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CFD vs Direct Market
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CFD vs Direct Market

  #1 (permalink)
Trading Apprentice
melbourne, australia
 
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CFD vs Direct Market

I trade a variety of indices (well 3) and have always done it through a CFD provider. I only trade during market hours and almost never hold any position over night. I make reasonable returns from what I do and am quite aware of the tricks that a CFD provider will pull on you on some occasions but over all it is an efficient use of capital. I am just wondering what the net advantage is going direct to market as the margin requirements are so much higher?

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  #3 (permalink)
Trading for Fun
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You can put your order inside spread.Only CFD on Dax can be compared with futures if we talking about cost and posibilities.Also on futures you can see order flow,much more ,,smoth'' chart's and more... Only advantage of CFD is that CFD are much smaller in value so it is very easy to ,,handle'' it.

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  #4 (permalink)
Market Wizard
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bbgg91 View Post
I trade a variety of indices (well 3) and have always done it through a CFD provider. I only trade during market hours and almost never hold any position over night. I make reasonable returns from what I do and am quite aware of the tricks that a CFD provider will pull on you on some occasions but over all it is an efficient use of capital. I am just wondering what the net advantage is going direct to market as the margin requirements are so much higher?

Guess you never compared your bucket shop's data stream to the prices that you would have with DMA ...

P.S.: Margin is a rather feeble argument. There are futures brokers with margins of ~$500 per ES - which
is just as myopic for the user as the over-leverage that most bucket shops offer.


Last edited by choke35; March 18th, 2016 at 09:31 AM.
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  #5 (permalink)
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choke35 View Post
Guess you never compared your bucket shop's data stream to the prices that you would have with DMA ...

I have. I have checked CMC AUS200 against the spi and the aus 200 which it is based on and they pretty much move point for point. Not sure about the DAX or UK indices.

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  #6 (permalink)
Market Wizard
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bbgg91 View Post
I have. I have checked CMC AUS200 against the spi and the aus 200 which it is based on and they pretty much move point for point. Not sure about the DAX or UK indices.

If that's ok with your shop, fine. Most of them try to avoid that from the outset by only giving proprietary
front ends so that you cannot compare the exchange's stream to theirs.

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  #7 (permalink)
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There are many issues in this area for sure but the simple solution is just to use a quality level datafeed (e.g. IQFeed, eSignal, etc) as well as the CFD/spreadbet GUI's. Problem solved.

Travel Well
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  #8 (permalink)
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If I were putting $1M USD or 1M EUR on the line, I would want proper clearinghouse settlement for my securities, or at least the margin to be transfer ed to my account during each settlement period as the position moves further in the money, rather than relying on my direct counter party, in this case the broker to pay up down the road.

Other than that, seeing actual orders in a centrally cleared market is always useful to see exactly how much size you can trade at each price.

But of course, if none of these are as important as low margin requirements, (presumably say for a retail account with a balance under $2500), then CFD is probably a better way to go.

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  #9 (permalink)
Market Wizard
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ratfink View Post
There are many issues in this area for sure but the simple solution is just to use a quality level datafeed (e.g. IQFeed, eSignal, etc) as well as the CFD/spreadbet GUI's. Problem solved.

I didn't mean to say that bucket shops' data is crappy per se (that might also be the case); I rather meant that
many shops do everything to avoid common front-ends like e.g. NT. The reason is trivial: By building a simple
spread of the original DMA asset vs their pricings one would find in the twinkling of an eye that advertised CFD
spreads and fills "close to DMA" are pure fiction most of the time. So better offer a proprietary bucket shop GUI

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  #10 (permalink)
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choke35 View Post
I didn't mean to say that bucket shops' data is crappy per se (that might also be the case); I rather meant that
many shops do everything to avoid common front-ends like e.g. NT. The reason is trivial: By building a simple
spread of the original DMA asset vs their pricings one would find in the twinkling of an eye that advertised CFD
spreads and fills "close to DMA" are pure fiction most of the time. So better offer a proprietary bucket shop GUI

I actually agree with you, although from own experience in recent years the situation has improved dramatically for the better ones. Also, some of the confusion for users does occur between index and future quotes, for example on Finspreads Germany 30 is the current month Eurex Future, whereas on IG Germany 30 DFB is based on the Xetra cash index. The versa-vicas are available on both but you have to look.

Spreads can be plenty tight enough e.g. 0.6-1 point, movement and fills still much better than FDXM, or on IG you can opt for a guaranteed stop fill 5 point spread and sleep whatever the market does.

Horses for courses, definitely a waste of time for big boys, but plenty useful as fractional cost building blocks and stepping stones for us growing little-uns.

Cheers

Travel Well
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