


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## Ageo (19 May 2006)

*Re: CFD's  anyone?*



			
				professor_frink said:
			
		

> If your asking if there are cfd's with this, I don't know for sure but I doubt it. The spi from what I've seen is normally 1 point. It should provide more than enough leverage for what you want to do.




Frink is the SPI based on futures?, im a newbie at that so any info would be handy.


Robot i do not intend on holding any positions over night simply due to the fact that im highly exposed to a downside in the overnight move.

cheers


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## professor_frink (19 May 2006)

*Re: CFD's  anyone?*

spi(share price index) is the index futures contract for australia. go to the sfe website, or search through the forums here for some more info on it.


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## Ageo (19 May 2006)

*Re: CFD's  anyone?*

Frink sorry but i didnt explain myself

is there anthing that basically allows you to buy at the price.

ie 5000 price   Buy and sell is at 5000?

so 1:1 win/loss ratio


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## professor_frink (19 May 2006)

*Re: CFD's  anyone?*

no such thing my good man! there will always be a difference. For what you want to do, you will just have to find a product with the tightest possible spread.

edit: what I meant before by risk/reward was the fact that you were going to be risking more on each trade, ie the 2.25 points, than your 1 point profit target.


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## Ageo (19 May 2006)

*Re: CFD's  anyone?*

Well that sux now doesnt it lol


looks like ill have to go back to the drawing board


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## professor_frink (19 May 2006)

*Re: CFD's  anyone?*

yes it does! that's why scalping is a tough gig. If your looking at daytrading, looking for bigger intraday swings are a better way to go, and futures are  the best vehicle for this. small spreads, high leverage, and its possible to get very low brokerage. 
But be warned futures aren't for the faint hearted, and most definately not for the inexperienced, so do alot of research before committing any hard earned to it.


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## chemist (19 May 2006)

*Re: CFD's  anyone?*



			
				Ageo said:
			
		

> Well that sux now doesnt it lol
> 
> 
> looks like ill have to go back to the drawing board




You should learn the basics of finance and economics before you start drawing any plans. Not to be rude, but the questions you ask show that you don't have a clue.

cheers,
Chemist


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## professor_frink (19 May 2006)

*Re: CFD's  anyone?*



			
				chemist said:
			
		

> You should learn the basics of finance and economics before you start drawing any plans. Not to be rude, but the questions you ask show that you don't have a clue.
> 
> cheers,
> Chemist




chemist I think it's great that he's on here asking questions. It might just save him a fortune down the track.


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## Ageo (19 May 2006)

*Re: CFD's  anyone?*

Chemist the reason im asking questions is because i have no idea in this area. As for finance and economics whats your point? I trade options successfully but im looking at further leveraging my money.


You're quick to make sarcastic comments and criticize but you dont back it up with any info or help? you would make a fantastic financial advisor 

Frink i had a look at the S&P 500 which has a 0.6 pip spread. Now each contract is worth $250US but check this out, IG markets

http://www.igmarkets.com.au/content/sites/aum/en_GB/cd_indices_index_aum.html

They have a limited risk order (like a Gauranteed Stop) at 0.5 away which means that for every 1 pip  against me i only loose 1.1 so it gives me more room to lose a few more and then get onto a couple of good swings in my favour.

i.e 10 losses would = 11pips loss

So if i had 3 wins with 4 pips each win that would mean im 1 pip up 

Whats your thoughts?


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## professor_frink (19 May 2006)

*Re: CFD's  anyone?*

It won't be that much different. the difference in the spreads when you consider the value of the indexes means your not really getting a better deal. 
They refer to it as a 'limited risk premium', not an order, which I think means that they will add this amount onto the spread when you open the trade, costing you more money.


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## Ageo (19 May 2006)

*Re: CFD's  anyone?*

ah ok so basically 0.6 is the max i can loose on each pip?


So if i lost 5 pips = 8 pips negative


To make that up i would need


 to make 20 pips which would = 8 leaving me with a clean sheet

So a 1:4 win/loss ratio

Yuk thats digusting hehe


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## mit (19 May 2006)

*Re: CFD's  anyone?*

Ageo,

I think that if you are keen to go forward, I would still look at CMC at $1 per pip. Even though it is a high relative spread. You can go for a single contract. Even though if it all pans out you'll only make $30 for a month. The issues of slippage timing and just getting your act together could cost you hundreds of dollars a month. However, compare this with thousands it could cost you using full futures contracts. 

