CFD books for beginners

[Diggs1]

I've searched and searched for a recommendation on here for CFD books but can't find any.

What I'm looking for is a beginners guide. I've read several share trading, technical analysis and option books so am looking for a book based solely on CFD's.

Any recommendations?

 

[joea]

I've searched and searched for a recommendation on here for CFD books but can't find any.

What I'm looking for is a beginners guide. I've read several share trading, technical analysis and option books so am looking for a book based solely on CFD's.

Any recommendations?

FIRSTPRUDENTIAL Markets have a complimentary understandings of CFD guide.
They also have a pack you can get.
Maybe that will help.
joea

 

[pixel]

I've searched and searched for a recommendation on here for CFD books but can't find any.

What I'm looking for is a beginners guide. I've read several share trading, technical analysis and option books so am looking for a book based solely on CFD's.

Any recommendations?

Try to get hold of Catherine Davey's "Contracts for Difference"
ISBN 0-7595-0022-3

 

[Diggs1]

Awesome, thanks guys

 

[young-gun]

Has anyone got any other recommendations other than those above? I've come across books like "CFD's for dummies" etc anyone read it?

 

[ausairman]

If you don't mind me asking, what makes you think you can make money trading CFDs? I know that sounds facetious, but I'm being very serious. CFDs are theoretically zero sum game, and in practice a negative-sum game.

In the theoretical limit of equal knowledge among everyone participating in the CFD market and no brokerage fees, CFD trades become a gamble in which the chance of winning is, on average, a risk-weighted 50%.

Given the fact that you are not only an individual (which already puts you behind the curve), but also a beginner without an education in market dynamics, what makes you think you can trade derivatives successfully using information publicly available in books?

You can ask around in these forums, and you'll hear back from a dozen people who will tell you how amazing CFDs are, and how people like me don't "understand" how it works. Many of those are liars, many more will get wiped out in the coming days, months or years, and of the capital of theirs that didn't get consumed by corporations, some will end up in the hands of a lucky few who will become very wealthy. When they finally go broke they'll write books on CFD trading for beginners, and the "secret" to their successes.

The OTC CFD market is largely funded by newcomers hoping to make money, but instead just being chewed up and spat out by their broker / a 3rd party with a cluster supercomputer running a neural network.

If you happen to own several tons of Iron ore or a cotton farm, then by all means hedge away your risk with CFDs, but if you're thinking about getting rich, you've probably (<- that word is important) got better odds at the casino.

Of course, I am hopelessly bias, and many have gotten far richer with CFDs than I have with my snail's pace value investing, so they'd probably have a somewhat different view on this matter.

If I can tell you one universally valuable piece of advice when it comes to investing and trading, it's this;

If you don't understand it, don't do it.


I'm sorry about the rant, just felt like i had to say something.

 

[AlterEgo]

CFDs are theoretically zero sum game, and in practice a negative-sum game.

So is the stock market, futures, etc, not just CFD's.

However 'market maker' CFD's (which I think you're referring to) are even worse, as the CFD provider sets the prices and takes the other side of your trade and wants you to lose. But DMA CFD's don't have any of the drawbacks that 'market maker' ones do - it's identical to trading the real market. I don't understand why everyone seems to assume when someone asks about CFD's, that they mean 'market maker' ones.

 

[5oclock]

Has anyone got any other recommendations other than those above? I've come across books like "CFD's for dummies" etc anyone read it?

YOUNG_GUN ,"Currency Trading for dummies" by Brian Dolan from FOREX.com has a lot of info in it and is not a bad read,may be of some help to you.

 

[ausairman]

So is the stock market, futures, etc, not just CFD's.

Investing in the stock market is not necessarily zero sum. In fact, by a graham definition, investing is by its very definition not a zero sum game.

Futures carry much of the same risks as CFDs and I wouldn't encourage their speculative use any more than CFDs, the same goes with stock options. The advantage of those two over CFDs is however that it's possible to limit your losses, even in the absence of liquidity. Of course the potentially astronomical gains from CFDs are higher, hence the appeal.

 

[AlterEgo]

Investing in the stock market is not necessarily zero sum. In fact, by a graham definition, investing is by its very definition not a zero sum game.

The only thing that makes stocks NOT zero sum, as far as I can see, is dividends. And as I 'trade', not 'invest', I couldn't care less about dividends. Almost all the stocks I trade don't pay dividends anyway.

 

[Trembling Hand]

Futures carry much of the same risks as CFDs and I wouldn't encourage their speculative use any more than CFDs, the same goes with stock options. The advantage of those two over CFDs is however that it's possible to limit your losses, even in the absence of liquidity. Of course the potentially astronomical gains from CFDs are higher, hence the appeal.

Those bits in red are just wrong.

 

[tech/a]

bits!

Those bits in red are just wrong.

Hmmm Red Bits!!

 

[ausairman]

Those bits in red are just wrong.

I don't think so.

 

[Trembling Hand]

I don't think so.

