Contracts for Difference

H

HorseBox

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Has anyone here ever invested using CFDs? I'm trying to find out more about them, although I've been told already that they are a very risky way to play the markets. On the other hand, a friend of mine, who recommended I get involved in them, said the gains to be made are enormous if you make the right call.

Steer clear or pile in?
 
ClubMan said:
Have you tried for existing threads?
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Yes, I did. Everything has been posted about before, but does that mean things cannot be posted about again? I'm looking for a fresh perpspective.
 
What precisely is not relevant or out of date in the threads linked by the search results above?
 
HorseBox said:
a friend of mine, who recommended I get involved in them, said the gains to be made are enormous if you make the right call.

Steer clear or pile in?
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If you make the wrong call, the losses can be equally enormous and can exceed your initial investment.

This is because CFDs are a leveraged investment. To answer your question, steer well clear until you have a clear understanding of the extra risk leveraging brings to the equation. Have a look at this story in last weekend's Sunday Business Post to start with:

[broken link removed]
 
Do Halifax offer one with a limited risk on losses? Or is that just in the UK?

Been there with CFDs, they're like a bad drug - massive highs and ferocious lows. Profit can sometimes be worth it.

I'd steer clear for a bit though, with the recent falls in the market there's been a lot of burnt fingers with CFDs. Really burnt.

Of course, if the markets were about to soar skyward it would be a good time to buy in.

If any of us knew for certain that was about to happen...............
 
Kendr said:
I'd steer clear for a bit though, with the recent falls in the market there's been a lot of burnt fingers with CFDs. Really burnt.

Of course, if the markets were about to soar skyward it would be a good time to buy in.

If any of us knew for certain that was about to happen...............
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Isn't it possible to sell short with a CFD - so possible to make profits in a market downturn just as much as in an upturn?
 
Here's a link for you. Haven't read it myself but looks detailed.

http://www.contracts-for-difference.com/advantages-disadvantages-cfds.html

A word of caution though. CFDs - like any leveraged product - are best used by people with a strong knowledge of markets and risk management. They tend to attract the exact opposite, unfortunately.

Understanding how CFDs work, the risks and opportunities involved, etc, does not mean you will be able to profit from them. CFDs are generally used by short term traders so the real question is; what do you know about markets and trading? How's your grasp of technical analysis? Money management techniques? How long do you want to hold a position for? Where will you enter and exit? Why here? etc etc.

In other words, I'd spend a small amount of time researching cfds and a lot more time on trading/market matters.

(BTW, in relation to South's query - yes, cfds can be used to sell short).
 
The 3:45 at Haydock is also a great way to play the markets. If you make the right call.
 
Yep, you can sell short.

And yep, not much use if you're in the hole for 50k before breakfast.

Market incertainty not great for either option at the minute.

I'm with the Haydock tip!!!
 
Howitzer said:
The 3:45 at Haydock is also a great way to play the markets. If you make the right call.
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" If you bet on a horse that's gambling, if you bet you can make three spades that's entertainment, if you bet cotton will go up three points that's business. See the difference ?" Blackie Sherrod


Doesn't look like you can Howitzer !

:D:D:D
 
Reading at the weekend how brokers were increasing margin calls for CFD's on clients and I think Cantor Fitzgerald liquidated clients positions if they hadn't paid more money by noon on Friday. Apparently people were unaware they had been sold out of the market just before the bouce on Friday afternoon.
 
Bet these blokes wish they never heard of cfd's.... see article on y;days [broken link removed] where a group of irish investors lost an estimated €50mil as a resukt
 
ninsaga said:
Bet these blokes wish they never heard of cfd's.... see article on y;days [broken link removed] where a group of irish investors lost an estimated €50mil as a resukt
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I don't know anything about these guys but the general standard of reporting on cfds is farcical and is almost exclusively based on the idea that anyone who uses cfds uses them to go long. Given that it is as easy to go long as short with cfds, it is reasonable to assume that some investors out there would have been bearish about the ISEQ over the past few months, particularly given the phenomenal run it had between June 06 and June 07 - these folks don't get a mention though even though there are likely to be some out there who have been coining it of late with trades to the short side. Good old biased, negative, fear inducing financial journalism - contributes to the volatility in the market imo and that's great news for the investor/ trader who can think for himself - long may it last.
 
demoivre said:
I don't know anything about these guys but the general standard of reporting on cfds is farcical and is almost exclusively based on the idea that anyone who uses cfds uses them to go long. Given that it is as easy to go long as short with cfds, it is reasonable to assume that some investors out there would have been bearish about the ISEQ over the past few months, particularly given the phenomenal run it had between June 06 and June 07 - these folks don't get a mention though even though there are likely to be some out there who have been coining it of late with trades to the short side. Good old biased, negative, fear inducing financial journalism - contributes to the volatility in the market imo and that's great news for the investor/ trader who can think for himself - long may it last.
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This is true but very few 'ordinary' investors will go short something. Its just not natural for alot of people. (I also know professional investors who struggle with the concept of short positions). There is no doubt that CFDs are very useful tools for market participants who know what they are doing but the leverage in the contracts makes them unsuitable for alot of people in my opinion and judging by recent events these are the type of people that this product has been sold to.
 
Sunny said:
the leverage in the contracts makes them unsuitable for alot of people in my opinion and judging by recent events these are the type of people that this product has been sold to.
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I agree that geared products are not for everyone but ultimately the people to whom you refer have to take responsibility for their own investment vehicles. I have never come across a broker offering the likes of cfds, futures or options whereby the inherent risks associated with such products weren't explained in their literature.
 
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