CMC also has a S&P500 like contract SPX500. The spread is 0.5 point. This looks good but remember the movement of the S&P 500 is around a quarter of the daily movement for the ASX 200. The contract size is $1USD per point. 

MIT


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## professor_frink (19 May 2006)

*Re: CFD's  anyone?*



			
				Ageo said:
			
		

> ah ok so basically 0.6 is the max i can loose on each pip?




not quite. It's the spread, ie bid 1200, ask 1200.6. The limited risk premium will then be added on if you take it, making the inital spread 1.1. At $250 a point this is a big impact.



			
				Ageo said:
			
		

> So if i lost 5 pips = 8 pips negative
> 
> 
> To make that up i would need
> ...




not quite sure what you mean by this bit. 

working out how much you can potentially win or lose out of any trade should come about from whatever system you use to get your buy and sell signals. Once you have a system in place that you are happy with, determine wether you can make that system work with this kind of product. If not, either look for another product to trade your system in, or redesign your system.

 Before going ahead with this, it's important to read the fine print at the bottom of the page.

*"1) Spreads are subject to variation, especially in volatile market conditions."*

I'd want to find out their definition of volatile market conditions first.

*6) Limited Risk positions on stock indices are closed if the middle of our quotation reaches the selected stop level. There may be nothing against which to measure our quotation, particularly at times when the underlying market is closed.*

I'd walk away right here.


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## Ageo (19 May 2006)

*Re: CFD's  anyone?*

SO Frink what your saying is find a product that obviously suits the system im trying to implement?


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## professor_frink (19 May 2006)

*Re: CFD's  anyone?*

exactly. workable system first. products later.


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## professor_frink (19 May 2006)

*Re: CFD's  anyone?*

ageo, I've posted a chart of todays XJO action.

 Have a look at the size of the moves available. If you don't mind me asking, what exactly is the appeal of trying to scalp out a point when there is potentially 20-30 points on offer for an hour or two trade? There's still no overnight risk trading this way, and the spread on the cfd would be alot less of an issue if you were going for a bigger move.


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## Ageo (19 May 2006)

*Re: CFD's  anyone?*

Thanks for the chart Frink, the thing is that if i lose 5 points it will require me to make 45 points to come even again (based on the Aussie200 2 pip spread).


As for the S&P 500 if i lose 5 points it will require only 20 points to recover the losses.

Obviously if i were to go with the S&P 500 i would basically look for signals that allowed me to ride a nice wave.

What spreads do you trade on futures frinks?


Just to add, 

the Aussie200 is 1:9 win/loss ratio

the S&P 500 is 1:4 win/loss ratio

thats more than half so wouldnt it be wiser to trade the S&P?


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## professor_frink (19 May 2006)

*Re: CFD's  anyone?*

I'm actually not that far ahead of you ageo, I'm moving into futures soon, but I want to be 100% confident that I can turn a profit first. which for my discretionary trading method means alot of papertrading!! I've been preparing for the move for the last 4 months, researching, papertrading, looking for a broker, trying to organise data, etc. Planning on starting live at the start of july. 

This move for me is coming after 5 and a bit years of share and option trading, and I'm still spending months working on it before I make the move so that when I do, I do it right.  That's why I've been telling you to make sure you do your research and look at what you want to do thoroughly before you commit any money to it.

I'm still not sure what your getting at by your risk reward ratios that your posting. Could you clarify it a bit for me.


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## Ageo (19 May 2006)

*Re: CFD's  anyone?*

Hehe ok ill try and explain it



*1st the aussie200

1 point down = 3 pip loss

3 points up = 1 pip profit


So a 5 x 1 point losses (5 points in total) = 15 pips down

45 points up = 15 pip profit


45 profit pips divided by 5 loss pips  = 9

So basically you need 9 wins to 1 loss to make up the losses. 
9:1 win/loss ratio

So i would prefer 4:1 win loss ratio with the S&P 500

Even thow my goal would be to cut the loss a 1 point and let my profits run into 10-20 points before taking the profit. Im trying to have my system allow me to lose a few times before i win but as you can see even 5 points of losses force me to make 45 points to break even.

So like i said before the tighter the spread the better win/loss ratio


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## professor_frink (19 May 2006)

*Re: CFD's  anyone?*

Ok gotcha. Do you see the problem with that situation?


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## Ageo (19 May 2006)

*Re: CFD's  anyone?*

With the aussie 200 i can but with the S&P 500 if i lose 1 point i only need to make 4 to break even.


