Contracts for Difference
- Thread starter hcubed
- Start date
I've been trading CFDs with Blue Index for about 6 months. check them out www.blueindex.co.uk
I've actually got 2 accounts there. 1 on 10x leverage (10% margin requirement) and 1 on 20x leverage (5% margin). You can get demo platforms for each before opening.
I did loads of research into CFD providers in the UK before opening an account. The main thing which swung it for me is their 'team-like' approach to the markets. Because they don't take the other side of your trades, they're allowed to advise and help clients on trading and have this guy: www.zaks-ta.com heading up their research department. It's never all one way traffic, but I've had more winners than losers, which surely is the test of a good broker!
It's a tidy operation. Have a look at the website, that Zak guy & several of the traders have had spots on CNBC or Bloomberg Television. I've had my trader on TV pumping my open positions! Nice hey?!
I started in CFDs as my stock portfolio wasn't doing so well. I wanted to short a few positions rather than realising any losses. I soon got the bug though - trading on my screens and with my personal trader over the phone had me selling my shares so I had more liquidity for CFDs!
Clearly there is an exaggerated downside risk with margin trading. That's almost rule number one. But if you're strict with your stop losses, there's great money on the right side of the market. The hardest lesson I found was changing from an investor to a trader. Running profits and cutting losses was the exact opposite of my previous approach to the markets!
But with the flexibility of approach and the diversity of markets and products I get with my account, I can't recommend CFD trading highly enough. Almost global shares, indicies, commodities & currencies - you can get exposure to almost anything, and Blue Index has advice on it all!
If you want to know anything about my experiences, I'm happy to share. Drop me a line, sell your shares and get involved!!
Spud54
I've actually got 2 accounts there. 1 on 10x leverage (10% margin requirement) and 1 on 20x leverage (5% margin). You can get demo platforms for each before opening.
I did loads of research into CFD providers in the UK before opening an account. The main thing which swung it for me is their 'team-like' approach to the markets. Because they don't take the other side of your trades, they're allowed to advise and help clients on trading and have this guy: www.zaks-ta.com heading up their research department. It's never all one way traffic, but I've had more winners than losers, which surely is the test of a good broker!
It's a tidy operation. Have a look at the website, that Zak guy & several of the traders have had spots on CNBC or Bloomberg Television. I've had my trader on TV pumping my open positions! Nice hey?!
I started in CFDs as my stock portfolio wasn't doing so well. I wanted to short a few positions rather than realising any losses. I soon got the bug though - trading on my screens and with my personal trader over the phone had me selling my shares so I had more liquidity for CFDs!
Clearly there is an exaggerated downside risk with margin trading. That's almost rule number one. But if you're strict with your stop losses, there's great money on the right side of the market. The hardest lesson I found was changing from an investor to a trader. Running profits and cutting losses was the exact opposite of my previous approach to the markets!
But with the flexibility of approach and the diversity of markets and products I get with my account, I can't recommend CFD trading highly enough. Almost global shares, indicies, commodities & currencies - you can get exposure to almost anything, and Blue Index has advice on it all!
If you want to know anything about my experiences, I'm happy to share. Drop me a line, sell your shares and get involved!!
Spud54
its not as great as it seems. you pay up to get in and to get out, the spreads are substantial, i asked some years back and to buy 1000 msft the commission they would receive ie the spread you pay was $250. You cant win that way. Most lose there, it is probably for people with money to wash. Of course the brokers make it seem easy.
I'm not sure if that reference is to CFDs or to the underlying stock? 
'Normal' broker?
The CFDs I trade have 'market' spreads, which are based on the SETS level 2 order book. No stockbroker can offer different prices. There are some less scrupulous market makers out there who provide their own level 2, but be warned about these 'in house' provisions.
Whilst there is commission in and out of a position, there is no 0.5% stamp duty as it's a synthetic contract. Anyway, if you're an active trader, there's always scope to negotiate commissions down.
