CFDs

StrangeWizard
StrangeWizard

I've been reading up on CFD and to me it seems they could make you a millionaire overnight or live in poverty for the rest of your life, because of the incredible leverages. Am I at least going somewhat in the right direction of understanding CFDs?

MPmaster
MPmaster

@StrangeWizard
no

girlDog
girlDog

@MPmaster
Thank you for elaborating, appreciate your comment a lot.

SomethingNew
SomethingNew

@StrangeWizard

I've traded a bit with forex on CFDs, the EUR/GBP/USD is usually the only ones with good spreads. If there is a sudden spike in the wrong direction, you usually lose too much to recover because of the leverage. If you make 9 good calls and one bad call, you will lose all your money. You break one of the most important rules of finance; position sizing.

askme
askme

As far as I understand them they're not really any different from any other leveraged product. The reason why they get used over here in the UK is that we get charged stamp duty on stock trading and these things mean you can sidestep that. But other people have pointed out that they're not really regulated properly, most providers charge you fees to use them and you can't really tell what's going on in the background like people working against you or pricing differences and other things I don't fully understand. When I did some simulated trading on one platform I'm sure I was coming out on top in some situations yet when I did some basic adding up I seemed to have been raped by fees. Like holding forex positions overnight and other shit like that.

There's probably people here that can do a better job explaining all this though. But I'm definitely wary. When I do start trading for real it definitely won't be with CFD's. Not until I'm much more experienced and or understand them better or when I have a lot more money.

Sharpcharm
Sharpcharm

@askme
Like holding forex positions overnight and other shit like that.

I traded forex on Plus500 and checked how much I would lose if I hold onto my stocks overnight. It took a whole third of my capital. I also traded VXX, and the spread cost a fourth of my capital.

tl;dr don't use Plus500.

RumChicken
RumChicken

@Sharpcharm
CFDs are those fees really that ridiculous? CFDs are supposed to be opened and closed ont the same day?

VisualMaster
VisualMaster

@RumChicken
Are the fees on CFDs really that ridiculous?*****

Playboyize
Playboyize

@Sharpcharm
So don't hold positions overnight, Especially if you don't have anough to cover the margins.

I've turned 20€ to 100€ in two days numerous times on plus500 demo. But I won't risk it in real money at least not yet.

Evilember
Evilember

never believe in leveraging - warren buffet

New_Cliche
New_Cliche

@Evilember

Well I don't know about that. That's like saying never use options or futures or anything. You need to use things like options to manage risk, reduce cost basis and hedge effectively.

Need_TLC
Need_TLC

@RumChicken
you can hold as long as you wish, there is a small overnight fee. short position fees are typically even slightly smaller or zero fees overnight.

cfd leverage works the traditional leverage not like most leverated etf's which are daily versions. meaning cfds do not suffer from the slight volatility drag etfs suffer from holding longer periods. for example daily 5x etf go bust only if the price goes against you On that day 20%, if it goes against you 10% every day it wont go bust as would cfd ofcourse with the fixex margin call

Firespawn
Firespawn

@askme
The reason why they get used over here in the UK is that we get charged stamp duty on stock trading
That's what Barney Sanders tried to do here, except he wanted to double the stamp duty.
You would've seen CFD's become a mainstream product in the US overnight.

Bidwell
Bidwell

Degenerate CFD user here

CFDs aren't scary at all if you know how to use them. Here's some tips for beginners:

- CFDs are strictly for trading. If you have enough time to spend on what will move the markets today you can win a bit with daytrading. None of this boring investing or crypto pump-and-dump BS.
- Buy CFDs on indices if you are too scared of Forex fluctuations. The S&P is low-risk while European & Asian indices are relatively higher-risk.
- Yes, CFDs are best used for intraday trading. You can hold them overnight if you are sure you will gain more or for sick gap up/down gambling. Watch out for (small) fees though.
- Start with small marges and, as your capital increases, only VERY SLOWLY increase the marges of the next trades. Not sticking to this rule has fucked me over in the past.
- Learn what scalping is and see if your broker allows it. IMO scalping is a bit inane and grind-y & can lead to bad habits, but it's a tool. A tool that some brokers don't approve of. In fact, study your broker's whole ToS.

LuckyDusty
LuckyDusty

@Bidwell
Oh, also:

- Learn how to use stop-losses and trailing stops. Your goal should be a steady amount of gains while minimizing losses.
- Just FYI: I heard the average duration of a CFD is 4 hours.

GLHF

w8t4u
w8t4u

@New_Cliche
That's like saying never use options or futures or anything. You need to use things like options to manage risk, reduce cost basis and hedge effectively.
Wtf? If you need options to manage you risk, you need to get a better financial education. There are literally hundreds of ways to tweak risk without using leveraged products.

Jesus, this board.

Gigastrength
Gigastrength

@w8t4u

Well you're right, I am new at this but I'm also all ears so please do explain further. I'm soaking up as much info on trading as I can. I'm open to all styles, methods, approaches and all the different tools in the shed. I plan to learn it all and use it all to my advantage.

