Jaydee
Established member
- Messages
- 556
- Likes
- 107
On the surface, for a retail investor, there isn't much difference between equities and cfds. Under the bonnet, cfds are a type of derivative known as a swap. Main differences are that you can go short and you can leverage your position using margin - you will also save money on stamp duty if you don't hold cfds positions for months.
If you haven't traded these with any success, it's likely to be because you are using too much leverage. For example, if you have £10K in your equity account, you can buy £10,000 of equities (obviously) but you can buy £100K of cfds with 10:1 leverage. Sadly, when a lot of people start trading with leverage, rather than use £1000 to access £10K, they use £10K to access £100,000 - a very quick way to go broke.
Yes, learn to understand and respect the leverage.
For example, when you traded CFDs, or any leverage product, if you're not asking and getting proper answers to these 2 questions you'll always be heading to the poor house -
1. How much am I willing to lose on this trade, and
2. At what point will I be proved wrong, ie where's my stop
Many people never ask those questions and instead like this one -
How much money can I make on this trade.
But look where that gets them, failure to understand that trading is ALWAYS AND ALWAYS WILL BE A GAME OF RISK CONTROL.
It's never and never will be a game of REWARD.
The first 2 questions are directly related to risk. The other question is directly related to reward......
Hope this helps.
For example, when you traded CFDs, or any leverage product, if you're not asking and getting proper answers to these 2 questions you'll always be heading to the poor house -
1. How much am I willing to lose on this trade, and
2. At what point will I be proved wrong, ie where's my stop
Many people never ask those questions and instead like this one -
How much money can I make on this trade.
But look where that gets them, failure to understand that trading is ALWAYS AND ALWAYS WILL BE A GAME OF RISK CONTROL.
It's never and never will be a game of REWARD.
The first 2 questions are directly related to risk. The other question is directly related to reward......
Hope this helps.
scose-no-doubt
Veteren member
- Messages
- 4,630
- Likes
- 954
Cant you get leverage on equity broker accounts? Difference with CFD's is you're trading to Brokers bid/ask unless you're DMA (probably still then too). Just look at transaction costs because you're still gonna get the CGT on them.
No offence meant here Newstart but it doesn't sound like you know much about trading. No one can tell you where to put your stops as we don't know what kind of strategy you're employing in the markets. Your opening post really came across like you're basically gambling, and i suspect you are. I'd recommend you read some books (pm me if you want some titles) and come up with a solid, robust trading strategy as a result of trial and error (paper-trading/trading v small size with spreadbetter). There are plenty of strategies on here you can start from and develop your own take on them.
I am trading stocks with very quite a bit of success (Position Trading) CFDs seem quite different on two occasions I held my position overnight and when I looked again in the morning my position was wiped out, so if you could give me a few Titles of books I would appreciate it and thanks.
Jaydee
Established member
- Messages
- 556
- Likes
- 107
What's different about your trading now with CFDs compared to when you were trading equities? They are, on the whole, the same: you buy £40,000 worth of Barclays using the cash equity, or you buy £40,000 of BARC using the CFD route - not much difference.
So, if you've had success position trading equities, do exactly the same with CFDs.
So, if you've had success position trading equities, do exactly the same with CFDs.
Someone who is experiencing success in the markets wouldn't have a position stopped out overnight without already having their risk predetermined, and therefore knowing the exact price where they are out of the market.
I really recommend you to read up on the products you are trading, your broker will have an information part on their website detailing them.
As for books; Reminiscences of a stock operator, Market wizards, Trade your Way to Financial Freedom, Trading in the Zone (M.Douglas), to name but a few....