Do CFD providers lose money when customers make money? Any problem if you're profitable?

[engineering]

Off topic but, why on earth get involved in CFD and all the various associated risks when you can just own the actual stock?

If I own shares in IBM, I lose my money if IBM fails. If you hold a CFD, you lose money from the failure of either of two companies. One of which might be exposed in the way that Credit Suisse was to Archegos.

Is it simply not being willing to wait for settlement on a regular stock trade?

 

[JamesJ]

Off topic but, why on earth get involved in CFD and all the various associated risks when you can just own the actual stock?

If I own shares in IBM, I lose my money if IBM fails. If you hold a CFD, you lose money from the failure of either of two companies. One of which might be exposed in the way that Credit Suisse was to Archegos.

Is it simply not being willing to wait for settlement on a regular stock trade?

That, and additionaly they tend to charge outrageous margin rates

 

[wmwmw]

Off topic but, why on earth get involved in CFD and all the various associated risks when you can just own the actual stock?

If I own shares in IBM, I lose my money if IBM fails. If you hold a CFD, you lose money from the failure of either of two companies. One of which might be exposed in the way that Credit Suisse was to Archegos.

Is it simply not being willing to wait for settlement on a regular stock trade?

Because you are not experienced enough.
When a trader has long experiences he would switch to futures or CFD trading later, for many advantages over stocks.

 

[JamesJ]

Because you are not experienced enough.
When a trader has long experiences he would switch to futures or CFD trading later, for many advantages over stocks.

Give me one advantage of CFDs over futures and stocks with DMA?
I'm curious...

 

[Pekelo]

If profitable

In theory I agree. But how do they know I don't have a sudden change and become profitable? Or after hundreds of scalp trades I stay in the position for days and make it back with one trade when a few ticks here or there doesn't matter?

 

[wmwmw]

jj

Give me one advantage of CFDs over futures and stocks with DMA?
I'm curious...

My previous post was to compare CFD and futures with stocks.
If you are comparing CFD with futures, then I would say each has its own advantage.
CFD has much higher leverage. If you want to hold position overnight,and maximize your profit, then futures maintenance margin is barely enough for one instrument. You absolutely do not have enough margin to hold two different instruments overnight. But in CDF you can hold 10 instruments.
Also, CFD price movement is more stable.
For example, I daytrade gold in both CFD and futures accounts.
Most time their quote are identical.
But sometimes their quotes are a little different. Sometimes CFD quote makes a new high but futures quote is not, or vice verse. So I have a buy signal on one but not a signal on another. On all these events, CFD signals are proved to be almost always the more favorable to me.That means if I trade based on CFD signals, I would achieve a little better
result.
On the other hand, futures trading cost is lower.

 

[Ivano]

Happy new year.
Sorry but should be implied that there are different brokers and what about regularization, I do not think you get a Commodity Futures Trading Commission?
Then what about the CFD overnight fee, I have never listened one professional trader interview where CFD are mentioned, even not for hedging purposes

 

[wmwmw]

Happy new year.
Sorry but should be implied that there are different brokers and what about regularization, I do not think you get a Commodity Futures Trading Commission?
Then what about the CFD overnight fee, I have never listened one professional trader interview where CFD are mentioned, even not for hedging purposes

1. Trading condition on regulated brokers are always worse than unregulated brokers.Regulated brokers have low leverage and much higher trading cost.
2. CFD overnight fee are posted in your account under" specification". It is called "swap"
They are different for different instruments and different brokers .
My broker has high swap on SPX500 but low swap on natural gas.The difference is more than 10 times.So I usually hold overnight position on natural gas.

 

[Snuskpelle]

Off topic but, why on earth get involved in CFD and all the various associated risks when you can just own the actual stock?

If I own shares in IBM, I lose my money if IBM fails. If you hold a CFD, you lose money from the failure of either of two companies. One of which might be exposed in the way that Credit Suisse was to Archegos.

Is it simply not being willing to wait for settlement on a regular stock trade?

From a retail perspective: I think some of the platforms are simply "easier" for beginners in terms of being able to access CFDs on a diverse range of financial instruments in a decent web interface. Taking IG as example: You can do stocks, futures, crypto, etc. They support simple guaranteed stops which means you don't need to worry about your 20x leveraged Nasdaq position suddenly gapping into negative account equity because Powell said something. Of course, pros would use options for that.

However, due to the a) high costs (e.g. $30 US stock commissions...), b) the tendency for people to overdose on leverage (e.g. 4x for overnight equities) means most have negative net expectancy. To be fair, it's really a question of how frequently one trades. For someone holding positions for a few months these kinds of costs don't matter too much, although the margin rates do. So in my estimation, someone who wants to be profitable, have done their homework, and trades accordingly can be so on this CFD platform. But it's not too likely for a beginner.

As for the concern of the CFD provider going bankrupt, it's a legit one but how big a deal it is basically depends on where you are in your career. It's a disaster to someone who's 60. Someone who's 25 will just shrug it off if it does happen.

 

[kroxobor]

Is it true that CFD providers make money when their customers lose money? If this is indeed true, do you encounter problems when you are a highly profitable customer?

In Reminiscences of the Stock Operator, the bucket shops hated Jesse Livermore and resorted to all sorts of tricks to kick his business away. CFD providers seems like the modern-day bucket shop.

Any profitable elite trader here can share whether you encountered problems with CFD providers when you become consistently profitable?

In CFD trading you trade with a dealer which is a counterparty to your orders so yes their win is your loss and vice versa.