Trading dax futures vs CFD
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Trading dax futures vs CFD


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Created July 13th 2019 by Redcycle
Updated September 30th 2019 by ycomp
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Trading dax futures vs CFD

  #11 (permalink)
Brisbane, Queensland, Australia
 
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Redcycle View Post
THanks for your answer, do you have any idea if mini dax future is somehow worse then the real dax future to trade?

And I dont know if this is true, but ive read on the internet that one thing thats very dangerous in futures market is that if its very volatily, then they can skip your stoploss, and you end up with a giant loss if you are not infront of computer?

I trade the mini (FDXM) most of the time, especially if Iím not around to manually adjust my trailer or initial stop. The mini is more liquid than the big contract. In 8 years of trading Iíve not had any stops that have failed. Even in volatile markets, slippage yes, but outright no fill....never.

I use GoToMyPC as well when I canít be in front and once Iím in a position I just adjust accordingly occasionally.

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  #12 (permalink)
stockholm
 
 
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xiaosi View Post
I trade the mini (FDXM) most of the time, especially if Iím not around to manually adjust my trailer or initial stop. The mini is more liquid than the big contract. In 8 years of trading Iíve not had any stops that have failed. Even in volatile markets, slippage yes, but outright no fill....never.

I use GoToMyPC as well when I canít be in front and once Iím in a position I just adjust accordingly occasionally.

Intressting, I thought it was the other way around that the big one is more liquid.

And iam right that the mini is traded in 1pip spread and not 0,5 as the big one?

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  #13 (permalink)
Market Wizard
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bobwest View Post
I've never traded CFD's, for the simple reason that they are illegal in the United States, so I am certainly no expert. Therefore anything I say will be of a general nature and not based on personal experience, so take it for no more than it's worth.

Some countries in Europe and in Europe do not allow CFDs either (Belgium). I believe that France does not allow advertising of CFDs.

The use of CFDs became prevalent because of the flexibility to trade small contracts and big contracts with enormous leverage until the new ESMA rules have looked into the models and restricted the use of leverage.

However, I am a bit puzzled how they call a CFD on the DAX a DMA(?). The term "Direct Market Access" also means that your orders are reflected in the exchanges. So, while I understand that CFD shares could be matched and edged directly on the regulated exchnages, where do "DMA Germany 30 (DAX)" gets hedged? If the broker is not the market maker and holds the risk on the trades, where do they offset the risk? For example, let's assume that 80% of customers go long, then how do they account for that risk? If some could explain that, I would be grateful.

Essentially, when you trade on the exchanges, the clearing firm (or broker) does not care if you are long or short because every buyer has a seller and vice versa. There are no SWAPS charges, tight spreads under most normal market conditions, and slippage is based on the depth of the market, not the mercy of the market maker.

I recognize that some CFD providers have a deep book of liquidity, but the exchange could still provide a better alternative for many of the CFD products.

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  #14 (permalink)
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In France, the advertising of CFD is still allowed at the conditions the broker offers both negative balance protection, guarranteed stoplosses and margin cuts at 50%. These are marketed online and by introducing agents as “limited risks CFD”

Regarding the DMA tag, the french regulator fined IG for false advertising, because indeed there’s no real DMA properties behind the scene, the broker just cheated with the name to comment that it follows precisely the underlyings.

In the end, the CFD brokers are B-booking 80% o 95% of the client’s activity.


Last edited by Kalisto; July 15th, 2019 at 05:53 AM.
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  #15 (permalink)
Brisbane, Queensland, Australia
 
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Redcycle View Post
Intressting, I thought it was the other way around that the big one is more liquid.

And iam right that the mini is traded in 1pip spread and not 0,5 as the big one?

Minimum increments on the mini are 1 point whilst the big one are half point ticks.

As far as spread goes, in illiquid conditions the big dax might have a several tick spread whilst the mini may stay tight.

As far as liquidity, the mini has from ten to dozens of contracts and the big dax single digits to dozens at times at some levels.

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  #16 (permalink)
Trieste Italy
 
 
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Redcycle View Post
Thank you very much for this detailed answer!

But If I enter and exit the market same time with CFD, isnt the cost totaly 25? Why should I pay the 1pip spread twice?

And ofcourse this cost also applies to futures, right? But the futures spread is 0,5 instead of 1. So instead of paying 25 x2 its 12,5 x2 ?



Yes ive understood that, but does those kind of manipulations happens often? Ive been with my broker for 2yrs and placeing in avarge 5-10 trades in dax, and ive never notices something strange, it isnt like they can manipulate dax 200points or? I think this is very important information for me to know, but there are so meny lies out there in forums, feels really nice to get info from you guys that know this!!

Hi Redcycle,
I wasn't refirring to such a kind of manipulations like you said 200 points ... I'm simply saying that they make the price THEY WANT...so over a volatility spike it can do the difference..even several points...

About the cfd broker maybe it could be right and you pay only once the 1 point of spread... but I'm not so sure about that.

Let me explane the difference with an example ( I also have cfd broker so I can saw the difference and the advantages ):

If you buy now the DAX with a limit order of 12300 with a future, you're buying it at 12300... with no spread, just at you limit order price. If you but the dax with a CDF at 12300 you immediately see a negative P&L of 1 point of dax.... and that is your spread.
The spread in futures come from the difference in the bid and ask of the book and you should see a real book to understand this...

