Trading CFDs?

[xtanda]

Re: Trading CFD's

In my opinion, CFD is for smart people. It's the power of leverage that make people wealthier ! Ask Kiyosaki !

If you only have $5000, what can you do with ordinary sharetrading? Say buy 1000 of $5 share. Say in a month share go up 10c, you have $100? Probably eaten-up by brokerage already.

With CFD, same money, same trading give you $1000! (based on 10% provider margin) So, who chose $100 instead of $1000? Yes, of course if the share down 10c, you COULD BE down $1000 instead of down $100. 'Could' is the key because it depends on your trading strategy of managing risk. For example, using CFD trading with downside protection will give you all benefit of upside without any downside risk.

Also CFD is for beginner as well. I started my sharetrading 'adventure' firstly with CFD. GOOD EDUCATION is the key. When I purchased my $4000 - 3 days seminar about CFD trading, I don't know whether it worths it or not .. It worth every cents !! Never look back !

Just ask your prospectus CFD teacher if he/she can teach you how to do the above scenario, then he/she is already more than average.

 

[mlennox]

Re: Trading CFD's

You can definately make money trading CFDs, i've doubled my account twice in the last year but unfortuntely gave back all the profits during the correction in late february and the more recent correction in mid august..

The key is to hold as few positions overnight as possible during times of increased fear in the market... the biggest problem i've had is having too large of an exposure overnight and then the market takes a hit and you can't do anything but book a loss...

 

[Trembling Hand]

Re: Trading CFD's

In my opinion, CFD is for smart people. It's the power of leverage that make people wealthier ! Ask Kiyosaki !

No its not. Its hard work, good timing, smart money management and persistence.
Leverage alone is what takes people out of the game quickly and makes them poor.

For example, using CFD trading with downside protection will give you all benefit of upside without any downside risk.

No Down side??? please explain?

 

[It's Snake Pliskin]

Re: Trading CFD's

xtanda;202737

In my opinion, CFD is for smart people. It's the power of leverage that make people wealthier ! Ask Kiyosaki !

Do you have his number?

If you only have $5000, what can you do with ordinary sharetrading? Say buy 1000 of $5 share. Say in a month share go up 10c, you have $100? Probably eaten-up by brokerage already.

A lot actually.

With CFD, same money, same trading give you $1000! (based on 10% provider margin) So, who chose $100 instead of $1000? Yes, of course if the share down 10c, you COULD BE down $1000 instead of down $100. 'Could' is the key because it depends on your trading strategy of managing risk. For example, using CFD trading with downside protection will give you all benefit of upside without any downside risk.

There is downside risk to everything, especially one's account which can be risked to the downside by BROKERAGE and interest which CFD's do have.

Also CFD is for beginner as well. I started my sharetrading 'adventure' firstly with CFD. GOOD EDUCATION is the key. When I purchased my $4000 - 3 days seminar about CFD trading, I don't know whether it worths it or not .. It worth every cents !! Never look back !

An expert already And $4000 down already, who said there was no downside risk.

Just ask your prospectus CFD teacher if he/she can teach you how to do the above scenario, then he/she is already more than average.

What scenario are you talking about? Rambling fool or naieve beginner? I don't think product diclosure statements cover that.

$4000 down. Ouch!

I have one short position running. The risk is to the UPSIDE.

 

[It's Snake Pliskin]

Re: Trading CFD's

Uncle Festivus

To be blunt, CFD's are for lazy investors/traders hoping to make twice the money in half the time, but end up loosing most if not all their capital.

I think they attract a lot of fools who you may be referring to.

There is only one genuine non gambling use for CFD's as far as I can see, that is to hedge against realising a capital gain on a share position.

Exactly. They are good hedging tools.

Unless you are very experienced with shares then save your money.

Prudent comments.

 

[xtanda]

Re: Trading CFD's

Buy 1000 CFD......
Buy 1 put option...

no downside risk, all the benefit of CFD !

 

[professor_frink]

Re: Trading CFD's

Buy 1000 CFD......
Buy 1 put option...

no downside risk, all the benefit of CFD !

......price goes nowhere after you buy, the put expires worthless and you owe interest on the cfd.

No risk indeed!

 

[xtanda]

Re: Trading CFD's

Yes, Prof ! - that's my worst case scenario !
But I said "no downside risk" not "no risk at all" (sideways risk is the one)...

