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CFD vs Direct Market

  #21 (permalink)
 steve2222 
Auckland, New Zealand
 
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@bbgg91


Quoting 
Like I said, CMC create a guaranteed market so if you play within that market depth it is not important. If you want a larger size, do multiple orders within their limit. If you are worried about getting scalped on fills change your order type. No different to the real market. Doing at market orders on any exchange will create problems at times. I have done both. If you play within the parameters they set there is not much difference.

So are you saying if you put a Buy Stop Limit above the market CMC guarantee to fill you at your limit price if 'their' market price trades through your limit? Because that is better than futures, where price can trade through your Stop Limit and never come back and fill it.

Presumably CMCs guarantee to fill you at your Limit is only if price trades through your Limit price, if it just touches the limit price I assume there is no guarantee of the fill.

And what do you mean by 'play within their market depth'? At various price levels are they showing what volume they are prepared to accept trades for ie a bit like the order book levels on futures?


Quoting 
If they move things around as to control what they do to their advantage at the cost of their customers I am sure they will not be in business for very long. There are plenty of CFD providers around to stop each other doing that.

But this is exactly what they do, although you have way more experience trading CFDs than I do. It is a zero sum game, so if all CMCs customer are winning then CMC is losing, unless of course all the orders are DMA. I recall years ago when I looked at this there was a trader on Aussie Stock Forums who would get his account shut down by CFD providers because he was winning too consistently. Sure there are a number of CFD providers in OZ you can move to, but it is not limitless. Maybe the industry has improved over the years, especially when it comes to CFDs that are traded via DMA, which was not the norm when I looked at it 8 or 9 years ago.

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  #22 (permalink)
bbgg91
melbourne, australia
 
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Neo1 View Post
So are you saying if you put a Buy Stop Limit above the market CMC guarantee to fill you at your limit price if 'their' market price trades through your limit? Because that is better than futures, where price can trade through your Stop Limit and never come back and fill it.

No. Though I have never tried it, I am sure you cannot do it. I will try and set one tomorrow. Once I see a setup I try and get a better price so will often wait for that small pull back to enter.



Neo1 View Post
Presumably CMCs guarantee to fill you at your Limit is only if price trades through your Limit price, if it just touches the limit price I assume there is no guarantee of the fill.

Depends on your position size. If you are within their market limit then yes it will be filled.



Neo1 View Post
And what do you mean by 'play within their market depth'? At various price levels are they showing what volume they are prepared to accept trades for ie a bit like the order book levels on futures?

Yes they have a depth level down to I think 10. I do not really look at it as it is of no use to me. If you want to take a position larger than what they make then your spread can and will vary. That is why if I want to open a larger position I just do multiple orders. I just set limits on all the orders at the same price and they are filled.



Neo1 View Post
But this is exactly what they do, although you have way more experience trading CFDs than I do. It is a zero sum game, so if all CMCs customer are winning then CMC is losing, unless of course all the orders are DMA. I recall years ago when I looked at this there was a trader on Aussie Stock Forums who would get his account shut down by CFD providers because he was winning too consistently. Sure there are a number of CFD providers in OZ you can move to, but it is not limitless. Maybe the industry has improved over the years, especially when it comes to CFDs that are traded via DMA, which was not the norm when I looked at it 8 or 9 years ago.

CFD providers here have upped their game. Some years back they would requote you on the smallest of orders which was just stupid and for trading purposes not workable. Their new platforms are all automated so you do not have to worry about that any more. CMC hedge more than 90% of their positions (maybe more now) so for them it is not a zero sum game. They make money from the spread (and interest/holding charges). I win quite often and have never been shut down. The old days of them trying to bleed clients are long gone. Like I said too much competition. I will add a caveat about trading out of market hours. You have to be careful though the SPI does track other indices after the asx closes. I then switch to trading the DAX or FTSE.

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  #23 (permalink)
 
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 pvlee 
Hertfordshire England
 
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I would concur with the previous poster. Most of my fills are pretty good on FXCM's Germany30 CFD. When the market is volatile I have had 4 or 5 ticks of slippage on stops and profit targets. All in all, the trading environment is pretty good. I think they have upped their game over the last few years.

Plus, no tax here in the UK for spread betting

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  #24 (permalink)
 
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 Neo1 
Christchurch, New Zealand
 
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steve2222 View Post
Thanks for that. Lucky I am not an Aussie

Actually a long time ago I did have an Aussie CFD account with IG when I lived there, but never really got into trading CFDs and closed the account.

I remember seeing somewhere else about IB not accepting Aussie CFD customers. Why is this given Australia is a well known CFD country with numerous CFD providers? Is it something to do with IB not wanting to comply with some Aussie regulatory requirement? Don't IB still operate there for other forms of trading?