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  #17 (permalink)
stockholm
 
 
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Dvdkite View Post
Hi, with cfds 1 point of spread means that if you trade the equivalent of 1 futures you're trading 25Ä at point ( 1 point of dax is 25Ä) ... so by using the cfd you spend 25Ä ( = your 1 point of spread ) to enter the market and another 25Ä to exit... so 1 roundturn for you with cfd is equal to 50Ä .... i would call it a 'commission' even if they said zero commission and only one point of spread. So compared to the 3/4 euro roundturn of futures there's is already a big difference.

Then the most important thing is that the Dax futures market ( as every futures market ) is a regulated market and in a book you can see every single contract bought/sold in the world... its datas are the SOURCE that every cfd broker uses to create their data so cfd brokers themselves decide what price to quote, not the market. Futures market is a real market, cfd markets are not... they can be easy manipulated in cases of sudden volatility ...

Hello again, sorry for this late reply but just Re reading this thread and really trying to understand what u was writing, I hope u still are around here


U later also wrote this


"
If you buy now the DAX with a limit order of 12300 with a future, you're buying it at 12300... with no spread, just at you limit order price. If you but the dax with a CDF at 12300 you immediately see a negative P&L of 1 point of dax.... and that is your spread.
The spread in futures come from the difference in the bid and ask of the book and you should see a real book to understand this..."




So iam trying to figre out if you are wrong, or i am really stupid.


Lets say that 1lot CFD is same size as 1lot future, so both equal to 25e/point. So if I buying one contract with CFD dax and immidietly step out of that trade, I will lose 1p since the spread is 1p between the ask and bid, right? So that "round turn" will totaly cost me 25 euro.


And exactly the same thiing should be with futures, only difference is that the spread is 0,5 instead of 1. So 1 buy and sell would cost me 12.5.

Isnt this right?

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  #18 (permalink)
Trieste Italy
 
 
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Redcycle View Post
Hello again, sorry for this late reply but just Re reading this thread and really trying to understand what u was writing, I hope u still are around here


U later also wrote this


"
If you buy now the DAX with a limit order of 12300 with a future, you're buying it at 12300... with no spread, just at you limit order price. If you but the dax with a CDF at 12300 you immediately see a negative P&L of 1 point of dax.... and that is your spread.
The spread in futures come from the difference in the bid and ask of the book and you should see a real book to understand this..."




So iam trying to figre out if you are wrong, or i am really stupid.


Lets say that 1lot CFD is same size as 1lot future, so both equal to 25e/point. So if I buying one contract with CFD dax and immidietly step out of that trade, I will lose 1p since the spread is 1p between the ask and bid, right? So that "round turn" will totaly cost me 25 euro.


And exactly the same thiing should be with futures, only difference is that the spread is 0,5 instead of 1. So 1 buy and sell would cost me 12.5.

Isnt this right?

Hello Redcycle, what you said IS right....but I think that is the point of view that doesn't evidence the difference.

So let's modify your example in order to show the difference between CFD and Future.

So lets say as before that in both cases we use 1 lot or 25€. Now if you buy limit the FUTURE FDAX for 12300 and then you sell limit the FDAX for 12300 you haven't lost anything except the commission that would be around 2$ total.

If you want to buylimit the CFD dax at 12300 then if you want to sell it for the same price at 12300 you will pay FOR SURE the spread agreed with the broker and with 1 pt of spread it would be 25€. There's no way to enter/exit at the same price without pay the spread. PLease note that in this example if you buy CFD dax at 12300 and then you place a sell limit at 12300 then the broker will need to reach 12301 to close your position (considering 1pt of spread).

I hope this example explane better the difference. :-D :-D

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  #19 (permalink)
stockholm
 
 
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Dvdkite View Post
Hello Redcycle, what you said IS right....but I think that is the point of view that doesn't evidence the difference.

So let's modify your example in order to show the difference between CFD and Future.

So lets say as before that in both cases we use 1 lot or 25Ä. Now if you buy limit the FUTURE FDAX for 12300 and then you sell limit the FDAX for 12300 you haven't lost anything except the commission that would be around 2$ total.

If you want to buylimit the CFD dax at 12300 then if you want to sell it for the same price at 12300 you will pay FOR SURE the spread agreed with the broker and with 1 pt of spread it would be 25Ä. There's no way to enter/exit at the same price without pay the spread. PLease note that in this example if you buy CFD dax at 12300 and then you place a sell limit at 12300 then the broker will need to reach 12301 to close your position (considering 1pt of spread).

I hope this example explane better the difference. :-D :-D




Ohh, Thanks for this fast answer, glad that you are still around here!


Well, I think I understand your logic, but dont understand why it is so. Cause sellers and buyers need to agree on a price, right?

Or do you mean that in futures market, there can be meny contrats traded at the same price? Lets say that there are 5 sellers on 12000 and 5 buyers at 12000? and those can buy and sell to each other without spread? Cause then I understand this, cause in CFD, there cant be selllers and buyers at one price, but always 1p difference between the buyer and the seller.



So basicly, if iam tradig the CFD and have a target for a nice win at 12000, and the price just goes to 12000 I wont be able to take profit, since price needs to hit 12001, but you on the other side thats trading futures, will probebly be filled at 12000 and take profit? So not just the 25euro difference with 1p, but its "easier" to trade futures if you trading small orders with lets say 5p stoploss and take profits?

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  #20 (permalink)
Trieste Italy
 
 
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Redcycle View Post

So basicly, if iam tradig the CFD and have a target for a nice win at 12000, and the price just goes to 12000 I wont be able to take profit, since price needs to hit 12001, but you on the other side thats trading futures, will probebly be filled at 12000 and take profit? So not just the 25euro difference with 1p, but its "easier" to trade futures if you trading small orders with lets say 5p stoploss and take profits?

This is EXACLY what I mean. :-D

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