Position Sizing with CFDs and Futures

J

JD430

I'm hoping someone can give me a bit of help . . .

I'm trying to assemble a broad portfolio that is suitable for trading with a smaller account by replacing some of the futures that aren't available as mini/micro contracts with CFDs. However, I can't get my head around how CFDs are priced, or how to size a position in them.

This will be easier to explain with a simple example.

Let's say that I'm looking to short Sugar, the CFD for which is trading at 10.20. I want to set a stop at 11.07, so at a distance of 0.87. And I want to risk an amount of $200.

So what is my position size in the CFD? The platform tells me the following info:

Minimum Trade Size: 5,000
Contract Size: 1
Tick Size: 0.01
Units: Pounds

How do I calculate my position size from this information?

To do this with a futures contract I would multiply the stop distance by the point value, and I would then divide the amount that I want to risk by this figure to arrive at the position size as a number of contracts to trade.

But with the CFD I am unclear of what the value of a point actually is? I'm unclear what the value of a tick is as well.

Thanks in advance for anyone who can help . . .
 
Hey.

This is what i see :

To go short.
Sugar.
Futures.
With CFD.
And leverage.
Low vol.
(Btw, do you really want to go short - now ?)

And those bucket shops, sometimes, can't get decent fills even at market price. The spread for example on eToro was 5%(that's theirs ,,zero commissions''), while there was bid/ask on IB.
(sorry, if you're on IB already, they allow trading CFDs in UK while in US it's baned)

So, your amount is $200, minimum is - $5000 per position (what hell, but whatever..), then your leverage is 1:25.

Damn, i wouldn't take 1 to 3.
Actually, i wouldn't take none at all.


JD, you must understand, if you're quite new, all of that above, puts you in disadvantage, once it comes to simple overall odds of your success.

There is conflict of interest, when it comes to CFDs, between the broker and the client.
(just google it)

Forget those 6 above, for the time to come, or until you become really good at this.
You don't need extreme leverage, nor any of those to make $ (or pounds in UK), the only thing you need is opportunities, and the more research you do, the more often you can find them.

Best of luck.



P.s,
better options ?

Lurk around, learn new stuff, follow some experienced members, - from time to time, they might share a tip or two on a good buy, e.g :
https://www.elitetrader.com/et/threads/my-new-favorite-stock-for-granny.342155/

And avoid idiots in stock-tweets and wall street bets. Gambling and nothing more.
 
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Thanks for your reply.

I'm not new. I'm 11 years in, but I've always traded futures. I'm new to CFDs, and the pricing of them just doesn't seem to make much sense to me.

I know about the counter-party risks, but as I'm working with a long term model a few extra dollars of slippage isn't a big issue.

And I don't want to go short sugar (or long sugar) right now - I've just used it as an example.

I don't believe that the 5,000 minimum is $5,000. I believe it's 5000 pounds weight of sugar (as opposed to the 112,000 pounds of the ICE contract, say).

Nobert said:
(Btw, do you really want to go short - now ?)
More...
 
There is Not necessarily conflict between broker and trader when it comes to cfds, this is just for crappy companies.

Try icmarkets, or jfd brokers, fxpro, alpari, pepperstone, etc
All good companies
and use mt5 instead of mt4

They won't cheat at you, because positive reference is what they need.

Check forexpeacearmy.com

A cfds is just a leveraged product;
Instead of using your whole equity, you can use a minimum to hold a very big position.
 
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Fx-Game said:
There is Not necessarily conflict between broker and trader when it comes to cfds, this is just for crappy companies.

Try icmarkets, or jfd brokers, fxpro, alpari, pepperstone, etc
All good companies
and use mt5 instead of mt4
More...

Thanks. I'm not really too worried about this - the counter party isn't a concern - and I'm only looking to replace a handful of the larger futures contracts in a portfolio with CFDs.

My question is how a given CFD is priced. If you think about the ES, I know that a 1 point move is worth $50 per contract. But what is a 1 point move in 1 contract of the Sugar CFD example above worth?
 
Please check admiral markets, they explain a lot of things about cfds
JD430 said:
I'm hoping someone can give me a bit of help . . .

I'm trying to assemble a broad portfolio that is suitable for trading with a smaller account by replacing some of the futures that aren't available as mini/micro contracts with CFDs. However, I can't get my head around how CFDs are priced, or how to size a position in them.

This will be easier to explain with a simple example.

Let's say that I'm looking to short Sugar, the CFD for which is trading at 10.20. I want to set a stop at 11.07, so at a distance of 0.87. And I want to risk an amount of $200.

So what is my position size in the CFD? The platform tells me the following info:

Minimum Trade Size: 5,000
Contract Size: 1
Tick Size: 0.01
Units: Pounds

How do I calculate my position size from this information?

To do this with a futures contract I would multiply the stop distance by the point value, and I would then divide the amount that I want to risk by this figure to arrive at the position size as a number of contracts to trade.

But with the CFD I am unclear of what the value of a point actually is? I'm unclear what the value of a tick is as well.

Thanks in advance for anyone who can help . . .
More...
JD430 said:
Thanks. I'm not really too worried about this - the counter party isn't a concern - and I'm only looking to replace a handful of the larger futures contracts in a portfolio with CFDs.

My question is how a given CFD is priced. If you think about the ES, I know that a 1 point move is worth $50 per contract. But what is a 1 point move in 1 contract of the Sugar CFD example above worth?
More...
 
Thanks to everyone for their advice about brokers, leverage etc, but this isn't what I'm asking.

If the Sugar CFD in my opening post goes from 10 to 11 and I have one contract, how much have I made/lost?

Someone must know this . . .
 
Easy.

Example Dow Jones Index CFD.

You buy one whole lot (1).

If DJ moves 1 point, you make 1$.

That's it.

How much you have to pay into your account, depends on the brokers margin requirements.
 
Fx-Game said:
Easy.

Example Dow Jones Index CFD.

You buy one whole lot (1).

If DJ moves 1 point, you make 1$.

That's it.

How much you have to pay into your account, depends on the brokers margin requirements.
More...

Thanks. But that can't be correct.

Consider the Sugar example above again . . . The minimum trade size is a 5000 lot. So when price moves one point from 10 to 11 then on your logic I would make $5000 (5000*1=5000).

But I don't - I only make $50.

Looking at crude as another example, your logic does hold. The minimum trade size is 25 lot. Price moves from 21 to 24 and I make $75 (25*3=75).

So what's going on here - why are they priced differently and what is the formula to work out the pricing?
 
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