What is CFD Trading?

Peter10 said:
If you have enough equity to trade on an exchange, then forget CFD. Most time, your broker is trading against you, most broker don't hedge and they believe the high leverage CFD offers will help you blow up your account.
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That's the general consensus I gathered after doing some reading on CFD trading. Thanks for confirming it.
 
Pekelo said:
Most CFD brokers are bucket shops, with even higher leverage than futures. There is no way they can hedge a 15 bucks (or whatever) margin per ES contract.

But if you can make money, and they send the profits back to your bank, do you really care?
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Very good point. Thanks. Indeed, I came across a prop/bucket shop that is offering CFD trading in NASDAQ and NYSE. The way they are promoting their business definitely seems like they are trying to take in deposits from beginner traders. They even let traders lose more than they deposit, which makes me realize that it is just demo trading disguised as CFD trading. In which all deposits made by losing traders is 100% profit for the prop/bucket shop owner. Since only a handful of the traders are profitable, this business model works for them because only a few of their traders will be requesting payouts. Payouts which in essence have come from trading results on a demo account titled a CFD account.
 
CFD trading is legal and highly regulated in the UK, as is its variation, spreadbetting. Both have low deposit requirements, very small minimum position sizes, SB has no tax implications. In terms of TA/FA, neither is any different from each other or from trading using any type of forex broker. Markets offered include large/medium cap stocks, indices, commodities, forex, bonds, /ETF's & sometimes "specials" like interest rates.

Winning clients are a very low percentage, as these platforms are available to the least capitalised, least prepared newbie, so its more a reflection of the low standards of the clients than any inherent difficulties in CFD or SB trading.

If they're accessible to you as a client at all, they're probably best used as a beginner's introduction to trading.
 
I have not traded CFD's, but it seems like an advantage could be there. What are the expiration and exercise agreements to CFD's? How does this compare to single stock futures?
 
Bryantrades,

Look into trading the HSI or HHI futures (Hong Kong market, both have mini contract versions too) in the US PM timeframe (the Asian next morning session). Both trade with high correlation to each other. They consistently trend each day better than just about anything else in the world (yes, better than the Dax). US traders face no currency risk with HKD as their dollar is pegged to the USD. Contract liquidity is no problem

Also, on the Singapore Exchange, the Xina50 (IB's symbol), moves very well, albeit in $1 USD increments, but you can easily have 150-200 pt runs and the contract is thick so holding 5-10 contracts starts adding up.

All 3 above trade from 9:15 to 12 AM EST and you'll notice that the after-hours NQ e-mini futures tends to move in their overall direction during that session.

1 HSI contract can generate from $5,000 to $15,000 USD in cummulative trend distance measurements in its morning session with a tick value of $6.37 USD.

Most American traders who have full-time jobs have no idea that such an animal is available for trading at an excellent time where they can focus 100%.
 
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From my limited studies, CFDs seem to simply be future contracts with no expiry date. That is my ultimate dream. Unfortunately because CFDs are not available to US peeps, I have no idea what they really are on about. I mean, if I had enough cash in my account to cover the overnight margin on a NQ CFD from last year, on ONE contract, I'd be well off. On 2-3 contracts, I'd be rich. *shrugs* There MUST be a very good reason why they are banned in the US, so I have to stick with futures, expiry dates and rolling.
 
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