'Normal' broker?The CFDs I trade have 'market' spreads, which are based on the SETS level 2 order book. No stockbroker can offer different prices. There are some less scrupulous market makers out there who provide their own level 2, but be warned about these 'in house' provisions.
Whilst there is commission in and out of a position, there is no 0.5% stamp duty as it's a synthetic contract. Anyway, if you're an active trader, there's always scope to negotiate commissions down.
CFDs are a great con for the providers.
Most CFD traders don't realise just how expensive they are to trade. They are like no other leveraged product in that they offer leverage but force you to pay comms on the full nominal amount.
Do the sums yourself and you'll be shocked. Trade once a week at 10:1 and I think you've got to make about 100% of your account balance just to break even.
Don't get fooled by the marketing and the leverage offered. Don't work for your broker, work for yourself...............
Most CFD traders don't realise just how expensive they are to trade. They are like no other leveraged product in that they offer leverage but force you to pay comms on the full nominal amount.
Do the sums yourself and you'll be shocked. Trade once a week at 10:1 and I think you've got to make about 100% of your account balance just to break even.
Don't get fooled by the marketing and the leverage offered. Don't work for your broker, work for yourself...............
I agree to an extent with AK100, but also, to an extent, I don't.
It would be a shady provider that isn't upfront about costs, and a mug trader to not know what s/he's getting involved with.
Clearly there's nothing free in the market, but where leverage is offered cheaper elsewhere, it's generally not as good. Futures have higher margin requirements and expire. Options & warrants suffer from time/value issues. Instead, a CFD is a rolling spot forward, so it affords you the opportunity to hold a losing position until it turns a profit (if that's your style).
For example of 'the sums', let me take you through my latest active trade, with costs and you can judge for yourself:
I had about £1,500 spare capital in my trading account. Tesco's was my broker's recommendation, so I went long for about £1000.
On 20x leverage, £20,000 market exposure rounded to 6,500 CFDs at 3.15 - margin requirement of £1,023.75
My entry commission was £102.38 (0.5% of £20,475 - the full underlying exposure)
We target a 3% move which, for the sake of simplicity, will be taken as 10p in the underlying stock.
10p X 6500 CFDs = £650 gross profit
Exit commission would be £105.63 (0.5% of £21,125)
£650 - £102.38 - £105.63 = £441.99 profit
44.2% return on my £1000 investment.
For the sake of the debate, I should make you aware I am charged 0.5% for the advisory service. Tesco's was not a stock I'd researched, my broker brought this to my attention, and that's what I'll happy to pay for. If, however, you take AK100's advice and 'work for yourself', cut the commissions in half. Doing that would take your return to 54.6% on your £1000
By all means take issue with your broker's fees and negotiate them down if you can, but I implore you not to take issue with the products. What other investment tools afford you such profitability for such minimal outlay??
It would be a shady provider that isn't upfront about costs, and a mug trader to not know what s/he's getting involved with.
Clearly there's nothing free in the market, but where leverage is offered cheaper elsewhere, it's generally not as good. Futures have higher margin requirements and expire. Options & warrants suffer from time/value issues. Instead, a CFD is a rolling spot forward, so it affords you the opportunity to hold a losing position until it turns a profit (if that's your style).
For example of 'the sums', let me take you through my latest active trade, with costs and you can judge for yourself:
I had about £1,500 spare capital in my trading account. Tesco's was my broker's recommendation, so I went long for about £1000.
On 20x leverage, £20,000 market exposure rounded to 6,500 CFDs at 3.15 - margin requirement of £1,023.75
My entry commission was £102.38 (0.5% of £20,475 - the full underlying exposure)
We target a 3% move which, for the sake of simplicity, will be taken as 10p in the underlying stock.
10p X 6500 CFDs = £650 gross profit
Exit commission would be £105.63 (0.5% of £21,125)
£650 - £102.38 - £105.63 = £441.99 profit
44.2% return on my £1000 investment.
