CFD Trading explained for Dummies

By cfdbroker

Contracts for Difference (CFDs) are contracts between a trader and a CFD Provider , who will at the close of the contract, exchange the difference between the opening price and the closing price of the underlying index, share, commodity, per the number of specified CFD contracts. A CFD differs from the traditional trading methods as it is not a purchase of the nominated investment, but trading on its speculated price movement. The main idea of CFDs is the ability to be able to trade higher volumes than traditional trading while using less initial capital. The buyer of the contracts is required to pay commission to enter the contract, plus fixed interest on the remaining value of the borrowed amount, until they decide to end the contract, at which time they are paid the price difference. The buyer may opt on either side - high (buy) or the low (sell), which means that if the contract was a low trade the buyer could still turn a profit it that was the initial investment. Advantages of CFDs versus traditional share buying This is done on leverage (this is typically between 5% and 35% for actively traded stocks), both shares and CFDs participate in all corporate actions, both buyers receive dividends but only the buyer of the share is able to vote and receive the franking credits. To select a great broker if you are trading in Asia, Australia, or UK visit CFD FX REPORT look at choosing a broker or simply email support@cfdfxreport.com as we have researched them all. With CFDs one is not entitled to these rights, which enables CFD sellers to sell with ease. This makes CFDs an excellent trading product. The leverage and ability to short sell gives power and flexibility. Unlike futures, CFDs do not have an expiry date, so one can hold on to them for as long as they desire. CFDs open up a whole new trading world, with the ability to trade shares, indices, foreign exchange, and commodities. CFDs are the flexible new way to trade. One can trade Singapore Stock Exchange (SGX) listed shares but you have access to worldwide markets, such as the United States (DOW, NASDAQ, S&P), United Kingdom (FTSE), Japan (NEIKKI), Hong Kong (Hang Seng) and many other countries. 1) Leverage If you do not have the money needed to trade shares directly on the Singapore Stock Exchange (SGX) trading CFDs can offer you the exposure required to make a profit from small percentage moves on the underlying share price. The leverage level offered by the CFD provider magnifies the underlying movement of the stock. Most providers set differing leverage levels and you can find the best level that suits you trading style. Certain CFD providers offer, at a cost, a Guaranteed Stop Loss (GSL) that can effectively increase leverage levels further by capping the margin requirement held against you.

2) Controlled Risk If you have ever traded, you know how important it is to use stop losses for capital preservation, especially when using a leveraged product. CFDs allow you to cut your losses quickly and leave your profits to run. This ability to quickly exit at the prevailing market price allows for greater risk control.

CFDs reflect the price of the underlying equity. Therefore, you will always know what the market price is of your shares and know what you can sell out for, provided you choose a CFD Provider who uses "at market" prices. Some CFD providers (market makers) may only give spreads, which have the potential to force you in at higher prices and out and lower prices.

Placing automated Stop Loss orders can exit you out of suggestions that go against you while you are busy in your day-to-day activities. Example: XYZ Ltd is currently trading at $9.95 bid and a $10.00 ask price. You want to buy 1000 shares of XYZ Ltd share CFDs at the offer price of $10.00, with your view that the stock will rise in price. We are working on the leverage margin of 1:10. Therefore every dollar of capital you invest the CFD provider will provide you with $10 of leverage.

CFD Trading Traditional Shares

Buy Price $10.00 Buy Price $10.00

Initial Margin (10%) $1,000 Initial Outlay $10,000

Brokerage $17 Brokerage $30

GST 5% $0 GST $1.50

Total Outlay $1,017 Total Outlay $10,031.50

Traditional brokers require that you have 100% of capital required for the trade upfront. The difference in funds required between the CFD provider and the traditional way of trading is $9,014.50.

Closing the trade

CFD Trading Traditional Shares

Sell Price $10.25 Sell Price $10.25

Gross Profit $250 Gross Profit $250

Brokerage $34 Brokerage $60

GST 5% $0 GST $3

Finance Charge $1.45 Finance Charge $0

Net profit/loss $218.55 Net profit/loss $187 In this example the trade was positive for the trader. If the stock had of fallen by $0.25, you would have realized a gross loss of $250 with both the CFD provider and the traditional broker. The net loss would have been $285.45 with the CFD provider and $313 with the traditional broker.

The difference in funds required between the CFD provider and the traditional way of trading is $9,014.50.

Closing the trade

CFD Trading Traditional Shares

Sell Price $10.25 Sell Price $10.25

Gross Profit $250 Gross Profit $250

Brokerage $34 Brokerage $60

GST 5% $0 GST $3

Finance Charge $1.45 Finance Charge $0

Net profit/loss $218.55 Net profit/loss $187

In this example the trade was positive for the trader.

If the stock had of fallen by $0.25, you would have realized a gross loss of $250 with both the CFD provider and the traditional broker.

The net loss would have been $285.45 with the CFD provider and $313 with the traditional broker. - 23159

About the Author:

The CFD FX REPORT is a real time trading tool that offers clients free trading reports, with trading ideas, stock market and forex market education as well helping them with. Also if you are looking for a Forex Broker, then feel free to visit our broker section as we recently reviewed all the forex brokers and have found the best on the market.

Forex Broker Indonesia- The Dummies Guide

By fx

As it seems the world economies are facing recession many people are searching for ways to generate extra income. One of the best ways to generate income is through trading the Forex Market. Now before you start trading the most important decision that you will make will be to find a great Forex Broker.

