Quote:
Originally Posted by K2
Firstly Shark have to say that if you don't understand the product your trading then DON'T trade it.
With the risk warning out the way - advantage of CFD's over stocks is that you have higher gearing since you trade on margin and the trades are settled only on the difference between the price (traded) in and the price (trade (out) so you no don't need to actually stump up the money to pay for the underlying stock. Higher gearing means (much) higher risk.
Hope you've got some good money management skills honed down - then have some consistant methodology for trading what ever you choose for time frame.
Good luck.
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Thanks K2, wont do that and i am just doing a research about CFD´s and how to trade them. Wont do it if i dont know enough about it. What i know now about CFD compared to a stock:
Simplified example:
Lets say i have 10k eur to invest. The stock is traded for 100€ so i could buy 100 stocks. The trading fee´s (buy/sell) are 0.4 % + 10€ for each trade
I could also buy a CFD of that stock with a margin of 10% (depending on wich CFD/stock). No trading fee but an interest rate.
With the CFD i would have now 2 possibiltys:
A) I buy 1000 CFD´s (1000 x 100 x 0.1) = 10 k
b) I buy 100 CFD´s (100 x 100 x 0.1) = 1 K (9k € left for other invests)
Case 1: stock goes up to 110
stock = 100 x 10 = 1000 € - (40 + 44 + 2x10) = 896€ profit
CFD A = 1000 x 10 = 10.000 € - fee 180 € = 9.810 profit
CFD B = 100 x 10 = 1000€ - 18 € = 982 €
Case 2: stock goes down to 90
stock = 100 x 90 = 9000 - ( 40 + 26 + 2x10) = 8914 = 1086€ lost
CFD A = 1000 x 10 = 10.000 + 180 = 10180 lost ( bye bye money and bring some extra cash)
CFD B = 100 x 10 = 1000 + 18 = 1018 € lost
So if i dont use the gearing i might trade better with CFD´s for short time, as i have to look on my daily fee´s. Using the whole capital for the gearing can mean the lost of all, but also high profit.Also that CFD´s are for short time invest whilst shares are for long time.
My example is a bit easy, but did i get the point in general?Any more info would be appreciated
Thanks all for your help