Would like some guidance regarding CFDs

[zwoop]

I have been reading about trading now for 6month and then i finally came across CFDs, and i have to start all over 🙂 This seems like the perfect instrument for non US short therm traders since it is so hard and expensive to go short in Sweden where im planing on start trading. I would just like to know some basic stuff about CFDs before i order my first books. What im palning on doing is swing trading manly OMX stocks.

My question now is how suitable is short term investments in CFDs or should i by directly the underlying instrument (need CFDs to go short)

And my biggest question is who is loosing money??? If I open a 1000 000$ account at IGmarkets and starts trading there and constantly makes money year in and year out will they let my continue? Is it not igmarkets that loose money when i win just like with spread betting????

 

[ns1000]

I have been reading about trading now for 6month and then i finally came across CFDs, and i have to start all over 🙂 This seems like the perfect instrument for non US short therm traders since it is so hard and expensive to go short in Sweden where im planing on start trading. I would just like to know some basic stuff about CFDs before i order my first books. What im palning on doing is swing trading manly OMX stocks.

My question now is how suitable is short term investments in CFDs or should i by directly the underlying instrument (need CFDs to go short)

And my biggest question is who is loosing money??? If I open a 1000 000$ account at IGmarkets and starts trading there and constantly makes money year in and year out will they let my continue? Is it not igmarkets that loose money when i win just like with spread betting????

Go DMA - if you're trading CFDs direct access it means that you're trading in the market, not with the broker's books, so they don't make money if you lose.

I'd go for CFDs for short term trading, rather than the underlying - com is generally lower, and if you're not holding positions, the funding won't hurt.

 

[zwoop]

Go DMA - if you're trading CFDs direct access it means that you're trading in the market, not with the broker's books, so they don't make money if you lose.

I'd go for CFDs for short term trading, rather than the underlying - com is generally lower, and if you're not holding positions, the funding won't hurt.

But what i dont get is why anyone would NOT go for DMA, it is pure madness to go with the broker's books???

So is the liquidity identical with the underlying contract of my CFDs???

And if you have do will could you explain how there can not be a broker's books with CFDs, what i have understood someone has to make the CFDs and be the seller?

Thanks for all the help!

 

[ns1000]

But what i dont get is why anyone would NOT go for DMA, it is pure madness to go with the broker's books???

So is the liquidity identical with the underlying contract of my CFDs???

And if you have do will could you explain how there can not be a broker's books with CFDs, what i have understood someone has to make the CFDs and be the seller?

Thanks for all the help!

Not necessarily madness to trade on the broker's books -

i) They may offer more liquidity than the market, or may be able to match off orders with other clients
ii) If they have signed up to best execution under MiFID they have to offer you the same price as the market. Need to read their execution policy to be sure

With DMA you're trading directly into the exchange's order book, so the liquidity is identical to the 'real' market (it's the same shares you're trading). The broker isn't taking the opsition on - bascially you're doing his hedge for him. You click and buy real shares in his name, he gives you a CFD in the same size and same stock.

Some of the brokers will try to convince you their product is DMA when it's not. 'Direct access to market prices' is not the same Direct Market Access to market any more than Farm fresh chicken is free range.

 

[zwoop]

Not necessarily madness to trade on the broker's books -

i) They may offer more liquidity than the market, or may be able to match off orders with other clients
ii) If they have signed up to best execution under MiFID they have to offer you the same price as the market. Need to read their execution policy to be sure

With DMA you're trading directly into the exchange's order book, so the liquidity is identical to the 'real' market (it's the same shares you're trading). The broker isn't taking the opsition on - bascially you're doing his hedge for him. You click and buy real shares in his name, he gives you a CFD in the same size and same stock.

Some of the brokers will try to convince you their product is DMA when it's not. 'Direct access to market prices' is not the same Direct Market Access to market any more than Farm fresh chicken is free range.

Thanks now i have some guidance, now it is time for the books 🙂