CFD vs Spread-betting (FAQ?)

This must be a FAQ but a search turned up nothing ....

If I wanted to trade US/UK shares, holding no longer than 2-3 months, what advantages do CFD's have over spread-betting ?

cfd's your winnings are eligible for tax, spread betting is tax free
maybe not that simple but thats the gist of it

That's a disadvantage though I presumed there must be at least one advantage over spread-betting ...

i dont trade them myself but from what i have read here on T2W they say that cfd are aimed at traders outside the UK whilst spread betting is aimed at the UK market how true i dont know maybe someone who trades both can enlighten you

Really ? I guess that would make sense ....

rjay said:

This must be a FAQ but a search turned up nothing ....

Click to expand...

You can't have looked very hard

Try here: specifically my answers in posts 6 & 8:

http://www.trade2win.com/boards/showthread.php?t=21643&highlight=CFD

With CFD's you can quite often be more finite in your trading size. Trading minimums are therefore quite often less. For example, with CMC CFD's you can trade just 1 share if you want as aposed to Spreadbet which has a minimum of £1 per point which obviously equates to 100 shares. Next size up is £2 per point which is obviously 200 shares etc - I'm sure you see my point. This makes CFD's a great way to step up from paper trading if you're trying a new system etc. If you're new then I wouldnt worry too much about the tax issues until you are making regular profits as Spreadbetting with most of the companies has its 'hidden' costs.

Steve.

I trade only CFD’s. You also receive dividends from CFD’s which if held over the long run helps out with the interest charges. I have to be pretty spot on as well with the amount of shares I purchase using my system, and spread betting just doesn’t allow that flexibility.

To me (maybe incorrectly) spread betting is for the day trading gambler who wants to buy and sell within a short time window; whereas CFD’s are for the investor who is quite prepared to hold onto a share for some time.

rjay said:

This must be a FAQ but a search turned up nothing ....

If I wanted to trade US/UK shares, holding no longer than 2-3 months, what advantages do CFD's have over spread-betting ?

Click to expand...

Hi rjay,

If you want to trade U.S. shares seriously, your best option in my opinion is to trade U.S. Shares directly instead of some derivative of the share-price generated by a spread-bet company.

If you trade the shares directly, you are trading ACTUAL prices with tighter spreads.


Thanks

Damian

Spread betting versus CFDS see here http://www.contracts-for-difference.com/cfds-vs-spread-betting.html

in2uxs said:

I trade only CFD’s. You also receive dividends from CFD’s which if held over the long run helps out with the interest charges. I have to be pretty spot on as well with the amount of shares I purchase using my system, and spread betting just doesn’t allow that flexibility.

To me (maybe incorrectly) spread betting is for the day trading gambler who wants to buy and sell within a short time window; whereas CFD’s are for the investor who is quite prepared to hold onto a share for some time.

Click to expand...

Perfect explanation

You GAMBLE with most spreadbetting instruments because they have the power to change the weightings and the volatility in the markets they create.. and their are issues in many system based ways that conspire against you, rushing you, clipping your trades, changing your state which leads to greater losses...Watch for red flags like binaries and CASH markets (these are fake bookie markets not true markets, they change the goalposts mid trade or clip opening and closing to their advantage dynamically, so new people be warned... you are "at the casino" with some of these products.

CFDs, ok now were talking true investing for long term steady gains for growing your portfolio seriously, although beware.. the interest charged for long positions held over large timeframes can reduce significantly the effectiveness of returns in many cases rendering the leverage obtained as comparable to buying a contract or share completely in the market., but the data should not be tampered with.. I believe... or thats serious grounds for frud. Plus you require more money to trade than with spreadbetting to cover margin calls on you.

Just my 2 cents...

Paul