Newbie Lessons - All your questions answered

[Iro]

No. With CFDs you just hit a button and get given a price. With Futures you execute into an exchange mostly one thats offshore.


Nope. You learn very little hitting a at market button of a CFD entry screen trading a couple of dollars a tick two or three times a day compared to getting a fill in an exchange at $250 to $2500 a tick and doing 10 to 100 round trips a day like you would trading prop.

Prop shops from what I've seen don't think a great deal about the skills people have picked up trading CFDs. You would be 1000 times better off learning the real thing right from the start.

You'd recommend trading futures for someone starting out then? I was under the impression futures have a pretty high minimum capitol requirement. So that's why I was thinking of trading CFDs to start off.

As for skills I'd assume you mean reading market depth and spreads right? Aside from those, I can't think of anything different between CFDs and futures if all you're doing is reading charts to get your entry and exit points.

 

[Trembling Hand]

You'd recommend trading futures for someone starting out then? I was under the impression futures have a pretty high minimum capitol requirement. So that's why I was thinking of trading CFDs to start off.

Well the capital is a problem for a newbie sure. But thats the point of CFDs, forcing under capitalised, under skilled, hopefuls into the hands of the sharks. Probably better off in that case siming on a DOM like NT or zeroline.

As for skills I'd assume you mean reading market depth and spreads right? Aside from those, I can't think of anything different between CFDs and futures if all you're doing is reading charts to get your entry and exit points.

Like I said just hitting a "at market" button at $5 tick is a million miles away from executing into a offshore exchange trying to get fills @ $250 a tick or more. If all you are doing is "reading charts to get your entry and exit points" we are back where we started. That is, IMO, you are unlikely to get the skills required to trade Prop while wasting time with CFDs.

 

[CanOz]

The only decent reason i can see for trading CFD's is to have the ability to short Australian stocks. The leverage can be used to get exposure to a higher number of open positions and in theory to a big winner, providing you still use reasonable position sizing. From there its a matter of portfolio heat, or how much of your overall account is at risk from your total open positions.

My biggest 'lesson learned' was from CFD's. I was using the leverage in the wrong way and i lost over 17k AUD in less than two months. In a way i was lucky in that this was money that had made trading mining stocks when it was easy to confuse brains with a bull market!



CanOz

 

[Iro]

Well the capital is a problem for a newbie sure. But thats the point of CFDs, forcing under capitalised, under skilled, hopefuls into the hands of the sharks. Probably better off in that case siming on a DOM like NT or zeroline.

I havn't started trading CFD yet, I'm was planning to paper trade with it until I get the hang of it. The reason I was asking is bc I'm wondering if its better to practice on CFDs or futures. If there's a big difference in skillsets required between those two and futures is the more profitable of the two, obviously I would trade in futures instead. This is what you're recommending right? Also if you're recommending futures, how much capitol exactly would you need to start off?

Like I said just hitting a "at market" button at $5 tick is a million miles away from executing into a offshore exchange trying to get fills @ $250 a tick or more. If all you are doing is "reading charts to get your entry and exit points" we are back where we started. That is, IMO, you are unlikely to get the skills required to trade Prop while wasting time with CFDs.

I'm confused about what you're saying in this paragraph. Are you saying the two are very different because the futures have much larger swings per tick? Technical indicators that work shouldn't change much if the only difference is the swing sizes.

I'm also not clear on what you mean by "If all you are doing is reading charts to get your entry and exit points we are back where we started". Many people have developed systems that made them millions by using just indicators on charts. Are you saying this isn't good enough?

I'm trying to learn more about trading, I currently got a few Bill Williams and Larry Williams books on my read list too. Would be good though if I got some recommendations from experts like you on where to start and try out some of the theory in action.

 

[Iro]

The only decent reason i can see for trading CFD's is to have the ability to short Australian stocks. The leverage can be used to get exposure to a higher number of open positions and in theory to a big winner, providing you still use reasonable position sizing. From there its a matter of portfolio heat, or how much of your overall account is at risk from your total open positions.

My biggest 'lesson learned' was from CFD's. I was using the leverage in the wrong way and i lost over 17k AUD in less than two months. In a way i was lucky in that this was money that had made trading mining stocks when it was easy to confuse brains with a bull market!

CanOz

Aye, that's what I thought about CFDs too. Its practically the only way you can short aus stocks.

Also obviously with any leveraged instruments if it goes against you, you get hit in a big way, but if it goes right you can make big profits as well. =D

BTW CanOz what do you trade with mostly?

 

[Trembling Hand]

I'm trying to learn more about trading, I currently got a few Bill Williams and Larry Williams books on my read list too. Would be good though if I got some recommendations from experts like you on where to start and try out some of the theory in action.