So even if i lost 5 times (@ 1 point trades) then if i made a 20-30 point swing trade i would cover myself if not make a nice profit.

This is based on worst case scenarios

im sure 1 out of every 6 i can guess right 

Now look at the flipside, imagine getting 3 swing trades right out of six.

 looking better than before


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## professor_frink (19 May 2006)

*Re: CFD's  anyone?*

it's more than likely that you will lose all your money if you try that unless you have some unbelievable trading skills.
You actually need 4 wins for every loss to come out ahead.
four 1 point wins= 4 points
one 3 point loss= 3 points.
4 out of every 5 trades needs to be profitable for you to come out ahead. 
that's assuming that you can always get out at the point you want to.

What happens when the market moves against you quickly and a stop blows out. You won't get out exactly at your stop everytime, and that will just help to kill you off quickly. And what will happen if you have a run of losses? It will take you an awful long time to catch up.
Getting 80% of your trades right is not going to be an easy task. If you find a method that does that then let me know coz I want it!

Anyway, it's been a long week- I'm going down to the pub for a coldie. Enjoy your weekend ageo


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## Ageo (19 May 2006)

*Re: CFD's  anyone?*

LOL so much maths in my life my head hurts!


I actually calculated it wrong frink.

Its actually almost 1:1 win/loss ratio

Why because i didnt realise that 0.6 was only the fee per trade and not calculated on every point.

So if i made 1 point it would only = .4 but then every point after that if i let it ride is 1 full point.

so if i made a 10 point trade i would actually recieve 9.4 pips (the 1st point always equals .4 pip).

So to sum things up

trade 1* 1 pip loss (plus 0.6) = 1.6

trade 2* 1 pip loss (plus 0.6) = 1.6

trade 3* 1 pip loss (plus 0.6 = 1.6

trade 4* 1 pip loss (plus 0.6 = 1.6)

trade 5* 1 pip loss (plus 0.6 = 1.6)

trade 6* 10 pip profit (minus 0.4 on the 1st pip which = 9.4)


8 pips down and 9.4 pips up = 1.4 pip profit


So out of 6 trades i lose 5 and still make a profit.

As you can see my style is to lose 5 small ones and ride 1 big 1

1.4 pip x 1 contract = $350US for outlaying on the $15,000 odd (obviously you would have a little more for a buffer). This is for the S&P 500

Thats the style im looking at trading, the reason why i like this style is i know im not always going to pick the winners but if i can pick 1 winner out of 6 then i will be more than happy.

Hope this clears things up and enjoy the pub Frinks (hehe im gonna have a few bourbons tonight aswell). Have a good weekend all


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## Ageo (23 May 2006)

*Re: CFD's  anyone?*

Guys i just spoke with IG Markets and there after hours qoutes allow you to place a CFD trade on the aussie200 before 8am.



Now correct me if im wrong but when the Dow Jones usually hits 100 points or more in either direction couldnt it be possible to then place a trade on the aussie200 just before 8am to follow the trend?

I mean in the 2 yrs of trading i have never seen the aussie200 open against a strong dow jones move. It always follows it (like the 1 a few days ago).

Obviously i would have Gauranteed Stops in place to minimize the worst case scenario.

Thoughts?


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## mit (23 May 2006)

*Re: CFD's  anyone?*

The thing is that it is open to everyone so you will find the SPI, Aussie200 or whatever tracking the Dow overnight. In fact you can look at them to get an indication where the traders will see XJO after opening. The way to make money is where you don't think the other traders have factored in the SPI move accurately.

An example is say the DOW moves down 200 overnight. CMCs Aussie200 moves down 100. You think it is oversold as the cash XJO wont go that far so you actually buy. the Cash XJO moves down 50 so the Aussie200  will move up 50 to meet it

MIT


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## Ageo (23 May 2006)

*Re: CFD's  anyone?*



			
				mit said:
			
		

> The thing is that it is open to everyone so you will find the SPI, Aussie200 or whatever tracking the Dow overnight. In fact you can look at them to get an indication where the traders will see XJO after opening. The way to make money is where you don't think the other traders have factored in the SPI move accurately.
> 
> An example is say the DOW moves down 200 overnight. CMCs Aussie200 moves down 100. You think it is oversold as the cash XJO wont go that far so you actually buy. the Cash XJO moves down 50 so the Aussie200  will move up 50 to meet it
> 
> MIT





Hey Mit, thanks for the reply

its free to open an account with IG and you can trade the mini contracts ($5 for the aussie200) so i will only know until i actually put some money on the line. With the limited risk trade it = 8 pips so the max i can lose on any trade for whatever reason it goes against me is 8 x the amount traded which in this case is $40.

