Re: Trading CFD's
Hey Michael,
I tend to agree with you with regards to CFD providers being bookies. Lets understand one thing, with CFD's its us (retail investors) vs the CFD Provider. For us to win, the CFD provider has to lose and vice versa.
In the case of market maker CFD providers, this is especially important, as they do not employ the DMA model and only needs to provide a synthetic market which may or may not bear a great deal of resemblance to the physical market (within reason off course).
Lets think about this statement, we are playing poker with a CFD provider who knows our hand. They are aware of all the net aggregate long and short positions, plus where the stop loss settings for everybody is, for every stock/index etc etc. So if I were a CFD provider with access to all this information, I can simply manufacture a synthetic market (without straying too far from the physical market, so as not to arouse market suspicion) that can maximise my gains, which is not too difficult, as I know the hands of all my opponents. It would take an absolute moronic CFD provider to to lose with this overwhelming advantage.
That is not to say that you will always lose against a market maker CFD provider as, I believe, they tally up the aggregates and then push the bids/asks around accordingly, on the basis of these aggregates, not individual positions. Therefore if your position is not one that the CFD provider is defending, you can potentially end up winning.
In any case, I believe there isn't any future whatsoever in playing poker with somebody that knows what your hand is. You'll need more than your share of good luck to win in those circumstances.
MichaelD said:
Hey Michael,
I tend to agree with you with regards to CFD providers being bookies. Lets understand one thing, with CFD's its us (retail investors) vs the CFD Provider. For us to win, the CFD provider has to lose and vice versa.
In the case of market maker CFD providers, this is especially important, as they do not employ the DMA model and only needs to provide a synthetic market which may or may not bear a great deal of resemblance to the physical market (within reason off course).
Lets think about this statement, we are playing poker with a CFD provider who knows our hand. They are aware of all the net aggregate long and short positions, plus where the stop loss settings for everybody is, for every stock/index etc etc. So if I were a CFD provider with access to all this information, I can simply manufacture a synthetic market (without straying too far from the physical market, so as not to arouse market suspicion) that can maximise my gains, which is not too difficult, as I know the hands of all my opponents. It would take an absolute moronic CFD provider to to lose with this overwhelming advantage.
That is not to say that you will always lose against a market maker CFD provider as, I believe, they tally up the aggregates and then push the bids/asks around accordingly, on the basis of these aggregates, not individual positions. Therefore if your position is not one that the CFD provider is defending, you can potentially end up winning.
In any case, I believe there isn't any future whatsoever in playing poker with somebody that knows what your hand is. You'll need more than your share of good luck to win in those circumstances.
