CFD Brokers in Australia?

[Dominover]

I'm considering trading CFD's in the near future and was wondering which broker stands out in terms of lower costs or spreads and honesty and transparency?
I was hoping to trade Aussie stocks and Indexes and maybe some FX.

I know DMA tends to be more expensive, but is it that expensive to the point you wouldn't use it.. What about spreads? Is it better to have a broker that is
not a DMA broker?

Do allot of people trade CFD's or is the leverage aspect of CFD's considered too risky for most?

 

[Chronos-Plutus]

I'm considering trading CFD's in the near future and was wondering which broker stands out in terms of lower costs or spreads and honesty and transparency?
I was hoping to trade Aussie stocks and Indexes and maybe some FX.

I know DMA tends to be more expensive, but is it that expensive to the point you wouldn't use it.. What about spreads? Is it better to have a broker that is
not a DMA broker?

Do allot of people trade CFD's or is the leverage aspect of CFD's considered too risky for most?

I would suggest doing demo-trading until you feel comfortable with knowing the product well. Plenty of trading houses like IG Markets, Interactive Brokers, City Index, Saxo Bank and FXCM to do demo-trading. CFDs are considered high risk financial products so they are not for everyone.

Leverage can be a double-edged sword; after making a bit of money and losing a bit of money trading CFDs, I now only trade CFDs to get exposure to foreign stocks, making sure that I have plenty of capital to cover the margin and a guaranteed stop loss way out from the current price.

 

[peter2]

I'm disappointed that your knowledge hasn't progressed as much as it should have for a person who seems to be keen to learn about trading. I'll try to outline why I think this.

CFD providers: There are plenty of them available in Aust that facilitate trading in ASX equities, FX, indicies and commodities. It's your responsibility to research the CFD providers. You make a short list of providers that have everything you need and then you've got to make a decision on one to trial first. All Aust regulated CFD providers will do the right thing 99.9% of the time. Yes like everyone they can make an occasional mistake. Mention this asap and if it's their mistake they'll fix it immediately. Most mistakes are made by ignorant traders and those unscrupulous traders who are trying to scam the brokers' systems.

DMA is only more expensive as we have to pay the ASX for the real-time data. Commissions, spreads between DMA and non DMA are almost identical. Some providers do things in a different manner and it's up to the trader to know this and accept it.

Spreads: Vary with the instrument you're trading. FX spreads are tight, spreads on stocks with high daily turnover are tight, spreads can vary from one day to the next on any stock CFD. When they're hot they're tight when they're not, they're not.

You, as a trader should want to get as close the the real market price action as possible. Of course you should want DMA. You should also be aware that some non DMA providers may fill your order if there's not enough volume on the real market. This is one advantage of a non-DMA provider over a DMA provider.

Leverage: This is an important misunderstanding (IMO). Leverage is not risky. Mis-using it IS.
If providers didn't allow provide us with leverage then we'd need $100,000USD before we could trade 1 std contract of a USD currency pair.

 

[Cam019]

I just wanted to pop by and give my as someone who has recently moved away from trading stocks to trading currencies only (in my personal account - I still trade stocks in super fund). It has taken me almost 5 years to get to this point.

Personally, I would never go with a MM CFD broker. I would always look for a DMA CFD broker. I don't feel comfortable using a broker who actually makes the market and is taking the other side of my trades - I want my broker to be my portal to the markets, and not the market themselves. If there is not enough volume in the real market, I don't want my order being executed. Hence, my decision to use a DMA CFD broker.

You also need to decide whether you want super tight spreads and are willing to pay a commission per trade for that (my broker is $7 per 1 lot - pro rata for smaller lot sizes. $0.70 per 0.10, $0.07 per 0.01, etc.) or whether you are willing to accept wider spreads and not have to pay a commission.

Now we come to the fun topic. Leverage. This is actually one of the three reasons I made the move to forex. Leverage, Liquidity and Volatility. But, you can get yourself into a world of hurt if you do not manage risk properly. I have done it. No denying it. But now, I manage my risk like a crazy man. I think people think about and utilize leverage in the complete wrong fashion.

The way I think about leverage is that it enables me to open more trades than I would be able to if I were not using any leverage. You should not be thinking about leverage like this: 'now I can take more risk than usual'. If that is how you think about and use leverage, you will get crushed.

Let me reinforce this: You should not be using leverage to calculate your lot size per trade. Lot size should only be calculated on the actual capital in your account.

You need to think about it like this:

I have a $10,000 AUD account.
I want to risk 1% of capital per trade. ($100)
I want to trade GBPAUD.
I need a 50 pip stop.
100 / 50 = $2 per pip.
1 standard lot size is $10 per pip.
2 / 10 = 0.2.
I need a 0.2 lot size for this trade.

Now this calculation is easy when the quote currency is in the same denomination as your account. When is it different, the calculation becomes more difficult. This is why I use the myfxbook Position Size Calculator every time I place a trade. It makes life very simple to calculate your lot size per trade, regardless of leverage.

Hope this helps!

 

[Fluid36]

I just wanted to pop by and give my as someone who has recently moved away from trading stocks to trading currencies only (in my personal account - I still trade stocks in super fund). It has taken me almost 5 years to get to this point.

Personally, I would never go with a MM CFD broker. I would always look for a DMA CFD broker. I don't feel comfortable using a broker who actually makes the market and is taking the other side of my trades - I want my broker to be my portal to the markets, and not the market themselves. If there is not enough volume in the real market, I don't want my order being executed. Hence, my decision to use a DMA CFD broker.

You also need to decide whether you want super tight spreads and are willing to pay a commission per trade for that (my broker is $7 per 1 lot - pro rata for smaller lot sizes. $0.70 per 0.10, $0.07 per 0.01, etc.) or whether you are willing to accept wider spreads and not have to pay a commission.

Now we come to the fun topic. Leverage. This is actually one of the three reasons I made the move to forex. Leverage, Liquidity and Volatility. But, you can get yourself into a world of hurt if you do not manage risk properly. I have done it. No denying it. But now, I manage my risk like a crazy man. I think people think about and utilize leverage in the complete wrong fashion.

The way I think about leverage is that it enables me to open more trades than I would be able to if I were not using any leverage. You should not be thinking about leverage like this: 'now I can take more risk than usual'. If that is how you think about and use leverage, you will get crushed.

Let me reinforce this: You should not be using leverage to calculate your lot size per trade. Lot size should only be calculated on the actual capital in your account.

You need to think about it like this:

I have a $10,000 AUD account.
I want to risk 1% of capital per trade. ($100)
I want to trade GBPAUD.
I need a 50 pip stop.
100 / 50 = $2 per pip.
1 standard lot size is $10 per pip.
2 / 10 = 0.2.
I need a 0.2 lot size for this trade.

Now this calculation is easy when the quote currency is in the same denomination as your account. When is it different, the calculation becomes more difficult. This is why I use the myfxbook Position Size Calculator every time I place a trade. It makes life very simple to calculate your lot size per trade, regardless of leverage.

Hope this helps!

Hi Cam,

Agree on your point of using DMA and not MM (IG have manipulated markets multiple times to take my stops out).

What provider are you using as I'm looking to move?

Thanks

Fluid

 

[Cam019]

nd not MM (IG have manipulated markets multiple times to take my stops out).

What provider are you using as I'm looking to move?

I use Pepperstone, specifically a Razor account.

 

[Warr87]

I use FXCM.

 

[Fluid36]

I use Pepperstone, specifically a Razor account.

Thanks for that, is the razor account DMA and the standard MM for Pepperstone?