new to cfd need some help

[spreadrisk]

polar828

"If you keep your position days or weeks, costs for interest or even differences in spreads will not matter, if the underlying moves in your direction. Would you agree? "

Costs for interest is not a problem for me, to a certain extent.
If you buy £50,000 worth of Barclays shares on the real market then you incur an interest COST. It is the loss of Bank interest on that £50,000.
You are borrowing money at good interest rates when you go long CFD's.
If you hold a CFD for a long time and the position goes your way then you have made a good trade, if you end up in Profit.
I suspect that most people that try CFD's soon over extend themselves with the margin and have not worked out a trading plan, panic and make silly trades.

Why do so many newbies get taken by "Tight Spreads" if they are going to be long term holds?
People see what they want to see and don't reserch enough.
A CFD supplier who charges a straight forward commission and trades at the real market prices is the only way to go IMHO, all the other suppliers are cowboys and greedy and should be shown up as such.

Online message to me from a popular CFD supplier after I placed lots of small trades in a short time...
"You won that one, but we will not let you do that again."
You are sometimes trading thru a human being, not always a computer program.

 

[spreadrisk]

hhh

"Sorry if I'm being dumb but what is a market maker, and how would you avoid one? Is Barclays or ODL a Market maker, or what are they?"

No disrespect hhh but you are the classic punter for the CFD suppliers
(as I was 5 years ago!!!)

A Market Maker (MM) is just that, he Makes A Market In the Stock.
He provides liquidity, he is the middle man, he sets the prices.
His profit is the difference in the B/A spread.
He SHOULD be 100% hedged and have ZERO risk.
He is happy to live off the B/A spread.
When you Buy shares and there is a MM you are Buying off him, he will then either trade with someone else on the opposite side of the deal, or hedge away his risk with some other instrument.
MM's have been around as long as the stock market itself.

MM's in the CFD world are different to the Stock Market world.
CFD MM's know all your trades, know your profits, know your weakness. You open and close a CFD position with the same supplier. He knows if you are in profit or not, and he can set the price accordingly.
The Stock Market on the other hand does not have this information.

ODL trade at the Stock Market price, they profit from the commission charged to you (and also on interest and dividends etc,).
They use the Stock Market MM's, they are NOT MM's.
Other CFD suppliers ARE their own MM and play their own game.

The Stock Market is an open market, the CFD market is a closed market.

Hope all this is helping some.

 

[polar828]

spreadrisk

"A CFD supplier who charges a straight forward commission and trades at the real market prices is the only way to go IMHO, all the other suppliers are cowboys and greedy and should be shown up as such."

100% correct.


happyhappyhappy

One suggestion: before you start with CFD´s why not "train" with stocks only for a while?
No gearing, plain buy and sell 1:1 and analysing results carefully? How much winners, how much loosers, how much do your winners make, how much do your loosers costs you, etc....
Once you are confident enough about your trading plan, - and IMHO much more important in your risk management -, its still time to use CFD´s leverage.

just my 2 cents,
regards,
polar828

 

[spreadrisk]

hhh

polar828 is giving excellent advice, "One suggestion: before you start with CFD´s why not "train" with stocks only for a while? "

Don't tell me why CFD's are attractive to you, try explaining why to yourself !
What's your plan.
If like me 5 years ago, you will see big adverts that say 10% margin, tight spread, 100% profits....
oh it's SOOO easy, quick dive in before it goes

I lost big time (big time for me anyway), who do I blame?
ME of course.
Every Tom, Dick and Harry posting on message boards makes constant profits, I wanted some.
Only problem is that VERY few make money. They just stop posting, like I did.

I've been out the market for over a year, I will get back in, but on my terms this time. I may well use CFD's but probably not just CFD's.

IT'S NOT EASY !

 

[JohnD]

bbb,
I'm in a similar position to yourself - looking to use CFDs or spreadbets and learning and investigating at present. I also considered Barclays as a CFD provider, but the "small print" on their site makes it clear that their CFD offering is provided by City Index, and your contract would be with City Index - I phoned their support line about this. Apparently if City Index went belly up, Barclays would not provide any financial cushion - it would be down to the FSA compensation scheme - so I can't see why anyone would want to deal through an extra middle-man - if I found their offering attractive I think I'd go direct with City Index (unless anyone can think of a flaw in this argument).

 

[polar828]

spreadrisk

"polar828 is giving excellent advice, "One suggestion: before you start with CFD´s why not "train" with stocks only for a while? "

Don't tell me why CFD's are attractive to you, try explaining why to yourself !
What's your plan."

sorry, had no intention to offend you, btw it was meant only as suggestion for happyhappyhappy

My plan is rather simple:
Ratio Winners:Loosers was 60:40 during last year
the loosers lost 70K, the winners made 275k
S/L 2% from entry price
I start with 100k only every year, so I want to leverage. that´s all.

sorry again if I was offending anybody, just tried to convey some of my experience.
poar828

 

[spreadrisk]

polar

Abit of confusion here, my post was to hhh, and I was agreeing with you.
You have in no way offended me! We are talking along the same lines

My point was:
Before using CFD's one should think hard why they are a better instrument than another.

