new to cfd need some help

[happyhappyhappy]

Hi techst,

thank you for your post, very helpful. I was made redundant by my company in October as they lost their contract and am desperate not to go back into the same job, (nothing to do with stocks) so I would like to make a living from stocks too and CFD's are a way to play a little higher.

I pick stocks quite well at the moment but with the amount I have invested the profits are not quite enough to live on, especially with the odd bad spells in the market. As for "VCT" I know what you mean about hindsight, but I actually picked this stock up early, as with some others and did well out of it, and I am still riding it. So to me this says I would have done much better if I had bought it through a cfd due to the margin advantage you get. My attitude is quite cold to dealing now so I feel I am as ready in that sense as can be. I am not kidding myself on my stock picks, I really do pick reasonably well overall. But as I said above I am not generating enough profits to live on as yet.

What is worrying me is that although I feel confident to do this I am not silly and listen to advice, a lot of advice on here is telling me this is too dangerous, stay away. But why, the CFD methods do not seem too hard to grasp and if I have the ability to pick the stocks, why should I not take advantage? All this discussion makes me think I am totally off target and missing something important, am I?

Do not get me wrong, I do value all the inputs on here very much, and want as much as possible to help me along.

You have confused me with the loan idea, it makes me think why doesn't every CFD trader get a loan for this instead, can you tell me? I might have to start a separate thread on this part, just to clear it up inside my head. If You trade CFD's why would you not choose to take a loan instead if you don't mind me asking?

I swing trade (which can last a few weeks holding a position), but what I look to do is turn my swing trade into a position trade which will last for a few months, moving my stop up,taking half my profits.

techst, what do you mean by swing trade, can you tell me what this is briefly and what do you mean by change it from a swing trade to a position trade? Sorry

You say you move your stops, I have asked this earlier but no one answered. are you allowed to do this and do they charge for it if you move it, or are these personal stops you apply, that you are talking about, and not done through the CFD provider. If you could apply these stops with the CFD provider and had done it on the example I give early on "VCT" surely you could not lose, because your stock would have risen quite well and you could have constantly lifted the stop under it. Am I right here or have totally lost it? Please tell me. I would appreciate your comments on this lot techst.

 

[anley]

HHH, we're all rich with hindsight re that VCT, of course CFDs would have been the perfect vehicle for buying VCT back a year ago. But that's all in the past now, the past which always makes so much sense.

Let's now deal in the future.

Which stock do you presently own or which stock are you looking at that you believe will share the same price movement as VCT for 2006?

And if you have one, don't worry too much about cfd theory, stop losses, margin, interest payments etc - Just go out and buy it on 10:1 or 20:1 margin today. If it goes up like you think it will, the things mentioned above like interest as you rightly point out will hardly be a problem......

Not having a go at you HHH but things have just got a whole lot harder haven't they.............

 

[happyhappyhappy]

Hi anley, very much appreciate your post. I am thinking of keeping VCT as it is doing well and have recently bought BGY (doing ok with this). Thinking about buying RIO.

So are you telling me I understand this CFD thing correctly and should go ahead, because that is what I want to hear. Everyone is scaring me that I am missing something.

I think if I go in with a sensible amount and try to grow from there, I can always come out without too much damage if my fingers start to burn. Hopefully I know my shares and will do ok.

 

[anley]

HHH, you're not really missing anything as if you trade longer term with CFDs costs are not so much of a problem (bid-offer spreads as well as comms). What will make you win or lose big is your calling on the underlying share. For example, I would rather have triple the amount of costs but great stock picking skills rather than zero costs but every stock I pick goes the wrong way.

However, when you start to take on too much leverage (above 10:1 I would say) then even small movements in the stocks you trade can mean not only large losses but also giving back large % of your profits and then then game becomes more psychological than you would believe, believe me on this one.

My advice is therefore simple, do the opposite of what most new traders do when they approach CFDs, so instead of using maximum leverage and thinking it's the greatest thing since sliced bread use minimum leverage and realise that it's actually a very dangerous substance. You'll therefore need training in how to handle it. The training you can do yourself by starting off small, learning the ins/outs and then after at least 6 months up your size, then after a year up your size again. If you stock picking skills are good then in 5 years you'll be a lot richer.......

 

[techst]

I've do believe that if your gonna be a trader your going to have to take sometime to learn and study some of the concepts of trading and technical analysis. Which means finding out what swing/ position trading is. I've read close to a hundred books regarding investment, trading, technical analysis etc. And this is the type of dedication your going to have to require to trading consistently profitable.

Yes your are allow to move your stop anywhere you like, and it depends on the broker you use as to what charges you will incur. Using stops is more of an art than a science, put the them to close and you wiped out by the market, but you protect your bottomline. Put them further away and you may lose more per trade , but get stopped out less. Trading is full of these types of decisions, trade-offs and paradoxes.

You write 'surely you could not lose' but not every trade goes the way you expect. And as we enter the latter stages of this bull market more people are enticed in by how well stocks have been doing of the recent years. And can't possibly imagine losing money, or even think that a bear market will arrive.

What methods do you use for trading stocks? What signals an entry in your strategy? What's your exit strategy? What's rules have you made for money management? Are you gonna risk 2% of your capital per trade? Or are you gonna try the Optimal F, or fixed fraction methods?

If you can't answer most of these questions then your need to be studying and began getting familiar with these ideas and methods. Before you enter a trade no matter how long your trade it for, you need to be prepared for all outcomes. You need to stick to a well thought-out trading plan that works for you. My advice would be to read as much as you can. But read books that apply to what your trying to achieve. I've listing one book which would suit your style of trading. You might have more work ahead of you than you realise.

 

[anley]

Tech makes some good points especially about an potential ageing bullmarket.

Don't confuse that you're any good when you've made good money is a bull market.

 

[Mattybuoy]

I would recommend reading "Reminiscences of a Stock Operator", at least three times. At first, because it relates to the US market of about 100 years ago, it will seem confusing and possibly irrelevant. However, once you have worked out what it all means, it becomes clear that, in fact, nothing much has changed

 

[happyhappyhappy]

Cheers guys to all of you for all your help, I have NOT just gone and left this thread never to return, I am in fact doing lots of reading and checking up. You guys have given me plenty of food for thought. So I will be back once I am a little further along. Feel free to offer any further advice, as I will keep coming back to read any new bits on the t2w site. I want to start very soon with the CFD's if all goes well.

 

[anley]

HHH, I might be wrong of course but the logic of buying RIO when it's so far extended hoping it will extend yet further might be risky. Check out the 2 year chart.

 

[spreadrisk]

Agree with anley.
Gold and metals have had a great run, but RIO could easily drop like a stone very soon.
It could go right past any stop loss you set.

There are other ways of protecting a long position in RIO.
Shorting some other mining stock/index could be better than a Stop Loss, or some bearish Options position.

Good luck.

 

[techst]

My sentiments exactly anley, As a long term play RIO's bus left the station a few years ago, and the talk of entering this stock for the long haul is what spurred me to write the lengthy post above.