With this strategy using option, you look at medium term trading... say 2-3 months...

Remember with CFD, (assuming 10% margin), you just need 5% expected movement (up or down depending long or short position) to get 50% profit....
hence if our selected stock doesn't move anywhere in 3 months.... bad luck... I would go back to Technical Analysis course....

 

[professor_frink]

Re: Trading CFD's

Yes, Prof ! - that's my worst case scenario !
But I said "no downside risk" not "no risk at all" (sideways risk is the one)...

With this strategy using option, you look at medium term trading... say 2-3 months...

Remember with CFD, (assuming 10% margin), you just need 5% expected movement (up or down depending long or short position) to get 50% profit....
hence if our selected stock doesn't move anywhere in 3 months.... bad luck... I would go back to Technical Analysis course....

Before you go and try this, I'd strongly suggest that you work out exactly where you stand with this kind of position. Saying things like 'I only need to make 5% on the share to make 50% is only 1/3 of the equation. You need to work out how much your chosen put option will cost you, and how much you'll be paying in interest each day to hold the cfd position. You'll probably be quite surprised at how big of a move you need to the upside just to breakeven after a couple of months hold time.

Another thing you'll need to think about is that a put won't give you as much protection as you think it will- unless you buy a very deep in the money option, you won't get much in the way of delta at all.

 

[wayneL]

Re: Trading CFD's

Buy 1000 CFD......
Buy 1 put option...

no downside risk, all the benefit of CFD !

Two trades when only one trade is needed... increases contest risk and capital needed to put on the trade and probably increases the cost of carry.

1000 x CFDs + 1 x put = 1 x call of the same strike as the put.

Remember there are synthetic relationships with options. Put plus stock (or CFD's) is a synthetic call option.

 

[xtanda]

Re: Trading CFD's

I agree fully with professor_frink !
There is a lot of nitty gritty (read: other checklist/criteria) need to be finalized befor entering particular trade... but the main purpose of my posting is to give idea that Trading CFD is not as risky as people thought if you equipped yourself with good knowledge.

There are substantial difference between call option only vs cfd+put:
1. In the event of downturn, when using CFD+option you may 'rolldown' your put option. Option only: lost 100% of investment.
2. In the event of upturn, you can 'lock in' profit without closing your position ('roll up' your put option).
3. Possibility receiving dividend

Having said that, if you want to invest long term...say more than 1 year.. I would prefer call option only as the CFD interest will be substantial

Happy trading !

 

[wayneL]

Re: Trading CFD's

1. In the event of downturn, when using CFD+option you may 'rolldown' your put option. Option only: lost 100% of investment.

You can roll the call option too. It will still be synthetically equivalent. The risk and reward will be identical.

2. In the event of upturn, you can 'lock in' profit without closing your position ('roll up' your put option).

You can roll up the call option in the same way... again 100% synthetic equivalence.

3. Possibility receiving dividend

Once again, once you involve options, the pricing in the option cum & ex dividend will account for the dividend... once again 100% synthetic equivalence.

Suggest some more study on options. Cottle has a good section on this.

Cheers

 

[wayneL]

Re: Trading CFD's

1. In the event of downturn, when using CFD+option you may 'rolldown' your put option. Option only: lost 100% of investment.

You can roll the call option too. It will still be synthetically equivalent. The risk and reward will be identical.

A quick lesson in synthetics.

1/ The risk and reward of a CFD + put, verses a call only (presuming same strike and expirey of course) is absolutely identical, excluding contest risk.

Charting the payoff diagram of each will demonstrate this irrevocably.

* You say you can roll down the put. ( Why you would want to do this is another discussion). This entails selling the put and simultaneously buying a put of a lower strike. What you have in fact done here is trade a bear put spread.

* If you own the call instead, you can roll down in identical fashion (synthetically). This entails selling the call and simultaneously buying a call of a lower strike. What you have in fact done here is trade a bear call spread, which is synthetically equivalent to a bear put spread.

So you see, whether you own CFD + put or a call. It requires the exact same trade (synthetically) to roll down.

The two positions are identical (bar contest risk, possible skews and margin/ capital employed considerations.)

