Contract For Difference - CFD

Re: Contract For Difference - CFD

Postby kennynah » Sat Jun 05, 2010 5:21 pm

hi profittaker:

i could well be wrong with my idea instead...

so...philip security gets a customer order thru their CFD platform...and sends a "corresponding" order (not the client's order) to the exchange...

why do this extra step??? extra spray...

unless it is a fact that all CFD platforms are NOT directly hooked to the exchange...and CFD transactions are ALL in-house....

what philip is trying to do, is probably not undertake any position risks by enacting such CFD DMA mechanism....

but why do they do this extra spray? becos they wana make commissions...by offering CFD leverage and yet assuring customers

a) that such DMA means more liquidity
b) spreads are demand/supply based
c) no price delays

but will philip securities give you the assurance that during a meltdown, they will open those counters for trading? will they impose Short selling ban as would exchanges? i duno...
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Re: Contract For Difference - CFD

Postby kennynah » Sat Jun 05, 2010 5:31 pm

CFD is nothing more than a leverage play, offered by brokerages to entice people with not enough money but wish to play big...

$10K can buy $100K or more of equities... that is appealing...and dangerous just as well... dangerous not becos you can lose $10K but many times of $10K.....becos while CFD brokerages impose maintenance margins...they dont always act in a timely manner ...and in a very adverse market move...the CFD player's reaction maybe so slow that the price move can cause losses in excess of $10K....

so...my suggestion is this... if you wana play leverage...play options... and choose a strategy that gives you a good leverage but limits the losses to a fix amount... it's much safer...


i can almost guarantee you that if you play CFD long enough, you WILL get into a lot of financial distress.... GUARANTEED....it's not a question of "if"...it's matter of "when" it happens....

so, i sincerely hope all CFD players re-think about using this instrument to trade/invest....in especially, investment... CFD is a shell...you own no shares nor will you ever receive real dividends by the companies...you have no voting rights (not that it matters to most people)...you are really playing ang kong kia cards on a table setup by licensed streetside thugs...
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Re: Contract For Difference - CFD

Postby profittaker » Sat Jun 05, 2010 5:39 pm

Hi Kenny Bro,

Now I recall I attended a seminar at KE last year and they mentioned:
- price is transparent i.e. you get to see the same price changes as stock market
- order is reflected in stock market e.g. a buy order of 10000 keyed in at KE platform, will be reflected in POEMS or Limtan stock platform. This means, client can move the price of stock market if they want to.
- No sgx clearing fees, but there is commission and gst.

KE only provides DMA type CFD, KE do not provide market maker type CFD, as far as I understand.
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Re: Contract For Difference - CFD

Postby kennynah » Sat Jun 05, 2010 5:53 pm

hi profittaker...

no question... the price reflected on CFD platform has to be almost similar to exchange platform... how can they be different...if they were... CFD brokerages will be broke within a day....arbitrageurs will whack them out of business in 2 mins.

no single client can move a market (not unless you are WB, Soros, etc, very large sized player), of cos in singapore...where liquidity is small and prices are in cents...it is conceivable that market manipulation happens frequently...

no sgx clearing fees is evident that customers orders are NOT directly punched into SGX system.... these brokerages absorb these fees and pass on to customers thru CFD fees

KE only provides DMA type CFD, KE do not provide market maker type CFD, as far as I understand.

i'm afraid the concept is not accurate...ALL CFD operates on the basis of the brokerage being the market maker for its clients...the fact that they simultaneously send clients' orders to some exchanges, do not diminish this role...they merely square off their position risks..

i'm not for CFD trading..that should be very clear...and for all the reasons i have already stated...

but to each his own...

so, all the best to you bro profittaker...take care...
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Re: Contract For Difference - CFD

Postby Poles » Sat Jun 05, 2010 5:59 pm

this is maciam football bookie..
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Re: Contract For Difference - CFD

Postby kennynah » Sat Jun 05, 2010 6:01 pm

Poles wrote:this is maciam football bookie..


YES :!: :!:

thanks.... i now have a very accurate and simplistic way to explain what CFD is all about...

CFD brokerages are the runners... they try to match all trades and any excesses are punched thru to the exchanges...like serious runners will square all bets and moments before the close...they will throw out all excess tickets to someone else... they want "water money" ....not take on risks...like CFD brokerages...they want commissions not position risks...

so these DMA is a way for runners to immediately remove all risks
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Re: Contract For Difference - CFD

Postby profittaker » Sat Jun 05, 2010 6:12 pm

Hi Kenny bro,

thanks so much.. i can see what you trying to highlight and I fully agree with you about the danger of CFD, just sharing little thing that I know.

I do trade CFD because frankly, it is easier to understand and I have not gained the kung fu to trade options yet. And I fully agree with you on the advantage of options.

For CFD I am extra careful with the open trade and close trade price, how much $ to risk in a trade, what is the price movement, how much to cut loss and etc..

For example, shorting of counter XXX, price at $1, 10% margin. Say I am willing to risk 2k in this trade. Let say the setup is, if price move above 1.06, I would cut loss.

Then number of shares = 2000 x 10 / 0.06 = 33330 shares, and I need to put down 3.33k to open the trade.

So if price moves above 1.06, I have to cut loss and lose all 2k and get back 1.33k, else I may even lose the 1.33k and even more! For this, options is definitely better.

For other readers, I am novice investor, please read what I wrote with many kilos of salt.
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Re: Contract For Difference - CFD

Postby lithium » Sat Jun 05, 2010 6:24 pm

kennynah wrote:
Poles wrote:this is maciam football bookie..


YES :!: :!:

thanks.... i now have a very accurate and simplistic way to explain what CFD is all about...

CFD brokerages are the runners... they try to match all trades and any excesses are punched thru to the exchanges...like serious runners will square all bets and moments before the close...they will throw out all excess tickets to someone else... they want "water money" ....not take on risks...like CFD brokerages...they want commissions not position risks...

so these DMA is a way for runners to immediately remove all risks


Aiya, say early mah, like that I understand 100% liao. Very very familiar with football bookie leh............ :lol:
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Re: Contract For Difference - CFD

Postby Cheng » Sun Jun 06, 2010 12:35 am

Thanks Ken ge, MM, lithium and profittaker for the clarifications and advice.

Chey, I thought DMA from Kim Eng is something different, that the broker dont trade against you haha... :lol:

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Re: Contract For Difference - CFD

Postby iam802 » Sun Jun 06, 2010 12:53 am

Cheng wrote:...
Chey, I thought DMA from Kim Eng is something different, that the broker dont trade against you haha... :lol:

..


Perhaps they don't.

And that is why they charge a higher commission.
1. Always wait for the setup. NO SETUP; NO TRADE

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