Hmm I do.

Futures carry much of the same risks as CFDs and I wouldn't encourage their speculative use any more than CFDs,

Fair enough. But lacks an understanding of how to use them. just because they give you a minium margin doesn't mean your are leveraged.

the same goes with stock options.

Options have a totally different risk profile. If you are a purchaser risk is very capped to your initial outlay. Simple.

The advantage of those two over CFDs is however that it's possible to limit your losses, even in the absence of liquidity.

Thats not true. If you are as above a purchaser your risk with options are limited to funds to open. CFDs and Futures if short theoretical have unlimited potential for loss. If Long have a Maximum risk of the contract value, which is far more than the initial margin required to open a trade.

Of course the potentially astronomical gains from CFDs are higher, hence the appeal.

The possible gains from all derivative is large. Usually the pay-off for futures and CFDs are the same (ignoring interest and cost of carry) and linear. Options also have large potential reward but as they have a different beta the reward is different.

 

[ausairman]

If you are as above a purchaser your risk with options are limited to funds to open. CFDs and Futures if short theoretical have unlimited potential for loss. If Long have a Maximum risk of the contract value, which is far more than the initial margin required to open a trade.

We're on the same page. Not really sure why you're disagreeing with me.

The possible gains from all derivative is large. Usually the pay-off for futures and CFDs are the same (ignoring interest and cost of carry) and linear. Options also have large potential reward but as they have a different beta the reward is different.

Yep. But remember, the net payoff for all derivatives is around 0, so it doesn't really make sense to use that as a guide.

 

[ausairman]

The only thing that makes stocks NOT zero sum, as far as I can see, is dividends. And as I 'trade', not 'invest', I couldn't care less about dividends. Almost all the stocks I trade don't pay dividends anyway.

Stock investing is not zero sum insofar as companies (and in turn their owners) have the capacity to produce a net global benefit to the global economy. That is to say, the sum of all stakeholders in the economy can be better off after the company exists, than before. Whether the benefits of that contribution are distributed to shareholders in the form of dividends, buybacks or reinvestment is not particularly material. But you are right in that it is a longer term phenomenon, and as a trader you are unlikely to benefit from it.

 

[Trembling Hand]

We're on the same page. Not really sure why you're disagreeing with me.

Because if you re-read the post I responded to you will see it is wrong. CFDs or futures do not have the theoretical advantage of limited losses where options do.

And CFDs have not got an advantage over possible gains compared to futures.

 

[ausairman]

Because if you re-read the post I responded to you will see it is wrong. CFDs or futures do not have the theoretical advantage of limited losses where options do.

And CFDs have not got an advantage over possible gains compared to futures.

Futures contracts can be bought and sold long, without exposure of more than principal, just like options.

I'm not saying that all CFD trades are riskier than all options trades, or that CFDs are inherently more risky than some other instrument. Both can be very safe and very risky, depending on their implementation. What can be said however is that the downside risk of CFDs has to be coupled with a greater potential reward, otherwise people wouldn't use them (why would you purchase a CFD, if options and futures can be safer and offer the same return?).

You throw around the word "wrong" a little too much I think.

 

[cynic]

Futures contracts can be bought and sold long, without exposure of more than principal, just like options.

I'm not saying that all CFD trades are riskier than all options trades, or that CFDs are inherently more risky than some other instrument. Both can be very safe and very risky, depending on their implementation. What can be said however is that the downside risk of CFDs has to be coupled with a greater potential reward, otherwise people wouldn't use them (why would you purchase a CFD, if options and futures can be safer and offer the same return?).

You throw around the word "wrong" a little too much I think.

During these past few years I've traded using OTC CFD's. I've preferred these products primarily on account of my desire to engage the market with smaller levels of exposure (per trade) than the futures or option equivalent. (e.g. I can take on as little as 1GBP per point exposure on the FTSE100 index via CFDs. To trade the equivalent futures instrument in the real market would require a minimum exposure of 10GBP per point).

I've encountered many "wannabe" traders whom chose to use CFD's because they simply couldn't get enough money together to manage a full size futures contract. (Some of these "traders" were scraping by on welfare - so no prizes for guessing how things worked out for them!)

I fail to see how you can argue "greater potential reward" for CFDs as I usually incur a charge of between 4 and 7 points per trade. Additionally, despite the fact that I always ensure that my account is adequately funded, my provider has the annoying practice of regularly applying interest charges to my account.

P.S. You've raised some interesting thoughts, but you might want to get just a little more comfortable with the word "wrong" as some of the posters subscribing to this forum (myself included) are only too happy to correct common fallacies upon presentation. Many (not all) of us prefer to "call a spade a spade" rather than "sugar coat" our responses.

 

[Trembling Hand]

What can be said however is that the downside risk of CFDs has to be coupled with a greater potential reward, otherwise people wouldn't use them (why would you purchase a CFD, if options and futures can be safer and offer the same return?).

You throw around the word "wrong" a little too much I think.

Carry on.....