It’s not just CFDs, it’s margin lending. Aussie retail clients can’t hold any type of margin account with IB. IB got into a disagreement with ASIC because apparently they didn’t have the right licensing, even though they were allowed to operate for 2-3 years before ASIC made them aware.

I assume the costs/ compliance required in order for IB to acquire the license makes it not worthwhile for them, or they think ASIC are a bunch of twats. Most likely it’s both…TD also shut down all their margin lending to Aussie clients as well, I don’t think they even offer accounts to Aussie clients anymore.

The compliance issue is something to do with Margin calls, where under IBs T&Cs they have the right to liquidate an account without warning, which doesn’t comply with ASIC regulation circa 2010.

From my understanding US firms have far more robust risk models vs Aussie firms- especially when it comes to options. ASIC regulation means US firms would be taking on more risk in order to comply.

"Free markets work because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or incentives for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can"
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  #25 (permalink)
 
Neo1's Avatar
 Neo1 
Christchurch, New Zealand
 
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bbgg91 View Post
No. Though I have never tried it, I am sure you cannot do it. I will try and set one tomorrow. Once I see a setup I try and get a better price so will often wait for that small pull back to enter.




Depends on your position size. If you are within their market limit then yes it will be filled.




Yes they have a depth level down to I think 10. I do not really look at it as it is of no use to me. If you want to take a position larger than what they make then your spread can and will vary. That is why if I want to open a larger position I just do multiple orders. I just set limits on all the orders at the same price and they are filled.




CFD providers here have upped their game. Some years back they would requote you on the smallest of orders which was just stupid and for trading purposes not workable. Their new platforms are all automated so you do not have to worry about that any more. CMC hedge more than 90% of their positions (maybe more now) so for them it is not a zero sum game. They make money from the spread (and interest/holding charges). I win quite often and have never been shut down. The old days of them trying to bleed clients are long gone. Like I said too much competition. I will add a caveat about trading out of market hours. You have to be careful though the SPI does track other indices after the asx closes. I then switch to trading the DAX or FTSE.


You've somehow mixed up your quotes in the previous post!

How much does it cost you per round trip when you trade ASX200? Does 1 point = $25 ?

"Free markets work because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or incentives for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can"
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  #26 (permalink)
bbgg91
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Neo1 View Post
You've somehow mixed up your quotes in the previous post!

sorry about that


Neo1 View Post
How much does it cost you per round trip when you trade ASX200? Does 1 point = $25 ?

It is whatever dollars per point you want to do so for example you want to do $100 per point then the cost is $100 as the spread at that level is 1 point. No other costs involved unless you hold over night.

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  #27 (permalink)
 
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 Tymbeline 
Leeds UK
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pvlee View Post
Plus, no tax here in the UK for spread betting


Not for spread-betting, this is true, but profits from trading CFD's are certainly taxable (as capital gains).

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  #28 (permalink)
 
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 Jason Rogers 
New York
 
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pvlee View Post
I would concur with the previous poster. Most of my fills are pretty good on FXCM's Germany30 CFD. When the market is volatile I have had 4 or 5 ticks of slippage on stops and profit targets. All in all, the trading environment is pretty good. I think they have upped their game over the last few years.

Plus, no tax here in the UK for spread betting

Hi Pvlee,

I'm glad you're pleased with the execution you get on your spread betting account with FXCM. Since you mentioned slippage during volatile markets, I wanted to make sure you are aware of the Market Range and Range Entry settings that are available on our Trading Station platform for market and entry (stop and limit) orders respectively.

These custom order settings let you specify how much negative slippage you are willing to tolerate. Your order will be filled at the best available price on our platform, but if that price is outside of your specified negative slippage tolerance, then the order will be canceled instead. Note that Market Range and Range Entry only limit your negative slippage, not your positive slippage.

If you have questions about our services at FXCM please send me a Private Message.
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  #29 (permalink)
 
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 Neo1 
Christchurch, New Zealand
 
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bbgg91 View Post
sorry about that



It is whatever dollars per point you want to do so for example you want to do $100 per point then the cost is $100 as the spread at that level is 1 point. No other costs involved unless you hold over night.

So if you want to trade a real SPI contract where 1 point = $25, then you would be paying $50 in commission per round trip?

"Free markets work because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or incentives for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can"
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  #30 (permalink)
 traderwerks   is a Vendor
 
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Neo1 View Post
So if you want to trade a real SPI contract where 1 point = $25, then you would be paying $50 in commission per round trip?

Yes you would pat that. It is the same as using market orders for everything and constantly crossing the spread.

In futures, you can get in an out with limit orders ( As any market with a limit order book ).

Math. A gateway drug to reality.
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