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Trading cfds

  • 24-10-2018 3:15am
    #1
    bidzers
    Registered Users Posts: 6 ✭


    Hi. Can I ask has anyone experience in trading cfds ( contracts for difference), with any of these online trading companies......is it too risky a business to go down this road if you've substantial money to invest? There are certain trends which are pretty secure ..no?? Ie the price of gold going up prior to Christmas ....any advice appreciated please?


Comments

  • #2
    Jim2007
    Moderators, Business & Finance Moderators Posts: 10,419 Mod ✭✭✭✭Jim2007


    Ask Sean Quinn. CDFs are basically gambling and not something to consider in serious investing.


  • #3
    Klemantine
    Banned (with Prison Access) Posts: 8 ✭Klemantine


    hey, friends, what's trading cfds? Could someone explain me what does trading cfds stand for? Just curious if it's the same thing like trading on Forex.


  • #4
    Static M.e.
    Registered Users, Registered Users 2 Posts: 3,088 ✭✭✭Static M.e.


    Honestly, I don't think I could if you were to include synthetic CFDs etc. The movie The Big Short was based on the CFD's and the Financial Crises, if you haven't already watched it you should. It's very entertaining. They do a nice explainer on synthetic CFD's which I tried to find for you but I can't see it (in my 5 minute search :) )


  • #5
    Jim2007
    Moderators, Business & Finance Moderators Posts: 10,419 Mod ✭✭✭✭Jim2007


    Klemantine wrote: »
    hey, friends, what's trading cfds? Could someone explain me what does trading cfds stand for? Just curious if it's the same thing like trading on Forex.

    The only difference between betting on the dogs and betting on the market, is that your loss is limited to your bet.


  • #6
    Mad_maxx
    Registered Users, Registered Users 2 Posts: 13,503 ✭✭✭✭Mad_maxx


    Static M.e. wrote: »
    Honestly, I don't think I could if you were to include synthetic CFDs etc. The movie The Big Short was based on the CFD's and the Financial Crises, if you haven't already watched it you should. It's very entertaining. They do a nice explainer on synthetic CFD's which I tried to find for you but I can't see it (in my 5 minute search :) )

    The big short four focused on different areas, Christian bales charecter shorted mortgaged back securities, credit default swaps were also detailed.

    Like CFD, s, all are complex instruments and only for the experienced trader


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  • #7
    Mad_maxx
    Registered Users, Registered Users 2 Posts: 13,503 ✭✭✭✭Mad_maxx


    Static M.e. wrote: »
    Honestly, I don't think I could if you were to include synthetic CFDs etc. The movie The Big Short was based on the CFD's and the Financial Crises, if you haven't already watched it you should. It's very entertaining. They do a nice explainer on synthetic CFD's which I tried to find for you but I can't see it (in my 5 minute search :) )

    The big short focused on different areas, Christian bales charecter shorted mortgaged back securities, credit default swaps were also detailed.

    Like CFD, s, all are complex instruments and only for the experienced trader


  • #8
    Mad_maxx
    Registered Users, Registered Users 2 Posts: 13,503 ✭✭✭✭Mad_maxx


    Klemantine wrote: »
    hey, friends, what's trading cfds? Could someone explain me what does trading cfds stand for? Just curious if it's the same thing like trading on Forex.

    If you need 10k to buy ten thousand shares that cost a euro each, with CFD, s, you only need one thousand euro to buy ten thousand of the same company shares, you are making a leveraged buy, trouble is, if the price goes down, you get a margin call and loose all your original grand


  • #9
    Jim2007
    Moderators, Business & Finance Moderators Posts: 10,419 Mod ✭✭✭✭Jim2007


    Mad_maxx wrote: »
    If you need 10k to buy ten thousand shares that cost a euro each, with CFD, s, you only need one thousand euro to buy ten thousand of the same company shares, you are making a leveraged buy, trouble is, if the price goes down, you get a margin call and loose all your original grand

    You can be on the hook for a lot more....


  • #10
    Tombo2001
    Registered Users, Registered Users 2 Posts: 6,709 ✭✭✭Tombo2001


    bidzers wrote: »
    Hi. Can I ask has anyone experience in trading cfds ( contracts for difference), with any of these online trading companies......is it too risky a business to go down this road if you've substantial money to invest? There are certain trends which are pretty secure ..no?? Ie the price of gold going up prior to Christmas ....any advice appreciated please?

    You sound like you have formed a view on things that you don't actually understand.

    For example - what is your evidence for saying Gold will rise before Christmas?

    CFDs are at the volatile end of the spectrum of investment instruments.

    With a german government bond you could invest 100 and lose 5 or 10, in a very bad scenario.

    With for example a blue chip like BP or Glaxo Smithkline you could invest 100 and lose 50 in a very bad scenario.

    With a CFD, you could invest 100 and lose 700 in a very bad scenario.

    Obviously they can rise as well as fall, as is the case with all investment instruments.


  • #11
    Tombo2001
    Registered Users, Registered Users 2 Posts: 6,709 ✭✭✭Tombo2001


    GwaneTIme wrote: »
    I have done some Forex trading before, I know a little bit about it. Is the leverage the only difference between them? I don't really understand it also. On MetaTrader, you could use leverage also. Does this mean that it automatically gives you the opportunity to trade CFDs? If yes, why should I use brokers like Investous that offer to trade CFDs? Why shouldn't I continue using MetaTrader? Is there something I don't understand?

    I wouldn't say CFDs are complex. They are not that complicated.

    In essence its like a mortgage, but to buy equities.

    You put up the margin, say 20% - and you borrow 80% - to buy 100% of the investment amount.

    If the investment falls, you have to input cash to offset the fall - such that the margin is maintained at the agreed rate, 20% or whatever.

    Its not complex. Its just highly risky - compared to other investments. There's nothing wrong like that - if risk is genuinely what you want. If you are genuinely prepared to incur significant losses if the arise, or more likely as part of a balanced portfolio.


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