What are you trying to achieve? Learning to trade or learning to trade to "hopefully" get a prop shop gig one day/soon?

If its trading to trade - knock yourself out trading CFDs with a small amount of capital. And remember enjoy the journey.

If you want to get a gig trading at a prop shop then thats a different game altogether. Which one you want?

 

[Trembling Hand]

Aye, that's what I thought about CFDs too. Its practically the only way you can short aus stocks. Obviously with any leveraged instruments if it goes against you, you get hit in a big way, but if it goes right you can make big profits as well.

BTW CanOz what do you trade with mostly?

Mate that is not true. If you use CFDs or straight stocks you still lose the same amount because you do not position size with leverage as the deciding factor.

 

[Iro]

What are you trying to achieve? Learning to trade or learning to trade to "hopefully" get a prop shop gig one day/soon?

If its trading to trade - knock yourself out trading CFDs with a small amount of capital. And remember enjoy the journey.

If you want to get a gig trading at a prop shop then thats a different game altogether. Which one you want?

Trying to make some money? I doubt I'll be trying to getting a gig at a prop shop unless I'm wildly successfully and turn out to be a trading genius.

But in the meantime I'm just trying to learn and see how it goes, hence the questions.

PS wow you respond quick!

Mate that is not true. If you use CFDs or straight stocks you still lose the same amount because you do not position size with leverage as the deciding factor. ?

Huh? Eg normal share $5, buy $1000 worth of shares = $1000
CFD leveraged share @ 95% $1000 worth of CFDs = $20000

Share price goes down $1
Shares = lose $200
CFD = lose $4000

???

 

[Trembling Hand]

Trying to make some money? I doubt I'll be trying to getting a gig at a prop shop unless I'm wildly successfully and turn out to be a trading genius.

But in the meantime I'm just trying to learn and see how it goes, hence the questions.

Ok no props in that case paper trade/sim your brains out. When you're profitable with that move up to the real thing in whatever interests you Stocks, FX, CFDs futs etc.

 

[CanOz]

Aye, that's what I thought about CFDs too. Its practically the only way you can short aus stocks.

Also obviously with any leveraged instruments if it goes against you, you get hit in a big way, but if it goes right you can make big profits as well. =D

BTW CanOz what do you trade with mostly?

On my live account i only trade index futs.

Cheaper, better fills, all of what TH says is true.

CanOz

 

[CanOz]

Ok no props in that case paper trade/sim your brains out. When you're profitable with that move up to the real thing in whatever interests you Stocks, FX, CFDs futs etc.

It just doesn't get any better than this....simple = if you cannot be profitable on a simulator you have no hope of making it with real coin....even then...if you are a discretionary trader then i would doubt that one could move from the sim to a real account seamlessly without some pain, unless you are an exceptionally talented trader.

CanOz

PS - if you still want to join a prop shop, check out SMB Capital. They'll take you on for 10k USD for a few weeks/months. If you truly have talent they'd probably hire you too. Its US stocks, mostly order flow stuff, hunt orders etc....There's a good book out too, One Good Trade, tells there story and how they do some of it.

 

[Iro]

Can you please clarify some of the questions on #544 though? Eg Fut or cfds, capitol req, confusing paragraph etc. Still interested in getting your opinion.

Also I have no preference.

 

[Trembling Hand]

Can you please clarify some of the questions on #544 though? Eg Fut or cfds, capitol req, confusing paragraph etc. Still interested in getting your opinion.

Also I have no preference.

The only reason you would use CFDs is due to a low capital base. To trade futures depending on the timeframe you are going to need $25,000 (shorter term daytrading on some of the small contracts) out to $100,000 or more if your trading EOD or some of the more crazy markets, HSI, DAX, Oil, Gold, Grains etc.

Trading CFDs to some degree and MM Fx is easier than futs or ECN FX because you just hit a button and get a price from your market maker. With futs and ECN and OS equities you have lag and a fast market which adds an added problem of getting fills and slippage. Then if you move up to trading real size on short term time frame you will find CFD execution skills are next to useless. This is of course talking on a shorter term time frame 10-100 trades a day. If your trading EOD or 1-3 times a day probably none of what I have said matters. :

 

[Iro]

The only reason you would use CFDs is due to a low capital base. To trade futures depending on the timeframe you are going to need $25,000 (shorter term daytrading on some of the small contracts) out to $100,000 or more if your trading EOD or some of the more crazy markets, HSI, DAX, Oil, Gold, Grains etc.

Trading CFDs to some degree and MM Fx is easier than futs or ECN FX because you just hit a button and get a price from your market maker. With futs and ECN and OS equities you have lag and a fast market which adds an added problem of getting fills and slippage. Then if you move up to trading real size on short term time frame you will find CFD execution skills are next to useless. This is of course talking on a shorter term time frame 10-100 trades a day. If your trading EOD or 1-3 times a day probably none of what I have said matters. :

I'm trading shares right now 1-3 times day, but I would like to trade more with bigger instruments when I get more experienced so what you've said matters alot! Though the way you say it can be a bit confusing to a newbie like me.

