Using CFD to short

[pb]

Let me understand: if I use my CFD account purely for shorting, then:
1. I have as much time as my need (no expiry of contracts)
2. I get paid interest by the broker.

As long as I have a good money management strategy in place and have decent stock picking ability, I cannot lose, can I?

Why doesn't everyone do it then? You might say CGT, but how many on this board made a profit of more than £8,000 last year? I certainly didn't !

Or is my understanding totally wrong?

 

[peterpr]

Let me understand: if I use my CFD account purely for shorting, then:
1. I have as much time as my need (no expiry of contracts)
2. I get paid interest by the broker.

As long as I have a good money management strategy in place and have decent stock picking ability, I cannot lose, can I?

Why doesn't everyone do it then? You might say CGT, but how many on this board made a profit of more than £8,000 last year? I certainly didn't !

Or is my understanding totally wrong?

1 & 2 - correct on both counts BUT ----

You certainly can lose.

Interest payable on shorts is hardly worth the accounting entry hassle (average LIBOR -2% or thereabouts pa). If a position is held for more than a few days on an index then there will probably be a dividend deduction for at least one of the index constituents which will dwarf any interest earned. Get the timing wrong (or simply fail to consider the matter at the outset) and you may be caned for half a dozen dividends which could easily wipe out any profit on the trade. Conversely, on longs the dividends are yours.

There are pro's and con's, but CFD's are not a panacea for SB problems.

 

[henry766]

i've heared of buy and hold , but sell and hold?

 

[Jumpin]

Sell and hold, fine as long as it doesn't go up.. some shares actually DO go up! Then you can run into margin problems very fast if you don't watch out

 

[henry766]

exactly , stocks and shares actually "tend" to go up!!

 

[Jumpin]

But they do tend to go down a lot faster than they go up!

 

[pb]

Guys, guys: I said 'As long as I have a good money management strategy in place and have decent stock picking ability...'

 

[Jumpin]

You are laughing if you do that!

 

[henry766]

money management won't make an unprofitable system profitable , and selling in the long term goes against 500 years of evidence to the contrary , they do go down fast , but only in the short term , stocks are more than double what they were 10 years ago , and about a squillion times what they were 500 years ago.