They have their good uses and should not be over looked.

Cheers

 

[happyhappyhappy]

Cheers polar828 and spreadrisk, you are both being very helpful and patient with me.

I should tell you I started trading in the stock market in 1992 and have got more and more into it ever since. I did not do too well for the first 3 to 5 years, I did average after that and over the last 3 years I have been much more active and doing pretty reasonable. I used to trade with Charles Schwab and then Barclays took over.

I understand fully when people do well in simulators and then go to pieces on real deals, and I have become very cold about deals I do without becoming reckless, it's almost Monopoly money now, only joking but I believe I have a good balanced attitude to my dealing.

Now I want to try and step it up a gear, I have done ok but CFD's give me a chance to do a lot better. I think I have my trading plan all sorted out. I am reading everything I can about them so I can know them backwards, but I don't want to be like the college boy who knows his subject from the book but is useless in the field so I ask and ask. I am hoping to learn the tricks and tips etc because I can see the CFD pitfalls. I am thinking of leaving my current stock funds alone so they are safe and entering the CFD's with about £5000 to see how I go. I think I will do ok but if I lose the £5000 (ouch) well I will learn that CFD's are a step too far for me.

Thanks JohnD, looks like Barclays are out of my equation. And ODL are becoming more attractive.

But this market master business; is there any way I can know, which are market masters and which are not?

Any other sugestions for which ones are good as well as ODL?

 

[221065]

Odl Require You To Have At Least One Years Experience Trading Cfds Before You Can Open An Account With Them

 

[happyhappyhappy]

Odl Require You To Have At Least One Years Experience Trading Cfds Before You Can Open An Account With Them

Well that is silly how can I get 1 year in, on CFD's before I join them. You are right though, their site says the FSA insistes you must have at least 1 years experience before you can open the account.

But if that is FSA rules

1. How can I ever open an CFD account as I will never be able to get 1 years experience "catch 22"

2. and why are Barclays offering it to me if all I have ever dealt in, is ordinary stocks and share dealing?

I don't understand, please someone help me.

 

[Mattybuoy]

I believe that experience with spread betting or other leveraged products might be considered equivalent by some providers.

How about starting out with Finspreads or Minicfds (same firm) to "train up"? They are possibly not the best provider (being a market maker, or bucket shop) but they do allow relatively small position sizes. So you lose less ...

 

[Mattybuoy]

One further point. Long-term investment with margin would be better done in a standard US stocks margin account. CFDs are really only suitable for short-term trading.

 

[Mattybuoy]

I just took another look at MiniCFDs http://www.minicfds.co.uk

It does seem ideal for a newbie:

1) No experience required.
2) 5 week training period ("Trading Academy").
3) Whilst in the Academy the minimum position size is 1 share ( = 1p per point).
4) Minimum deposit only GBP 100.

 

[happyhappyhappy]

Cheers Mattybuoy

Sorry but I am getting more confused, I looked at the site you suggest and at the moment I cannot see what the difference is between miniCFD's and ordinary CFD's. I'm sure I am being stupid here but they both trade on a margin, they both require financing etc, etc, so what is the difference.

And what is this training period, am I to believe that I have to go on a course now to trade CFD's and for 5 weeks? They don't seem that difficult to understand. I think they are complicated but not beyond many peoples understanding, what is hard is picking the right stocks and getting in and out at the right time.

And yet again someone is saying they are only really suitable for short term. Many CFD info web pages say this but why? I can see this would be right for many volatile stocks but I don't see why it should be short term if the stock keeps rising. Don't get exasperated with me. It is strange I feel I understand these CFD's quite well now, but things keep appearing that worry me that I do not, such as the fact I cant get into one without 1 years experience or a 5 week course. Going back to my previous question then, why are Barclays saying "in you come" to dealing CFD's with them, without any course etc? Is it because I have traded through them regularly for quite a while now or have I got it all wrong? Even if they do make their spreads a penny wider, I would hope for more than this in general and therefore am now thinking I should put up with this, saving myself from all the training / experience requirements of all the other trading companies.

All answers really appreciated now as I must be wearing you guys down with all my silly questions. Still I know a lot more than I did when I first posted if that helps.

 

[Mattybuoy]

MiniCFDs is just a trade name, which they have chosen presumably because they allow a lower minimum trade size than everybody else. That is also what the "training course" is about. A 5 week period where you can test the waters with small stakes. I believe they do offer some sort of online training thing but it's optional.

