CFD trading

Quote from MTE:

CFDs are ok until the firm you are trading with goes bust, then you can kiss your money good-bye!

And let's not forget that the firm you are trading with takes the other side of all of your trades and they control the pricing...hmm...on second thought, they are all honest so you got nothing to worry about.
More...

So much wrong info on this thread.

Not one broker has gone bust who offers CFDs in London, not one.

Only fools and amateurs trade CFDs where the firm makes the market. Therefore all non-idiots use DMA (Direct market access) where the dealing prices (and size) are 100% the same as cash.

So if you buy 1000 BT in the cash market it's exactly the same as using CFDs to trade the positon. Plus the CFD broker will buy 1000 BT shares so he's hedged.

Again, if CFDs were such a con as many of you peons try to make out why is 40% of all LSE turnover CFD based? And out of that I'd estimate a maximum 10% (of the 40%) is small retail business.

PS. If you haven't worked it out yet a DMA CFD is a swap - nothing more, nothing less.
 
Quote from AK100:

So much wrong info on this thread.

Not one broker has gone bust who offers CFDs in London, not one.

Only fools and amateurs trade CFDs where the firm makes the market. Therefore all non-idiots use DMA (Direct market access) where the dealing prices (and size) are 100% the same as cash.

So if you buy 1000 BT in the cash market it's exactly the same as using CFDs to trade the positon. Plus the CFD broker will buy 1000 BT shares so he's hedged.

Again, if CFDs were such a con as many of you peons try to make out why is 40% of all LSE turnover CFD based? And out of that I'd estimate a maximum 10% (of the 40%) is small retail business.

PS. If you haven't worked it out yet a DMA CFD is a swap - nothing more, nothing less.
More...

Well, until 2008 it was also unimaginable for a big investment bank to go bust, yet we all know how that ended.

The point is that CFDs like swaps are OTC instruments and if the sh*t hits the fan your money goes into the liquidation pool. On the other hand, if you trade exchange-traded products your money is protected.
 
CFDs have there place. For example if you have shares in listed company and for tax reasons or dividend reasons you want to continually hold a position, but you're worried about a fall in the market. You can use CFDs to accurately hedge your position. Going short against the box.

This way you can remain market neutral as long as you want. You lose a few points on the spread but at least your share position and any capital gain is protected. You can then claim the interest on the CFD position as a tax deduction. And some of the CFDs actually pay a small amount of interest as well.

You can't do this with futures as many stocks do not have a Single Stock Future. Put options lose value with time so if the market doesn't move you still lose.

Runningbear
 
Trade2live,

Any product offered at a wider spread to the market with the product provider pocketing the difference is by definition a bucket shop.

So IMO all CFD providers are Bucket shops. And I guess there happy to be bucket shops because they make buckets of money.

The secret is knowing how to use their products intelligently and where appropriate.

Commodity CFDs are only offered on commodities that have underlying futures contract. This is so the CFD provider can hedge any large position in order to remain market neutral.

Given that their is a commodity future for every commodity CFD, your better to use the real market in nearly every circumstance.

CFDs real and only value is in taking short positions in products that otherwise cannot be shorted any other way.
 
Quote from NumLock:

amazing how little people know isn't it

at CMC when I asked them are you guys a bucket shop

they couldn't even look me in the eye

I shit you not :eek: :eek:
More...

where are you located?
 
Most common benefits of CFD trading are
Liquidity
No expiry date
Leverage value
short Selling
less capital Requirement
From above benefits we can say it is good to invest in CFD trading.Other benefit is that it is a online investing way.
 
You must log in or register to reply here.
Back
Top