LuckyDusty
LuckyDusty

@Bidwell
This

also, most of the players in the CFD provides ( UK at least, ymmv ) offer dummy or training accounts for month or two. might be handy to i) get you're head around your trading strategies and tactics ii) see if you can handle it - some people can, some people cant ( no shame in that )

best of luck

Firespawn
Firespawn

Bump

Stupidasole
Stupidasole

@Bidwell
How do you define scalping vs intraday trading. Like for example, I trade the YM futures. 40-80 dollars and I am out. That is like 8-16 ticks.

Stark_Naked
Stark_Naked

@Stupidasole
The duration of the trade. Anything below 3 minutes is considered scalping by some brokers.

askme
askme

@Stark_Naked
some brokers
Mine must not give a fuck, then.
I was in for 72 seconds last night.
Some will prohibit that shit?

Deadlyinx
Deadlyinx

@askme
Yes, but you will only truly find out when you try to withdraw your gains kek

Emberburn
Emberburn

@Stark_Naked
i dont think such trading makes any sense for retailers as the spread would eat you alive in no time

StonedTime
StonedTime

@Deadlyinx
What happens then? They say "This trade goes against our policy"?
It's not like they can cite some SEC rule like Reg T.

@Emberburn
spread
On futures contracts? Have you heard they're enormous or something?

JunkTop
JunkTop

@StonedTime
Quite enermous for such strategies to be profitable.

Nojokur
Nojokur

@JunkTop
Well, I don't know who your broker is, but when I buy oil or silver contracts, I get in within a tick. That's somewhere between $10 and $25.
Gigantic spreads are usually present for really illiquid stuff, which these two are not.

Illusionz
Illusionz

@StonedTime
What happens then? They say "This trade goes against our policy"?
It's not like they can cite some SEC rule like Reg T.

They can cite their ToS though, and if their ToS says "We do not allow scalping", they will use that against you. Your scalped gains will be deducted. Worst case, your account may get frozen and reviewed, but this is for serious actue scalping offenders.
But if you just scalp once in a while, everything should be alright.

The policies vary from broker to broker. +500 doesn't allow scalping. IG allows it. FXCM encourages scalping and algos.

@Emberburn
Scalping only really works if you're trying to catch a falling knife or holding onto a rocket to the moon aka sell the rise after a few seconds/minutes.

Garbage Can Lid
Garbage Can Lid

@Illusionz
scalping
That's the answer. What I'm doing isn't technically scalping, as I'm not entering two orders simultaneously.

TalkBomber
TalkBomber

@Garbage Can Lid
Let's hope that your broker thinks the same way

TechHater
TechHater

@w8t4u
You show me a screenshot of a complete portfolio bringing in over 10% over a period longer than 2 years WITHOUT the use of options/futures as hedges to your trades and I'll show you a person who's soon to be arrested for insider trading. Shut the fuck up if you don't know what you're talking about grandpa.

BinaryMan
BinaryMan

@TechHater
bump for interest

Burnblaze
Burnblaze

avoid plus500 like the plague, some israeli scammy shit company

Emberburn
Emberburn

@TalkBomber
Sometimes you gotta raise hell with them to get anything accomplished.
I asked one of their guys what it would take for them to shave a couple points off my margin rate, he said $250K.
Yeah I'll get right on that.

Boy_vs_Girl
Boy_vs_Girl

@TechHater
You show me a screenshot of a complete portfolio bringing in over 10% over a period longer than 2 years WITHOUT the use of options/futures as hedges to your trades
10%? How about 220%. From an index fund.

Fuck you're stupid.

Evil_kitten
Evil_kitten

@TechHater
a complete portfolio bringing in over 10% over a period longer than 2 years WITHOUT the use of options/futures as hedges
And lest you think I can only cherry-pick dates, how about the fact that the stock market as a whole has beat your 10% benchmark over the last 90 fucking years.

No wonder you Puppies of Wall Street stay so poor, playing with options and forex and VIX. You're too fucking stupid to even know that better alternatives exist.

cum2soon
cum2soon

@whereismyname
That ETF uses options within their portfolio. Try again.

@Boy_vs_Girl
Also, uses options and futures. Do research.

@Evil_kitten
No account for inflation dipshit. Learn to research and read charts fuck.

likme
likme

@cum2soon
I also said show me a COMPLETE PORTFOLIO. Not an index that is artificially inflated by multiple rounds of QE by the Fed to inflate assets prices beyond reasonable measurements so as they don't have to raise rates and kill this bull-parade. You're still in undergrad aren't you.

Poker_Star
Poker_Star

@cum2soon
@likme
moving the goalposts and changing the definitions after getting #btfo
A smarter man would have just disappeared, It's anonymous message board. We know you're an idiot, but we don't know who you are.

Instead, you come back for more punishment. There's a name for people like you.