Like ECN? I googled it and according to "http://www.investopedia.com/articles/forex/06/ECNmarketmaker.asp" its like DMA cfds cept for forex. But apparently there are "fake" ECN operators out there? No sure what OS equities are. Google turns up mac stuff. I'm guessing EOD means end of day, but donno why you say it requires more capitol than periods with less volume.

Then if you move up to trading real size on short term time frame you will find CFD execution skills are next to useless." .

Again not sure what you mean by this, CFD execution skills? Like putting the quantity, limit order and stop loss targets? Don't think you need skill for that. Just type the numbers in. If you're referring to finding a software to do the above quickly then its more a function of the software. And yes I would like to find a program where I can set default lot sizes, set different prices with a mouse click, switch from buy position to short quickly, have good charting functions etc. (any recommendations?)

In regards to capitol I did a bit of searching around the forum and it seems you trade on HSI futures? There's a HK mini index @ 10hk$/index point, 20000ish index point, aud-> hkd 1:8 so around $AUD25000 per contract. This is where you got the $25,000 number right? However I thought since its a leveraged instrument so you can trade like with a 95% margin like CFDs (correct me if I'm wrong) and therefore not foot up the entire 25k?

Finally I'm still trying to work out what you mean earlier by

"Like I said just hitting a "at market" button at $5 tick is a million miles away from executing into a offshore exchange trying to get fills @ $250 a tick or more. If all you are doing is "reading charts to get your entry and exit points" we are back where we started. That is, IMO, you are unlikely to get the skills required to trade Prop while wasting time with CFDs."

when you refer to "skill".

 

[Trembling Hand]

OS equities means Overseas Equities.

Mate I would just go about learning the market and finding out what makes a system/approach profitable. You are at the very beginning and you know next to nothing. Thats fine that is where we all started. Worrying about trading @$250 a ticks probably not going to concern you for a few years yet.

For example although I've said it a few time you still haven't got the grasp of what I'm saying. When you start trading real volume you cannot just hit a button and get a "good" fill. You need skill to execute at a favourable entry/exit. Nothing to do with filling a order ticket lol! Otherwise a good edge can just disappear when going from $5 a tick on MM CFDs to a few contracts on the futures market. but really this is all way way down the track. And this started in response to my comment about trading prop. Not taking your first steps.

Though one thing you do have to get your head around right now is position sizing. You seem to no idea about it. You ask me about required capital but you would know that better than me if you understood position sizing and what type of trading you are looking at. I would start there before you even stated paper trading.

 

[tech/a]

IRO

Clearly you have no idea how to leverage a position correctly.
You have no idea how a spread will affect your trading.

You appear stuck in beliefs and those who actually have come out on the other side seem to you --- antagonistic.

They know the stupidity in many accepted trueims.

Unfortunately its not possible to show truths to those who cannot see them.
You ave a way to go before a meaningful discussion with traders like T/H.

 

[Iro]

I thought this is the newbie lessons thread? Or is this the newbie insulting thread?

Its not hard to answer my questions and give a proper explanation but all you two guys seems to be interested in is avoid everything I ask and hell bent on proving you're superior like some ego maniac.

If you don't wanna answer my questions fine then don't post. You dont have to be an asshole about it jez.

 

[Starcraftmazter]

I thought this is the newbie lessons thread? Or is this the newbie insulting thread?

Its not hard to answer my questions and give a proper explanation but all you two guys seems to be interested in is avoid everything I ask and hell bent on proving you're superior like some ego maniac.

If you don't wanna answer my questions fine then don't post. You dont have an asshole about it jez.

Yeh mate, unfortunately you get a lot of that here - but don't worry, some people are nice

There's also a lot of people here hating on CFDs. Personally I use them without issue, and reputable brokers can even give you direct market access. Of course it's not to say they are the best for all situations, as already pointed out. Everything will have a trade-off, it's just a matter of understanding them and choosing what's best for you. But of course to do that you need experience with all instruments.

 

[tech/a]

I thought this is the newbie lessons thread? Or is this the newbie insulting thread?

Its not hard to answer my questions and give a proper explanation but all you two guys seems to be interested in is avoid everything I ask and hell bent on proving you're superior like some ego maniac.

If you don't wanna answer my questions fine then don't post. You dont have an asshole about it jez.

Well you have successfully alienated any help from this poster.

Enjoy your stay here.

 

[Julia]

Yeh mate, unfortunately you get a lot of that here - but don't worry, some people are nice

Oh, the irony.