For the sake of the debate, I should make you aware I am charged 0.5% for the advisory service. Tesco's was not a stock I'd researched, my broker brought this to my attention, and that's what I'll happy to pay for. If, however, you take AK100's advice and 'work for yourself', cut the commissions in half. Doing that would take your return to 54.6% on your £1000
By all means take issue with your broker's fees and negotiate them down if you can, but I implore you not to take issue with the products. What other investment tools afford you such profitability for such minimal outlay??
Spud
Sure you made a 44% profit but you should focus more on the 'cost of doing business' because this in my opinion is the number one reason why most don't make it in this game, they all think it's about trading P&L.
You paid a total of £208.01 comms on your spare £1500, wowzers that's 13.86% in costs just to pick up the phone!
I'm not having ago at you by the way but you ARE working for your broker not the other way around.
Let's look at this topic a little more detail:
A client has a £20k account
He short term trades the market, trades lasting 1-3 days
He ONLY use 4-5:1 leverage (£1k cash controls £4k-£5 in stock)
Average bargain size is therefore £90k
Round turn comms are 0.25%
Comms will be an average of £450 or 2.25% of the account balance per trade!
If he trades just once a week your yearly comms bill will be in excess of £23k!
But cut the leverage in half and only trade once every 2 weeks. You'll still be paying over 30% of your account balance in costs.
Spud, I agree that brokers will give you the facts and costs involved but I very much doubt they'll break it down like I have. Also I was a broker doing many cfds on behalf of clients and you wouldn't believe the amount that called me after a while saying something like 'I'm making money in the market, why is my account not showing it, can we please go through it because I think there must be some mistakes'.
No mistake Mr Client, it's just you got suckered into the marketing and the leverage etc.
You should realise that CFDs on the whole weren't developed for people like you to make money, they were developed by brokers and other interested parties to skim and cream money of the 75% of people who never bothered to investigate them for the catch/con....
Spud, do yourself a favour and get rid of the 0.5% bro, negoiate this down to a MAXIMUM of 0.25% (the broker should still accept this because it's free and easy money to him). If he doesn't then get an actual name from another broker and say that Simon Smith is calling me all the time from ABC brokers and is offereing me advisory with 0.25% and I've got a friend who backs up that his advice has been HOT over the last 6 months.
Sure you made a 44% profit but you should focus more on the 'cost of doing business' because this in my opinion is the number one reason why most don't make it in this game, they all think it's about trading P&L.
You paid a total of £208.01 comms on your spare £1500, wowzers that's 13.86% in costs just to pick up the phone!
I'm not having ago at you by the way but you ARE working for your broker not the other way around.
Let's look at this topic a little more detail:
A client has a £20k account
He short term trades the market, trades lasting 1-3 days
He ONLY use 4-5:1 leverage (£1k cash controls £4k-£5 in stock)
Average bargain size is therefore £90k
Round turn comms are 0.25%
Comms will be an average of £450 or 2.25% of the account balance per trade!
If he trades just once a week your yearly comms bill will be in excess of £23k!
But cut the leverage in half and only trade once every 2 weeks. You'll still be paying over 30% of your account balance in costs.
Spud, I agree that brokers will give you the facts and costs involved but I very much doubt they'll break it down like I have. Also I was a broker doing many cfds on behalf of clients and you wouldn't believe the amount that called me after a while saying something like 'I'm making money in the market, why is my account not showing it, can we please go through it because I think there must be some mistakes'.
No mistake Mr Client, it's just you got suckered into the marketing and the leverage etc.
You should realise that CFDs on the whole weren't developed for people like you to make money, they were developed by brokers and other interested parties to skim and cream money of the 75% of people who never bothered to investigate them for the catch/con....
Spud, do yourself a favour and get rid of the 0.5% bro, negoiate this down to a MAXIMUM of 0.25% (the broker should still accept this because it's free and easy money to him). If he doesn't then get an actual name from another broker and say that Simon Smith is calling me all the time from ABC brokers and is offereing me advisory with 0.25% and I've got a friend who backs up that his advice has been HOT over the last 6 months.