SniperWish
SniperWish

@Boy_vs_Girl

That picture is garbage. The graph in the background is showing about the last 5 years of the S&P 500 where it grows from about 1200 to the current 2167 which is not 220%, more like 100%

eGremlin
eGremlin

@SniperWish
actually no, it is showing just after the low point after the crash in 2008/09

BinaryMan
BinaryMan

@SniperWish
read
@Evil_kitten
and reflect upon why your parent's are so disappointed in how you turned out.

Poker_Star
Poker_Star

@BinaryMan

I'm pointing out that what you displayed in your pic does not support the text in your post.

And if you look at the post ID's you'll see that I already admitted to being new at this stuff.

I like index funds as well but you're at their mercy and can only just ride them. I can show you some recent gold funds that have done more than 125% in the last 6 months. Most active funds use derivatives to manage various aspects. I'm also learning to fully manage my own money. I'll be doing both active and passive stuff.

Flameblow
Flameblow

@Poker_Star
I'll be doing both active and passive stuff.
Congratulations skippy, you'll be underperforming the markets just like 99% of all individual investors who manage their own money. Enjoy your lifetime of being behind your peers.

Go read the Dalbar studies, noob. Stop wasting our time.

TechHater
TechHater

@Flameblow

So your advice is that there is only one way to do things, and that is put all your money into a index fund and that's it?

How do you account for self-made millionaire traders then?

Ignoramus
Ignoramus

@TechHater
So your advice is that there is only one way to do things, and that is put all your money into a index fund and that's it?
No, I never said that, although its pretty solid advice for most people. Different people have different investing goals and needs, but regardless index funds can and should serve as the core of any well-rounded portfolio.

Specifically related to this thread, there is NO role for options, forex or (for-fucks-sake who even opened this pandora's box) derivatives in an well-constructed portfolio. There are safer, cheaper, and more effective ways to add risk for the 0.0001% of people who need to tweak their holdings in this direction (which includes no one on this board).

How do you account for self-made millionaire traders then?
How do you account for millionaire lottery ticket winners? Or are you under the impression that playing the lottery is a sound economic strategy?

takes2long
takes2long

@Ignoramus

Well, CFD's are themselves derivatives. and options aren't simply about about adding risk, they're more often about mitigating it.

I'm invested in a S&P 500 index fund and am pretty happy with the results so far, I'm also in a few actively managed funds too, which I'm also happy with. But I'm also paper trading on various platforms and able to use option strategies to actively generate more money, using less capital and in a shorter period of time. Options provide you the opportunity to win in bull, bear and sideways markets with a higher probability of success than simply hoping markets or stocks climb higher over time. (which they do tend to do, I'm not denying that, positive drift and all that)

Sounds to me like you've been well sold on the fear, uncertainty and doubt you've been fed by the financial services industry. The more you know, the less they make. They're quite happy for you to stay ignorant.

Methshot
Methshot

@takes2long
Options provide you the opportunity to win in bull, bear and sideways markets
You can do that without options for your first two cases.
with a higher probability of success
This demonstrably and provably false.

All your really doing is adding leverage, and doing it in one the most expensive and risky ways possible. Don't kid yourself that you're some sophisticated market hedger with advanced trading tactics. And don't dismiss my advice based on your own internalized fears and doubts. I'm cleared for Level 4 options trading and have been for years. I've traded options in positions as large as 6-figures. But I also learned my lesson, by which I mean I learned there are better ways to generate alpha. And no, it had nothing to do with being on the losing end of trades. I ended my options career solidly in the black. When you gain some wisdom, you learn that just because something can work doesn't mean its the right or best way to get the job done.

Evilember
Evilember

@Methshot
with a higher probability of success
This demonstrably and provably false.

That is where you are most definitely wrong my friend and demonstrate a clear lack of understanding.

Mathematics proves you wrong.

hairygrape
hairygrape

CFDs seem like a quick way to become homeless overnight.

You're paying extra for extra leverage basically.

Sir_Gallonhead
Sir_Gallonhead

@Evilember
Even though I'm a noob and you have years of experience, I'm right and you're wrong because ... reasons.
Hard to argue with ironclad logic like that.

Poker_Star
Poker_Star

@Sir_Gallonhead

Me and you can argue all day night. But neither of us can argue with mathematics.

You are talking shit. Just as you did with the first pic you posted, trying to make it look like it something it was not.

I have little to no experience and fucked you up badly. Go somewhere else and lick those wounds.

Firespawn
Firespawn

@Poker_Star
Math! I Win!
Kid, you're a cautionary tale and you don't even know it. I'd pity you, if I gave a shit.

RavySnake
RavySnake

@Firespawn

Math! I Win!

No, math wins, and always will.

Options give you the ability to cap your upside and work with probabilities in your favour. You can still lose ten trades out of ten, sure, but that doesn't change the fact that you work with them in your favour.

Sorry old chap. You're wrong.

CodeBuns
CodeBuns

@w8t4u
if you need options to hedge you don't know finance
Are you fucking retarded?

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