I am halfway through the Habit of Success (HOS) webinar by Ray Barros. In his preview webinar, he mentioned: “You are lucky, we don’t have CFDs during our time”. That set me thinking. I have found out the following about CFDs:
Smaller margin requirements and tick size
So now with US$5000 trading capital, we can trade the S&P500 index! See the table below. Fine, perhaps we cannot trade futures because we need US$5,625 minimum in our trading capital to trade a futures contract. Now we have the option of CFDs.
| Type | US$ per Point | Initial | Maintenance |
| S&P eMini Futures (CME) | 50 | US$5,625 | $4,500 |
| CFD - US SPX500 (IG Markets - micro contract) | 10 | US$498.42 (5%) | - |
| CFD - SPX500 Index CFD (CMC Market) | 1* | S$71.90* (5%) | - |
* - Values I gathered with a demo trading account. I could not find the specs from CMC Markets website.
There is CFD for everything! (almost)
Seriously, I don’t know what we cannot trade with CFDs. There is CFDs on forex, futures, stocks from various countries etc.
BUT…
The prices for CFDs, like forex (non-ECN), are quoted by the brokers. So there are talks of manipulations, brokers trading against us etc, giving rise to long candle tails.
So is CFD for you?
If you find this post or this blog is helpful to you in any way...do consider buying jmot a kopi (aka coffee)!
Facebook Group
The only way to be truely satisfied is to do what you believe is great work and the only way to do great work is to love what you do… - Steve Jobs
“The prices for CFDs, like forex (non-ECN), are quoted by the brokers. So there are talks of manipulations, brokers trading against us etc, giving rise to long candle tails.”
This is generally true for market-maker brokers. The pro for using them (e.g CMC) is that they seldom charge commission for the trades done, the margin requirements are very low (more leverage), and they allow non-standard size contracts to be traded. They basically make profit from traders by adding spread to the quotes.
On the other hand, futures broker that have direct access to the exchange (e.g Phillip Futures) does not manipulate the quotes and the spread are as quoted on the exchange. Needless to say, commission is charged per trade and the margin requirements are standard as per each futures product specification.