Selection between SB and CFD

[Late-4]

Hello all,

This is my first post, but I've been reading this forum for about a year.

I've traded forex in the daily TF for a year with success. Now I'd like to see how my forex strategy works with indices and commodities. My strategy is 100% techical using PA with support and resistance, trendlines etc.. basic TA tools that work universally across most markets and TFs. I dont do fundamental analysis at all, so I think giving a shot at other markets would not be a bad idea.

I have read the stickies about the pros and cons of CFD and SB, but I still cant get a clear picture which one would suit me better, so I'd like to list some facts about my trading of which you guys could maybe base your suggestions on.

Also broker suggestions based on the following facts are very very welcome.

1. After a period (6 months) of demo trading with consistent success (if/when that happens) I would go live with a relatively large account. With a large account I dont mind paying a FIXED commission (not a percentage), but I'd of course prefer tight spreads.

2. I only trade the daily TF.

3. I am not from UK, where SB is tax free. I am not 100% sure but I think it is taxable here in Finland.

4. About the broker selection, since I would be trading a large account I dont give a sh*t about welcome gifts or bonuses. I will only consider brokers that are 'generally accepted' as good brokers, those that have deep liquidity pools, tight spreads, good customer service, BS free, somehow popular etc...

If the broker is good and offer FX trading (with good spreads) I will consider changing my FX broker also for the sake of having only 1 broker to trade with. A bonus would also be if the broker allows CFD or SB trading through MetaTrader4 (I dont know how common this is)

Finally I'd like to say i dont like testing things out and seeing what suits me best if it takes weeks or months. I truly belive that there is only 1 better options for me (SB of CFD) based on the facts listed above and maybe a few brokers to choose from.

Thank you in forehand!, I'm sure I'll find your thoughts useful!

Regards,
Late-4

 

[timsk]

Hi Late-4,
Welcome to T2W.

If you can't open a SB account in Finland - or if you have to pay tax on any profits - then your question becomes largely academic! A quick phone call or e-mail to any SB provider will determine the former and, similarly, your local tax office will determine the latter.

Assuming that you can have a SB account and that you don't have to pay tax (i.e. the same as U.K. residents), then you need to look at your holding periods. Given that you trade a daily timeframe, I'm assuming that you hold positions for a minimum of a few days and possibly much longer? There are no expiry dates with CFDs which might suit you well if you hold positions for any length of time. Then you need to compare overnight financing charges and how those levied by your chosen SB firm compare with CFDs. There are too many variables to offer a definitive answer but, based on what you've said, my leaning would be slightly towards CFDs.

Perhaps you could try a road test by opening a demo account of each, placing identical trades and monitoring which account accumulates the most / least charges and is most profitable over time?
Tim.

 

[Late-4]

Hi Late-4,
Welcome to T2W.

If you can't open a SB account in Finland - or if you have to pay tax on any profits - then your question becomes largely academic! A quick phone call or e-mail to any SB provider will determine the former and, similarly, your local tax office will determine the latter.

Assuming that you can have a SB account and that you don't have to pay tax (i.e. the same as U.K. residents), then you need to look at your holding periods. Given that you trade a daily timeframe, I'm assuming that you hold positions for a minimum of a few days and possibly much longer? There are no expiry dates with CFDs which might suit you well if you hold positions for any length of time. Then you need to compare overnight financing charges and how those levied by your chosen SB firm compare with CFDs. There are too many variables to offer a definitive answer but, based on what you've said, my leaning would be slightly towards CFDs.

Perhaps you could try a road test by opening a demo account of each, placing identical trades and monitoring which account accumulates the most / least charges and is most profitable over time?
Tim.

Thanks for the quick answer timsk, that was very helpful!

I did some research and as a result I found out that SB profits are taxable income here in Finland. Also I found out that the biggest and most popular SB brokers dont even allow SB accounts for residents outside UK. So I think the best choice for me is CFD broker with direct market access, would you agree? Is there any reason for choose a NON-dma broker when spread betting isn't an option?

Now, I guess, its just up to finding the right broker for me. Suggestions are very welcome.

- MetaTrader4 as a charting platform would nice since I am already familiar with that with my current broker (not a necessary requirement)
- A good 'reputation' with FX would also be nice, but not necessary (It would be just simpler to deal with 1 broker)
- The size of the minimum deposit doesnt matter if the broker is worth it
- Again, starting bonuses doesnt matter

So to sum it up:
I'd like the best broker there is for DMA CFD trading. CFD trading through MT4 and a possibility to trade FX are just nice bonuses.

I know there isnt the one and only best broker, but it is surprisingly hard to find the best ones. In T2W reviews section the best ranked brokers only have a few real reviews and the ones that are mostly talked about (CMC markets and capital spreads) are not that high in the T2W ratings.

Late-4

 

[timsk]

Hi Late-4,
Everything you've said makes sense to me. However, I don't trade forex or have a CFD account - so I can't help you any further I'm afraid. I might be wrong about this, so take this comment with a pinch of salt, but my impression is that most CFD brokers are DMA these days. The 'issues' associated with Spread Betting brokers don't apply to the same extent in the CFD arena. But do please get confirmation from someone who knows more about this than me.

In your shoes, I'd trawl recent threads in the Spread Betting & CFD forum, looking for members who trade CFDs and appear to know their onions. Then ask them for their views about brokers either on the thread or privately via PM. Most people will offer you their opinion if you ask them.

Good luck! Oh, one other thing - when you make your decision - do please write a review of the firm you end up with!
Cheers,
Tim.

 

[Late-4]

Thanks Tim,

This is my believe too. But I also think a DMA broker would happily inform that in their website with big letters if it is. I will certainly write a review when I have tried one out.

Spread betting brokers are usually mentioned as market makers. Any opinions about DMA spread betting? ProSpreads offers this option.

Also I can see that many brokers are trading names of LondonCapitalGroup like:

Capital Spreads
ProSpreads
Capital CFDs
LCG MT
InterTrader

Any opinions about these listed? Both Capital Spreads and InterTrader offer spread betting so I can assume they have the same liquidity providers etc?

Some commonly known CFD brokers:

Interactive Brokers (IB)
ATC Brokers
CMC Markets
IG

Any opinions about these?

Thanks,
Late-4

 

[Late-4]

Hi,

Just got an email from LondonCapitalGroup. They said they dont offer DMA at all for CFDs, but they do offer a MT4 platform for CFD trading.

MT4 | Metatrader 4 | Market Information | LCG MT Here are their market information.

You guys think these spreads are reasonable? I mean altough this isnt a DMA trading I know that LCG is a big caliber company and I dont believe they would rip me off.

Still pleased to take opinions about the ones on the last post and others as well.

Thx,
Late-4