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Stocks v CFDs

  • 01-11-2010 2:23pm
    #1
    PH4T
    Registered Users, Registered Users 2 Posts: 931 ✭✭✭


    Was thinking of buying some Google stock but then I was told I should look at CFDs as Paddy Power are going to introduce them.

    As far as I can tell, 1 Google stock will cost me about $600 plus brokerage whereas exposure to $600 worth of Google stock via a CFD will cost me $60 plus I will have to pay some sort of interest for my position.

    What are the differences between the two methods?


Comments

  • #2
    strmin
    Registered Users, Registered Users 2 Posts: 315 ✭✭strmin


    Before you consider investing you should GOOGLE CFD FAQ and decide whether it is for you or not.


  • #3
    RoadKillTs
    Closed Accounts Posts: 1,710 ✭✭✭RoadKillTs


    As far as I can tell, 1 Google stock will cost me about $600 plus brokerage whereas exposure to $600 worth of Google stock via a CFD will cost me $60 plus I will have to pay some sort of interest for my position.

    And what happens if the position goes against you?

    If you don't know the difference you should buy stocks instead of CFD's.
    Article here on the subject.

    Link


  • #4
    D-Generate
    Registered Users, Registered Users 2 Posts: 2,945 ✭✭✭D-Generate


    Its basically just a means to give the average punter leverage although similar could be achieved by buying stocks on margin. Gains are amplified as are losses for equivalent invested capital to stocks.

    One thing I will say is that with CFDs if you are not actively trading is that the trend is your friend. From friends I know working in IG Index and CMC Markets is that the vast majority of customers try to guess the bottom or top and are also quite risk adverse and as such get their limits closed out even if their initial instinct was correct about the general movement. So either take the risky movement of moving your limits wider or follow trend.

    Finally, I wouldn't use Paddy Power as I find their interface brutal and childish. I suggest you use IG Index, CMC Markets or CityIndex.


  • #5
    OfflerCrocGod
    Registered Users, Registered Users 2 Posts: 6,334 ✭✭✭OfflerCrocGod


    Don't use tight stops for trading CFDs it's a recipe for losing money (as D-Generate says). Your best bet is to have a position with 50% capital covered in a BIG company and run it a long time from a low value. Don't trade because you're desperate to trade, trade because there is an opportunity. If there is no opportunity then wait. Otherwise you may just lose your money.


  • #6
    PH4T
    Registered Users, Registered Users 2 Posts: 931 ✭✭✭PH4T


    I already have a TD Waterhouse account so was thinking of using their CFD trading account, think City Index are behind it.

    http://tdwaterhouse.ie/typesofaccount/cfds/


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