As for the short-term thing, well, if you can find a stock that goes up in a straight line at more than 7.5% a year then yes I suppose CFDs might be OK for investing in it. It would still be more expensive than holding the actual stock though. The opportunity cost for holding stock is likely to be in the 2-4% p.a. * region for us retail punters. Which is a lot less than 7-7.5% ...

* What you would get on your cash if it was not tied up in the shares.

As to why CFDs are "hard" to get in to, the main reason is that, as they all say on their websites: You can lose more than you start with. I will repeat that: You can lose more than you start with. Leverage at 10 x is not something be messed with!

I should know, I got into enough trouble with 2 x margin in the US back in 2000 ...

 

[happyhappyhappy]

Cheers Mattybuoy, with the example I give "VCT" , it went up nearly 200% in one year, so this I think would be good for the CFD wouldn't you say? Also if you put your stop in quite tight under your buy price surely, once you have gone up slightly, you will know roughly what you may lose if the stock suddenly turns? And therefore is it not just a case of putting in a sensible stop, obviously always watching out for the financing costs.

I realise holding the actual stock would be a cheaper but surely the whole thing about CFd's is the margin thing allowing you to trade big and make big profits if you do it right. I would not have enough money to do the deals the CFD's allow with the margin thing and so could not get access to the big possible profits without the CFd's.

 

[Mattybuoy]

OK well it seems you are determined to try this thing. All I can say is good luck.

 

[investmen_8848]

Hello Mattybuoy!

One thing to bear in mind about the financing charges for longer-term positions:

As your (long) position improves, the daily interest goes up. It is charged on the current value of the position, not the initial value.

The same applies to shorts, the daily interest credit decreases as the stock falls in price.

You're not just borrowing to finance the initial position. If the same thing applied to mortgages you would pay interest based on the value of your house, not the purchase price.

Sucketh? Yes, I think so ...

---------------------------------------------------------
Hello Mattybuoy! Nice to meet you in the internet world.I am from Shanghai,China.Now I am
doing CFD deals,our Supplier is BlueIndex.Though I enter into the China stock market nine
years ago,the British stock market is a new one to me.After a month experience,I find there are
great difference between British stock market and Chinese stock market.
In China realtime stock quote is free,every one can download the stock software from broker's
website,data is free. I have spent much time search for a free realtime quote software in UK web,but cannot find one.If you know anyone ,can you kindly recommend one to me.
A real time quote trial version is welcomed! I need the L2 level quote!
Thank you very much!

 

[techst]

Hello hhh

I saw this thread a few days ago, but thought i'd drop in. I currently use CFD's to trade and have been using CFD's for 3 years. I make living from trading CFD's and have done for a few years now. Some of the issues rasied will depend on your trading style. Issue's like CMC Deal4Free and their 're-quotes' probably won't effect your trading as it appears your looking more into holding positions for months rather than minutes. A re-quote can also occur when the underlying market changes and the CFD broker has to adjust it price when your looking to trade. So these situations are not all cloak and dagger.

"Cheers Mattybuoy, with the example I give "VCT" , it went up nearly 200% in one year, so this I think would be good for the CFD wouldn't you say?"

This would have been a good opportunity a year ago before they went up 200%. And it's only with the benefit of hindsight that you can now see how good a trade it would have been. Holding onto a stock is much harder than looking at VCT 's chart and assuming you would have bought 'there' and would still be holding now. Emotions come into play, making trades tougher than assuming you would of held for the full 200% profit.

For trading in a long term style i'd suggest reading Stan Weinstein's Profiting in Bull and Bear Markets. I thought this was great book about longer term trading. I swing trade (which can last a few weeks holding a position), but what I look to do is turn my swing trade into a position trade which will last for a few months, moving my stop up,taking half my profits. Trade management and money management are really important. From my experience I would avoid any day trading books or information. If you started really looking at this it would probably effect your long term trades, as you might be tempted into day trading or begin 'micro managing' your trades and end up falling in between trading styles and ending up in danger. Day trading should be left to the pro's, and it's just as intense as a playing sport at a professional level and that intensity is not physical but mental.

"Remember that using CFD's means you are taking a loan to trade long stock, you may be better off simply getting a bank loan and trading the real shares." ----- I not sure who offered this advice but it's not good. scared money never wins and do start with an amount you can afford to lose without affecting your everyday life. Don't be sold the dream that you can trade for a living, take it step by step mate.

Try that book, I'm sure you'll enjoy it and feel free to visit the Swing and Position Trading Thread it's about the UK Market. Good luck.

 

[anley]

HHH

My advice is stay away from CFDs because the brokers are likely to skim and scam you without you even knowing. Instead, open an account with Interactive Brokers and use just a touch of margin, say £1000 controls £1500 or £2000, that's plenty for most people.

Remember risk is far more important than reward in this game................