Only time and results will answer me on this 1.

cheers


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## Bobby (23 May 2006)

*Re: CFD's  anyone?*



			
				Ageo said:
			
		

> Hey Mit, thanks for the reply
> 
> its free to open an account with IG and you can trade the mini contracts ($5 for the aussie200) so i will only know until i actually put some money on the line. With the limited risk trade it = 8 pips so the max i can lose on any trade for whatever reason it goes against me is 8 x the amount traded which in this case is $40.
> 
> ...



Ageo is that deal, market maker or DMA ?

Bet its MM    be careful.

Bob.


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## Ageo (23 May 2006)

*Re: CFD's  anyone?*



			
				Bobby said:
			
		

> Ageo is that deal, market maker or DMA ?
> 
> Bet its MM    be careful.
> 
> Bob.





Sorry whats DMA?


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## robots (23 May 2006)

*Re: CFD's  anyone?*

hello,

if using IG etc around opening or closing make sure you have big stop loss, as there "price" fluctuates greatly around this time.

they want you to be stopped out, so you enter again, so be careful

thankyou
robots


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## Bobby (23 May 2006)

*Re: CFD's  anyone?*



			
				Ageo said:
			
		

> Sorry whats DMA?



 DMA  direct market access .


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## Bobby (23 May 2006)

*Re: CFD's  anyone?*

Ageo have you read IGs ( Product Disclosure Statement ) ?

Bob.


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## Ageo (23 May 2006)

*Re: CFD's  anyone?*

Correct me if im wrong but the aussie200 (xjo) doesnt open until 10am?


So from 7am to 10am wont it just be sitting there?

Also my stop will allow enough room to move a little.

P.S they can qoute after 9:45 so i might be able to slip a trade in before it opens.

Bobby that deal is from IG although i can manually stop my position if i want to but i will place the GSL as a backup.


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## Ageo (23 May 2006)

*Re: CFD's  anyone?*



			
				Bobby said:
			
		

> Ageo have you read IGs ( Product Disclosure Statement ) ?
> 
> Bob.





Yes Bobby why?


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## Bobby (23 May 2006)

*Re: CFD's  anyone?*



			
				Ageo said:
			
		

> Yes Bobby why?



Like to know what was said about MM & the cost of a GSL ?


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## Ageo (23 May 2006)

*Re: CFD's  anyone?*

The GSL is just added to your spread (in the asx200 case 3 points extra).

For the added protection and my strategy that doesnt bother me at all.

Not sure what u mean about the Market Makers but im reading through it again now


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## Bobby (23 May 2006)

*Re: CFD's  anyone?*



			
				Ageo said:
			
		

> The GSL is just added to your spread (in the asx200 case 3 points extra).
> 
> For the added protection and my strategy that doesnt bother me at all.
> 
> Not sure what u mean about the Market Makers but im reading through it again now



Ageo 3 extra points for a GSL   
Do you realise the implication of this ? 

Bob.


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## chemist (23 May 2006)

*Re: CFD's  anyone?*



			
				Bobby said:
			
		

> Ageo 3 extra points for a GSL
> Do you realise the implication of this ?
> 
> Bob.




Don't you know real traders don't care about costs?
 

Chemist


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## Bobby (23 May 2006)

*Re: CFD's  anyone?*



			
				chemist said:
			
		

> Don't you know real traders don't care about costs?
> 
> 
> Chemist



 I must congratulate you on the obvious , deep stuff   ! as i'm a real trader  costs that are known are factored in .

But tell me something new ?    

Bob.


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## Ageo (23 May 2006)

*Re: CFD's  anyone?*

Hehe before you guys bagg the crap out of me  the reason i said its not of a concern is because the trades im looking at are usually over 20 point swings.


Minimum twice a month, 

My goal is 10 points per month (conservative bases) anything extra is a bonus. I wouldnt add the GSL to my plan if it wasnt worth it. All it takes is for 1 move to go against me and it could harm my account. With the right position sizing and positive expectancy i am happy to trade under these conditions. Although i will adjust accordingly as i trade live.