Cheers

 

[kerosam]

Re: Trading CFD's

excuse me for poking in... i opened a position RIO with Mac Prime yesterday... and like all CFDs transactions I make, I put a GSL on. The question is, how much should a GSL cost? I think this RIO trade will barely make it even due to the GSL cost.

maybe i should consider just stop loss instead? but then i would like to have a peace of mind when I open positions with CFDs.

Is there a CFD provider with very reasonable GSLs cost? sorry for sounding like a tight-ass.

thanks in advance.

sigh

 

[It's Snake Pliskin]

Re: Trading CFD's

excuse me for poking in... i opened a position RIO with Mac Prime yesterday... and like all CFDs transactions I make, I put a GSL on. The question is, how much should a GSL cost? I think this RIO trade will barely make it even due to the GSL cost.
maybe i should consider just stop loss instead? but then i would like to have a peace of mind when I open positions with CFDs.

Is there a CFD provider with very reasonable GSLs cost? sorry for sounding like a tight-ass.

thanks in advance.

sigh

It depends on the account you have.

Some GSL's are EXPENSIVE at least in my experience.

Number of shares and the distance it is set at will determine the cost.

On more probable trades I now incorporate my GSL into my risk amount, but not always, as it is something I would like to experiment with more. If there is sufficient probable reward I go for it. For example, I have a predetermined loss amount of, say $300. Then I determine entry and stop levels and get a quote from my provider, just click no if it is too much (my policy). For example $160 GSL is quoted.
I then reduce the amount of shares until that $160 GSL is factored into the $300 TOTAL loss amount excluding costs.(it becomes part of the $300) If the PROBABLE traget is still enough it is a good trade to take. If it loses it isn't painful. $160 on top of $300 is like half a trade more of losing - account destroying. I tend to use straight stocks on longs so I don't waste money on GSL's and interest. I tend to use my GSL's for short longs or predominantly shorts.

NOT ADVICE OK.

The closer the stop the more expensive it is.

Cheers.

 

[prawn_86]

Re: Trading CFDs

I too have just started out with CFDs, and in hindsight have probably been a bit agressive with my position sizes.

I am down overall on my CFD capital after 3 weeks, but one good thing is having such great leverage forces you to learn very quickly, otherwise thats it.

 

[nathanhulls]

Re: Trading CFDs

CFD's can be great, and they can also kill you as we have read from many posts already.

My own personal experience.

My very first trade:

The trade lasted 1minute and 24 seconds.
It was a short trade.
$250 investment
returned $4500

I think for some reason that gave me a false sense of success and security.

The end of the story is that I lost approx 50k of borrowed money after thinking this whole CFD thing was just so good I borrowed money on my dad's house and the rest is history (plus interest).

So like most its pick myself up out of the dust, dust myself off and now its time to get educated, build a trading system and recoup the losses plus some.

I still think CFDs are great, i just need to learn to read the markets, develop some more strict money management and risk management practices.

If there are any CFD traders out there that would love to help mentor a young guy I'd love to hear from you.

Regards
Nathan
- its more blessed to give than to receive!

 

[Timmy]

Re: Trading CFDs

CFD's can be great, and they can also kill you as we have read from many posts already.

My own personal experience.

My very first trade:

The trade lasted 1minute and 24 seconds.
It was a short trade.
$250 investment
returned $4500

I think for some reason that gave me a false sense of success and security.

The end of the story is that I lost approx 50k of borrowed money after thinking this whole CFD thing was just so good I borrowed money on my dad's house and the rest is history (plus interest).

So like most its pick myself up out of the dust, dust myself off and now its time to get educated, build a trading system and recoup the losses plus some.

I still think CFDs are great, i just need to learn to read the markets, develop some more strict money management and risk management practices.

If there are any CFD traders out there that would love to help mentor a young guy I'd love to hear from you.

Regards
Nathan
- its more blessed to give than to receive!

Nathan, there is an active thread at present here, someone developing a trading plan - it may be of interest to you in developing your own.

 

[giasing]

hi guys,

Please share some experience of trading CFD. i just started trading CFD a few days ago.

i have purchase my short position of NCM of average price at $A36.04 on Thursday and it closed at $A36.01. and today i didnt know why my short average price changed to $A36.01. and i lost 3 cent profits.

Are there anyone know why i lost that 3 cent profits? please share some experience.

regards,

 

[Ardyne]

Re: Trading CFD?

I'd just ring them up. Sure you were looking at the sell price. maybe it was a 3 cent spread ?