cfd spreads on equities

kevynt

Junior member
I am considering using deal4free to trade equities. Can someone explain to me how they calculate their spread compared to the underlying market. And on average, how many points do you lose compared to utilising the Level 2 screen?

Thanks
Kevynt
 

NickW

Junior member
In theory the spread presented to you by the spreadbetting firm should exactly straddle the current mid price of the underlying share or index. However they are not obliged to do so and this is a topic of great debate - take a look at the recent thread on spreadbet biasing.

Level 2 trading is a completely different approach and I don't know enough about it to explain. L2 players talk about buying at he bid and selling at the offer - it's a bit of black magic that no one has ever explained to me in simple terms so I'm afraid I'm not qualified to answer that. I can tell you that L2 is not for beginners - to me it sounds like a big poker game - and if you don't know the rules the big players will take all your money!
 

Morris

Well-known member
Been using CMC to trade CFDs for two years now.

I only trade large caps.

Techinically, the spread is supposed to be identical to that on SETS, however, recently they have introduced a min spread on a few shares I folow - RBS is an example. Min is now 2p, whereas SETS may often be 1p. A few others as well.

Having said that, 2p on RBS @ 1450 is not too bad. And pleanty of others are SETS spreads.

Have tried GNI demo version - nice prices, the the charges are silly IMHO. (£900 racked up in a day's trading).


Hope this helps.
 

kevynt

Junior member
Thanks for your help guys,

Interesting you should mention GNI - I was wondering whether it was going to be cheaper paying their 0.25% commission, or even E Trade's $10.00 commission as MMiller suggested, against the 'spread cost' suffered thru CMC. By the sounds of it Morris you see the spread cost as the lesser of the expenses...

Kevyn T
 

Naz

Experienced member
NickW said:
.

Level 2 trading is a completely different approach and I don't know enough about it to explain. L2 players talk about buying at he bid and selling at the offer - it's a bit of black magic that no one has ever explained to me in simple terms so I'm afraid I'm not qualified to answer that. I can tell you that L2 is not for beginners - to me it sounds like a big poker game - and if you don't know the rules the big players will take all your money!

I hope this helps.
First, the best level 2 direct access screen is on the Nasdaq.Something only seems complicated when we know nothing about it.A NL2 trader can see what the large market makers are doing and have the facilities to trade exactly like them.

So if the public want to buy a stock they pay a spread and buy on the offer.If i see a large market maker who i know controls that stock selling to the public on the offer,i can join him on the offer and sell (short) as well.Hence i'm paying no spread.If after a while he drives the stock down hitting traders stops and as they sell he buys on the bid i join him on the bid and once again pay no spread.

He is taking the opposite side of the publics trades and i can not only see what he is doing but i have the facilities to copy him.Far from him robbing me he is helping me to see how the stock is being played.The people at a disadvantage are the people who cant see whats happening and cant take advantage of it.

Naz
 

kevynt

Junior member
Naz,

Does that not also hold true for the UK Level 2 trading screen?
 

mmillar

Guest
kevynt

I think Etrade offering CFDs is a fairly new thing and they have entered the market at an aggressive price. The only reason I spreadbet over CFDing is that in the UK spreadbetting has no tax but any profits on CFDs are taxed at 25-40%. I would assume that doesn't apply to you in Australia so CFDs would probably be better.

Obviously it depends on the how big your trades are but I would have thought that, for anything but the smallest trades, Etrade would work out cheaper. Can't comment on their service, but was wondering if anyone else uses them?

There are lots of posts on this board about GNI being extremely expensive.

Cheers
 

JonnyT

Senior member
But spreadbets are taxable!

They are not liable to capital gains tax under UK legislation, but they are liable to income tax if the Inland Revenue deems you are trading for a living. So far no one has taken the IR to court over this as the costs are likely to in the 100s of thousands.

JonnyT
 

Mr. Charts

Legendary member
I also found Man unbelievably arrogant and grossly incompetent when I traded futures with them. I currently use GNI Chicago as brokers through netfutures. They are much cheaper in Chicago than in London.
GNI London are poor in my experience whereas GNI Chicago have been fine.
However since Man has taken over GNI I am closing my account; I refuse to have anything to do with Man - they are the pits.
I use IB for US shares and will use them for futures from now on.
I used deal4free for cfds before I moved on to Direct Access Trading and I always found them ok despite all the BB slagging.
Anyone trading US shares should really move on to DAT with a Pattern Day Trader account as Naz says. Act as market maker yourself and increase your profits rather than enriching brokers, especially Man!
 
Just a qualifier on your suggestion about having a PDT (Pattern Day Trader account for any new readers here who are not already aware - a PDT account requires a minimum of $25,000 to open and maintain an account.
 

Mr. Charts

Legendary member
Yes,sorry Skim, I should have clarified that.
Where in Surrey are you, may I ask? I'm sitting in the sun in Weybridge.
 

Gadget

Newbie
Hi. I've been comparing the charges this morning for CFD trading from CMC (Deal4Free), ETrade and IG. As mentioned above CMC's is commision free and their spread on the FTSE100 is 4 points. ETrade charge £9.95, however their spread is also 4 points on the FTSE100. As far as I can see CMC wins hands down as long as their system is reliable.
IG - FTSE100 spread is 6 points. No commission but once you move out of the main indices the commission rockets! Their example is ARM where commission is 0.25% on both side of the trade.

p.s. New to this site and CFD trading so please be gentle!
 
Last edited:

neil

Legendary member
Welcome

Welcome aboard Gadget.

Don't be afraid to jump in and ask.

Good luck.



:)
 
CMC make money if their client loses - we all know this, so of course it is in their interests to oscilate around the market price. However, depending on your trading strategy, you can use this and the sometimes delayed trade execution/requoting to your advantage. CMC are far from perfect, but for myself, for some types of trade, they do work out more profitable over using a commission charging broker.
 

Gadget

Newbie
I was wondering why CMC were frequently not centered around the FTSE100 quote. I thought it maybe because the demo system was delayed or slightly 'manufactured'. Going on my paper trading yesterday I would say their method also suits me.
 

mmillar

Guest
kevynt - just seen that no-one has replied to your specific question...

Does that not also hold true for the UK Level 2 trading screen?
Nasdaq Level 2 is entirely different from UK Level 2/market depth. With Nasdaq you know WHO is trading, which is the key to success.


warm_machine, Gadget,

You comments about CMC and their quotes are pretty controversial around here :)

I think you will find that the reason CMC (and other SBs) quotes don't match those you see on your charts is that they use futures prices (even for their 'cash' products) and your charts don't.

See these posts for more details...

http://www.trade2win.co.uk/boards/showthread.php?s=&threadid=4633

http://www.trade2win.co.uk/boards/showthread.php?s=&threadid=4564

Cheers
 
 
Top
AdBlock Detected

We get it, advertisements are annoying!

But it's thanks to our sponsors that access to Trade2Win remains free for all. By viewing our ads you help us pay our bills, so please support the site and disable your AdBlocker.

I've Disabled AdBlock    No Thanks