All in good time


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## Bobby (24 May 2006)

*Re: CFD's  anyone?*



			
				Ageo said:
			
		

> Hehe before you guys bagg the crap out of me  the reason i said its not of a concern is because the trades im looking at are usually over 20 point swings.
> 
> 
> Minimum twice a month,
> ...



Hullo Ageo,

Alls well  mate, you ok ?

My advice is not to trade the SPI untill your good at normal share trading, much more forgiving.

Huge amount of help here, when you need it  
Don't blow your capital.

Bob,


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## Ageo (24 May 2006)

*Re: CFD's  anyone?*

Bobby, its $5 per contract! im only going to trade.


Max i can lose is $60 before my position is stopped out. My system allows me to have higher win/loss ratio with a nice risk/reward ratio (since im only doing a few trades per month).

So if worst comes to worse i lose all 4 trades for whatever reason it hasnt even effected my total capital not even a touch.

i appreciated the concern but i know the feeling of being over exposed before and losing lots of capital.

Anywayz ill keep you's posted 

Cheera


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## happytrader (24 May 2006)

*Re: CFD's  anyone?*

I notice it is a feature with some CFD brokers to provide an automated stop loss. I was wondering if anyone uses it and how they have found them.

Thanks in advance.

Cheers
Happytrader


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## agreen (27 May 2006)

*Re: CFD's  anyone?*



			
				Ageo said:
			
		

> Bobby, its $5 per contract! im only going to trade.
> 
> 
> Max i can lose is $60 before my position is stopped out. My system allows me to have higher win/loss ratio with a nice risk/reward ratio (since im only doing a few trades per month).
> ...




Hi Ageo,
Just some quick info about IG Markets for you (I have been trading with them for the past four months, mainly the Aus Stock Index $5 contract which is their ASX200).
With a limited risk account the spread will be 6 points while the market is open and 8 points while it is closed.
The minimum you can set your stop loss is 15 points away from the current market level ($75 for 1 $5 contract).
The spread is added to the market price to determine your opening price.
So if the market is open and at 5,000 (assuming you buy) your open will be 5006 and your stop will be at 4991 (15pt stop loss).
During times when the ASX is closed the Index will still move around and as others have said is very volatile overnight (I guess based on World market movements) and just before the ASX opens.
The Index trades from 9.50am to 4.30pm (6 point spread) then closes & reopens at 5.10pm & I've found that it closes again at 7am (although I've heard that IG say 8am)

Cheers,
agreen.


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## Ageo (27 May 2006)

*Re: CFD's  anyone?*

Hi Agreen, thanks for the info - 

yeh i was just playing around with strategies (along with my system) to see what suits me. I went to a CMC seminar today and im going to open an acount with them simply because the platform they use is better (many more features) and some margins are lower which allows more flexibility.

Also i have read both PDS's and they are pretty much similar. The spreads on CMC are tigher aswell in a few indexes and other markets.



Adrian


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## alankew (28 May 2006)

*Re: CFD's  anyone?*

Advice again please.I am looking at trading CFDs in some of the volatile but safe stocks(BHP etc)Is my inderstanding correct that i can buy say 10000BHP at a price of for example $28.50 and pay only 5% of value of trade plus commission.My query is if i want to hold for a few days or so(or until I at least make a profit),do i just issue 1 buy order until time is right to sell or does each trade have to be closed on same day


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## Ageo (28 May 2006)

*Re: CFD's  anyone?*



			
				alankew said:
			
		

> Advice again please.I am looking at trading CFDs in some of the volatile but safe stocks(BHP etc)Is my inderstanding correct that i can buy say 10000BHP at a price of for example $28.50 and pay only 5% of value of trade plus commission.My query is if i want to hold for a few days or so(or until I at least make a profit),do i just issue 1 buy order until time is right to sell or does each trade have to be closed on same day




Your understanding is correct for the margins.

As for size of order basically if you buy 10000 shares today, and next week you want to sell - you put in a sell order for 10000.

Does this answer your question?


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## alankew (29 May 2006)

*Re: CFD's  anyone?*

Think so looks like i was getting mixed up with spreadbetting!


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## Ageo (29 May 2006)

*Re: CFD's  anyone?*



			
				alankew said:
			
		

> Think so looks like i was getting mixed up with spreadbetting!





Alen think of the spread as a brokerage fee but implemented into the trade.

Basically if the spread is 3 points then think of (its going to cost me 3 points, so if i make 10 points just minus 3 and im left with 7).

It can seem confusing at times but the more you hang around it the more you will understand it.

hope this helps


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