CFDs - Confused!

[anthon]

I have been reading everything I can about CFD's but still have a fair few questions.

Currently we're trading mainly indices through IG Markets although we are starting to notice a few of the tricks spoken about on here. Things like opening/closing a position nowhere near where it was when we executed, spikes in the market that didnt happen anywhere else etc.

Now we're starting to wonder if there is a better provider for indices, or different things we can try to maximise our gains on the IG platform.

Are there any rules people follow or things they look for? Whats an average margin that you risk? Do you trade the full contracts or minis?

If anyone has any advice or answers they would be greatly appreciated.

Cheers,

Anthon

 

[The Ferret]

CFD.... Capital Fast Disappearing.

I've decided to stay well away from CFD's for the time being. Especially if they are via a service provider who does not use direct market access.

Good luck!

 

[robots]

hello,

you can go to the futures market, I went with tricom

i used to spread bet with IG, had to have huge stop losses, mostly traded the asx200 (whatever) and dow, got sick of watching the dow

they are all as questionable as each other (futures and other derivatives),

i would guarantee not one cfd provider would "hedge", if they did they would only make money via overnight cash rate + margin, miniscule

they are betting houses,

CMC has a PDS of 166 pages!

thankyou

robots

 

[robots]

hello,

good one ferret

thankyou

robots

 

[Trembling Hand]

Currently we're trading mainly indices through IG Markets although we are starting to notice a few of the tricks spoken about on here. Things like opening/closing a position nowhere near where it was when we executed, spikes in the market that didnt happen anywhere else etc.

Show us an example. I have yet to see this to be true in about 5 years of following CFDs and Futures. I wish it was true because it would create the Biggest arbitrage opportunity out there. Mostly these comments come from people who don't know what they are trading.

Are there any rules people follow or things they look for? Whats an average margin that you risk? Do you trade the full contracts or minis?

Its generally accepted that risking anymore than 2% of equity on a trade is going to lead to a blow up. That is when you are about to enter a trade you should calculate where your stop so, then how much you can trade to only risk Max 2% of your account if your stop is hit.

 

[vishalt]

Please don't play in CFDs, please don't.

They are bad, they are evil, and you may think that when you beat the market that you're invincible, you cannot imagine the damage even 5% gearing has caused people I know.

 

[tasmanian]

I personally think cfd,s are great.Too many people that dont understand how they work will blow there accounts in a month or 2.

People that dont know what they are doing seem to be the worst ones hit.

If you have $10,000 in your cfd account trades as though you have $10,000 in your account.Too many people think oh with leverage now I have a $100,000 and they blow there account in a few trades.

If you cant understand how they work dont touch them until you do.

The main adantage with cfd,s is instead of having all your money tied up in the market you can put it in the bank or invest it somewhere else and add to your cfd account if need be.

If you have a $100,000 to trade with you only need to put $10,000 into your cfd account and still have the same exposure.Your other $90,000 can be invested somewhere else and added to your account as I said if you have a few loses.My max loss on a cfd trade is $500 or thereabouts.Just let my winners run hopefully they turn into a few thousand or more and the good ones pyramid into them as Im more and more in profit.This way you can have alot more loses but the good trades you hold for a few months will cover the loosers.Its not get rich quick but slowly your account wil grow and you can have more trades running and start to buy biggger parcels.

Too many people get greedy and want the big $$$ fast.Trust me Ive learnt from experience there.

Its all about risk/reward.If your right 50% of the time and wrong 50% and you look after your loses and keep them small eventually you will win.

Learn as much as you can before using cfd,s they can obvisouly be deadly to the inexperienced but they are great imo when used properly

cheers

 

[Trembling Hand]

The main adantage with cfd,s is instead of having all your money tied up in the market you can put it in the bank or invest it somewhere else and add to your cfd account if need be.

If you have a $100,000 to trade with you only need to put $10,000 into your cfd account and still have the same exposure.Your other $90,000 can be invested somewhere else and added to your account as I said if you have a few loses.

But the problem with this is that if you have $100,000 exposure with CFDs you are paying interest on a $100,000 loan!!

Your above example is only going to work if you can use the other $90,000 to make more than the interest you are now being penalized. Not an easy task in this market by a long shot.

 

[tasmanian]

Sorry should have clarified that abit more I mainly use cfd,s to go short.So get paid interest not much but enough.

cheers

 

[Nick Radge]

Please don't play in CFDs, please don't.

They are bad, they are evil, and you may think that when you beat the market that you're invincible, you cannot imagine the damage even 5% gearing has caused people I know.

There is nothing evil with CFD's. This is a great example of ignorance and inability to take responsibility for one's actions.

Both a Porsche and Toyota Starlet offer the driver the ability to kill them self. The choice is how the car is driven.

