is there an actual market for CFDs or are CFD firms just bucket shops?

[tomorton]

What do they do with a very profitable trader? Can they kick him out like a casino? Or do they just suck it up because the rest will lose with them? If you swing trading the spread isn't a problem specially with this volatility...

No, I've never heard of a profitable long-term trader being stopped from spreadbetting. Of course, the profitable trader pays spreads and over-night charges on increasingly larger positions, so they're a profitable revenue stream for the firm and they certainly haven't been forced to migrate to a competitor.

The only profitable spreadbetters I've ever heard of being barred are those suspected of short-term arbitraging. But that's not because they're profitable as such, its because they make it hard for the firm to manage their risk exposure in real time. I suppose you could say they're akin to card counters in a casino.

 

[MichalTr]

What do they do with a very profitable trader? Can they kick him out like a casino? Or do they just suck it up because the rest will lose with them? If you swing trading the spread isn't a problem specially with this volatility...

Depends. If you go with some gray broker it's is possible (frienf of mine had this situation few times) or they can use "gray" methods to discourage you from trading. If you go with reliable one it won't happen. Then they will just hedge your position. They bet against weak traders and took their money (majority) and hedge the rest. But I don't see any sense in trading CFDs if you calculate spread as execution cost and compare it to underlying products it doesn't make sense. Ok it can have sense in several markets, but you will find other issue - chart data. A little longer topic - you can simply compare the chart on futures and CFDs for the same product. You'll see what's going on.

 

[Pekelo]

But I don't see any sense in trading CFDs if you calculate spread as execution cost and compare it to underlying products it doesn't make sense.

I do:

1. Trying out new strategies cheaply in a very realistic environment.
2. Leverage. I mean LEVERAGE.
3. Cheap start for small account owner. Where else can you open an account with $100?
4. Spread isn't a problem as long as you don't scalp.
5. No chart and exchange fees.

 

[MichalTr]

"1. Trying out new strategies cheaply in a very realistic environment." - Part true part not - there is this problem with charta data. You know that this data dosen't look like normal e.g. futures data ? And how they calculate value of CFD ?
2. Trading intraday futures I also have very good leverage. But if you think about bit longer term trading than it's true. But I still will prefere options in this case (not only because of the nightly maintenance costs of CFD). And you need to remeber that leverage comes with risk in this case (if you don't spread it or anything like that)
3. Agree with that. That's very good point.
4. Part true part not - if you don't make high volume then ok - you don't loose to much. But it is problem not only for scalpers - for spreaders also. And I have noticed that in shorter time trading (not scalping) it can affect your psycho a bit.
5. Execution data feed for non-pro is not so expensive. You can get it free with some brokers. You can use your data feed to power up charts (it's not super accurate but still better than CFD data and you can see bid offer / level 2 data). So it depends what type of trader you are. I know trader, who is very profitable and use Forex/CFD broker, he don't use bid ask data or real tick data.

 

[Pekelo]

"1. Trying out new strategies cheaply in a very realistic environment." - Part true part not - there is this problem with charta data. You know that this data dosen't look like normal e.g. futures data ?

Not going to debate it, but if your strategy works with a CFD, chances are it will work even better with a futures broker.

Again, where can you start to trade real money for $100 out of the box? People trying TST should just open a CFD account.

 

[MichalTr]

"Not going to debate it, but if your strategy works with a CFD, chances are it will work even better with a futures broker." No it won't - if your strategy is based on chart. You are looking at different charts. You didn't answer my question - do you know the difference between this charts ? And how CFD are calculating ?

"Again, where can you start to trade real money for $100 out of the box?" - I wouldn't call starting with 100$ trading real money

"People trying TST should just open a CFD account." - ok, I start to think that you are some kind of troll. These are two completely different topics

 

[Xela]

No, I've never heard of a profitable long-term trader being stopped from spreadbetting.

IG Index, in London, used to do this fairly regularly, Tom. They used to send out very polite letters saying, basically, "Sorry but you're just too good for us and it isn't in our shareholders' interest to accommodate such accounts indefinitely". In other words, they were totally open and honest about why they were doing it. (I'm talking about 4-5 years ago: I have no more recent information than that).

 

[southall]

IG Index, in London, used to do this fairly regularly, Tom. They used to send out very polite letters saying, basically, "Sorry but you're just too good for us and it isn't in our shareholders' interest to accommodate such accounts indefinitely". In other words, they were totally open and honest about why they were doing it. (I'm talking about 4-5 years ago: I have no more recent information than that).

I doubt they do it often as otherwise there would be examples of that letter posted on the internet by disgruntled ex clients.
Its not like IG make you sign an NDA or anything.

 

[Xela]

I doubt they do it often as otherwise there would be examples of that letter posted on the internet by disgruntled ex clients.

That's exactly what happened: it's actually from having seen so many of those, online, that I know about it. (Countless UK bookies, of course, do exactly the same: evidently there's no "shame" in it, for them.)

 

[southall]

Well i made lots of money, well into the six figures, with IG with unhedgable binaries, they never asked me to go away or close my account. They restricted my size and then widened the spread on binaries till it wasnt worth my while anymore.

They could easily do that to a profitable long term trader. Don't have to turn them away.