"Market Makers" questions

[Flathead Flick]

Wow, great thread - lots of good info here.

It's been mentioned that people slag off MMs every now and then, and I've got to say, I'm one of them. After getting scewed (I won't name names) on quite a few trades I pulled up stumps and moved to a DMA provider. No problems ever since, be with with my trades or even liquidity. I've since spoken to a former employee from the provider I used to use and he mentioned that the firm ACTIVELY tries to manipulate trades so that they come out on top. Now, I've got to put a caveat on this - the employee is a disgruntled former employee, and while I trust what he says, it does need to be taken with a grain of salt. Sure, the company is trying to make money, just as we are, but I don't like the idea that the company has so much control over the price they 'decide' to give me...

While I have been trading CFDs for a little while, I'm by no means an expert so my trading strategies are far from fancy. For my level and for other beginner CFD traders, I reckon you can't go past DMA providers for the simplicity and transparency.

Magdoran - or anyone else - do you have any ideas on pros and cons for CFD providers depending on length of time trading, different trading strategies, etc.?

 

[Magdoran]

Wow, great thread - lots of good info here.

It's been mentioned that people slag off MMs every now and then, and I've got to say, I'm one of them. After getting scewed (I won't name names) on quite a few trades I pulled up stumps and moved to a DMA provider. No problems ever since, be with with my trades or even liquidity. I've since spoken to a former employee from the provider I used to use and he mentioned that the firm ACTIVELY tries to manipulate trades so that they come out on top. Now, I've got to put a caveat on this - the employee is a disgruntled former employee, and while I trust what he says, it does need to be taken with a grain of salt. Sure, the company is trying to make money, just as we are, but I don't like the idea that the company has so much control over the price they 'decide' to give me...

While I have been trading CFDs for a little while, I'm by no means an expert so my trading strategies are far from fancy. For my level and for other beginner CFD traders, I reckon you can't go past DMA providers for the simplicity and transparency.

Magdoran - or anyone else - do you have any ideas on pros and cons for CFD providers depending on length of time trading, different trading strategies, etc.?

Hello Flathead Flick,


Have a look at my comments on “The idiots way to options riches” thread Post 12 regarding the comparison of CFDs and options to get a handle on my viewpoint. Since I don’t trade CFDs my knowledge is theoretical, and formed from observation and conversations, hence I can only comment with limited authority without direct personal experience trading them.

Please understand that I have made a personal decision not to trade CFDs based on my estimation of the instrument, hence please be aware that I have reservations about using CFDs, and that my comments stem from this bias (and I recognise there are alternative viewpoints others have on this subject).

Some people I know prefer CFDs, and trade them successfully for instance, but the successful players I know are very experienced, and have developed sophisticated analysis and systems approaches.

The reasons why I have not traded them is in part because of the risks associated with trading CFDs. Here are some notable aspects:

• Credit risk if the provider becomes illiquid for one reason or another,
• Potential for Spread manipulation
• Costs for risk mitigation (Guaranteed Stop Loss – GSL)
• Risk to Reward ratio
• Disclosure of stop loss to the opposing party

As for the DMA model, I haven’t had a chance to look at this in detail, and I wonder how this is achieved, and how the provider can guarantee that they will honour this approach. The problem is how do we know that they are actually delivering the result? Who polices their actions, and how can we be sure that breeches will be reported, and some sanction applied? It sounds preferable to the previous CFD approach if it is real, and there is an unbiased party which can ensure that the provider delivers this kind of liquidity.

Generally though, if you’re T/A or trading style and system is any good, the relative slippage will really be a cost of doing business, provided your account is big enough to support the size of your positions. As you can imagine there are a range of variables each person has to take into account when evaluating which instrument to trade. This is true of dealing (or not dealing) with CFDs.


Hope that answers your question FF.


Regards


Magdoran

 

[robots]

hello,

with a cfd with either MM or DMA you are not buying/owning the shares, they will talk about all sorts of smoke and mirrors stuff

cfd=contract for difference

when I was using IG Index for spread betting the SPI, the fluctuations in "their" price were enormous

around opening and closing their price would move erractically

I believe this is to stop you out and make you re-enter

I would have around 200 pt stops to counter this

thankyou
robots