The same is true for CFD's and any other instrument for that matter.

Trade them incorrectly, trade them without correct education and one will come unstuck. However, this is not a function of the instrument, but of the user.

Part of one's education is what and how a MM provider can skew the prices according to their own book. In other words one should steer well clear of any MM provider. If you want to trade indices then use the futures markets.

 

[anthon]

Whilst I am keen to eventually move to futures I dont have the funds available for the time being.

Can someone recommend a platform then that would be better to trade the ASX200 and FTSE on?

 

[Trembling Hand]

Whilst I am keen to eventually move to futures I dont have the funds available for the time being.

Could you answer me this.
If you haven't the funds to trade Futures why would it be any different trading the same thing with CFDs?

 

[anthon]

Well correct me if I am wrong but im only playing with $1500 - I didnt think that would be enough to cut it on futures.

Obviously I am wrong.

 

[Trembling Hand]

Well correct me if I am wrong but im only playing with $1500 - I didnt think that would be enough to cut it on futures.

Obviously I am wrong.

Thats my point mate. If you only have $1500 that is not going to last long. Putting up a tiny margin with CFDs is not what you have to be thinking about. Its the risk per trade and the Max number of bad trades that will end in ruin. And with $1500 you fate is sealed.

Especially if you are new to the game. Thats leaves no room for mistakes.

 

[MichaelD]

If you haven't the funds to trade Futures why would it be any different trading the same thing with CFDs?

I can think of one example; the Aussie 200 mini CFD contract ($5 per point versus $25 per point for the straight futures) - makes risk management viable in situations where it may not be otherwise.

To the original poster; a novice trader with $1500 should NOT be trading CFDs. In fact, you shouldn't be trading anything yet - this level of capital is at least one order of magnitude too small to survive the learning curve (unless you gamble and get really, really lucky).

 

[anthon]

Well pointers on where to start?

Happy to lose it if I learn something.

And to think I was doing well!

 

[Trembling Hand]

If you really had to trade you could try CMC they have a Aussie200 which has a minimum $1 move per tick (1/25th of the spi)

But really, almost certainly to be a $1500 education.

 

[CFD]

anthon, if you can afford the $1500- loss in the name of education and experience, why not give it a go. You will learn more when your own money is on the line than by doing theory.

IG Markets, whilst not that highly thought of by successful trades, has an excellent platform that is easier to learn and better suited to CFD trades than the professionals WebIRESS platform. Also there are no monthly platform and ASX fees to eat away at your funds.

Stay with IG and look at shares rather than holding index's overnight.
As an example set a stop loss initially at 5% with the difference in value between the SL and entry price being 2% of your bank. ie
Share EP (long) $5-.
SL $5 x 5% = (0.25) set at $4.75.
Units, $1500 bank x 2% / .25 = 120.
The min. comm. is $8- per trade, so $16- is likely going to eat up any profits without a bigger bank. But you're not looking to be viable, your looking for experience.

So without expecting to make money, have some fun seeing how long you can make it last.
Learn how to manage the SL, so your maximum risk of $30- per trade is progressively reduced as the trade progresses.
See how slippage works, both for and against you.
See how the outcome of the last few trades has no bearing on the next.
See how important it is for the outcome of any one trade not to be important.

 

[>Apocalypto<]

Please don't play in CFDs, please don't.

They are bad, they are evil, and you may think that when you beat the market that you're invincible, you cannot imagine the damage even 5% gearing has caused people I know.

LOL,

Funny post!

I take it all your mates were using strict money management Vishalt. There is so much wrong with that post, i just won't start up. I trade FX and FX only I risk 1-3 % of my account depending on Risk reward and if it's a trend continuation or a counter trend. I now trade with a Forex dealing desk and I used to trade with IG fx cfd's. did blow myself up using cfd's? yes twice. Have i blown my self up again since I used my MM plan? No I have put on 400% since November 07. Are CFD's Evil? no your own mind is evil and greedy that's why u blow up. you could trade on any product and blow yourself up. come on Vishalt keep this kind of crap off the public forums.

Cheers

 

[IFocus]

LOL,

Funny post!

I take it all your mates were using strict money management Vishalt. There is so much wrong with that post, i just won't start up. I trade FX and FX only I risk 1-3 % of my account depending on Risk reward and if it's a trend continuation or a counter trend. I now trade with a Forex dealing desk and I used to trade with IG fx cfd's. did blow myself up using cfd's? yes twice. Have i blown my self up again since I used my MM plan? No I have put on 400% since November 07. Are CFD's Evil? no your own mind is evil and greedy that's why u blow up. you could trade on any product and blow yourself up. come on Vishalt keep this kind of crap off the public forums.

Cheers

Great to hear you are going well Trade it keep that expectancy cure upwards and onwards.....