No matter if you are Forex Trading in India or Forex Trading in Australia, Forex trading can be risky, but it does have huge potential for you to either make a lot of money or lose a lot of money. If you have been around the market awhile you will realize that not all Forex Brokers are equal, and in fact some border being just plain rip off merchants. This can be a major turn off for many new investors, the fear of being ripped off by a Forex Broker.

So how can you find a Great Forex Broker if you are trading From Indonesia?

The great news is that there are some awesome forex brokers in the market. A good place to start is finding Forex Brokers as a referral or through a company that knows a lot about forex brokers. Recently the CFD FX REPORTresearched all the Forex Brokers and have found who they believe to be the best.

Now if you don't feel comfortable with that and you want to do all the hard work of researching brokers yourself, then here is a list of things to look about when looking for a great Forex Broker.

1. Find and validated the companies reputation- See what license they hold

2. Make sure they are tied to Forex legitmatly

3. If the company has just started stay away, they maybe fly by nighter

4. What sort of spreads do they offer

5. Do they offer stop losses?

6. Do they requite your orders? If the do stay away

7. What is the slippage?

8. Where is your money held? If it is not through a reputable bank stay away

Any trader serious about gaining extra knowledge and becoming a better trader should continue to educate themselves as great place for Free education lessons is the CFD FX REPORT they offer as host of great education lessons. You can also join there forum and chat to traders around the world, or visit there broker section and see who the expert recommend. This site is a must for anyone serious about trading. - 23159

About the Author:

The CFD FX REPORT is a real time trading tool that offers clients free trading reports, with trading ideas, stock market and forex market education as well helping them with. Also if you are looking for a Forex Broker, then feel free to visit our broker section as we recently reviewed all the forex brokers and have found the best on the market.

Currency Trading- The Strategies the Pro's Use

By fx

As it seems the world economies are facing recession many people are searching for ways to generate extra income. One of the best ways to generate income is through trading the CFD Market. The real power of CFD's is the ability to be able to go long or short, so you can still profit while the market falls.

Most beginner traders don't bother trying to follow the trend that has come about long term - instead they try to trade by forex scalping or day trading. These methods focus the trader on small moves and they hope to catch small profit however as most short term moves are random, this leads to equity eliminate and sending the trader broke.

The other alternatives are swing trading and long term forex trend following and this article is all about the latter method. If you look at any forex chart, you will see long-term term trends that last for months or years. These moves can and do yield serious profit - present we will outline a simple method to get them.

Breakouts- Trading on Confirmation of Break outs

By far the best way of catching the serious moves is to use a forex trading strategy based around breakouts. A breakout is simply a move on a forex chart where a new high or low is made and resistance or support is broken.

It's a fact that most leading moves start from new highs or lows. Right this an sit it next to your computer so that you don't forget it.

While it might appear that you are not buying or selling at the greatest level, you are in terms of the odds of the trend continuing. Most forex traders make the mistake of waiting for the breakout to come back and get in at a better price but these traders never get on board. The grounds for this is if a breakout occurs, then you have a new strong trend and a pullback is not very likely to occur. So you will the boat and therefore profits.

Most traders don't buy or sell breakouts and that's exactly why it's such a powerful method.

The only point to keep in mind is a support or resistance which is ruined, should be valid and that means at least 3 points in at least 2 different times frames. The more tests and the greater the spacing between the tests the more valid the level is.

Confirmation- Don't Guess it, Confirm IT

Of course not every breakout keeps and some reverse, these are false and can cause losses. You therefore need to confirm each move. All you need to do to achieve this is to put a few momentum indicators in your forex trading system to confirm your dealing signal.

These indicators give you an estimation of the strength and velocity of price and there are many to choose from. We don't have time to discuss them here (simply look up our other articles) but two of the greatest are - the stochastic and Relative Strength Index RSI

Stops and Targets

Stop points are easy with breakouts - Simply behind the breakout point.

If you have a serious trend then you need to be careful but you can milk it, so don't move your stop to soon and keep it outside of normal volatility. If it is a huge move, trailing stops should be held a long-term way back and the 40 day moving average is a good level to use.

You have to keep in mind that when the trend does eventually turn you are going to give some profit back. You don't know when the trend is going to end, so don't predict it.

It's ok to give a little bit back, as that's the nature of trading forex. Keep in mind if you got 50% of all leading trend you would be very rich. When you are long-term term trend following you have accept giving a bit back and taking dips in open equity as the trend develops - this is noise and does not affect the long term trend.

The above is a simple way to trade forex and catch the high odds moves that yield the serious profit. If you are learning forex dealing and want a simple method that is robust and will help you get every major move, then you should base your dealing on the above method.

Now that you have all the winning strategies, you now need to have a winning broker, recently the CFD FX Report has reviewed these brokers and have come up with Best Forex Broker.

Any trader serious about gaining extra knowledge and becoming a better trader should continue to educate themselves as great place for Free education lessons is the CFD FX REPORT they offer as host of great education lessons. You can also join there forum and chat to traders around the world, or visit there broker section and see who the expert recommend. This site is a must for anyone serious about trading. - 23159

About the Author:

The CFD FX REPORT is a real time trading tool that offers clients free trading reports, with trading ideas, stock market and forex market education as well helping them with. Also if you are looking for a Forex Broker, then feel free to visit our broker section as we recently reviewed all the forex brokers and have found the best on the market.

How Solid is Excess Brokerage Coverage (Full-Net-Equity Protection) for Losses Over $500,000?

By Jack Haddad

The Securities Investors Protection Corp. (SIPC), often assumed to be analogous to the Federal Deposit Insurance Corp. (FDIC), insures retail brokerage accounts for up to $500,000 each in the event of a catastrophic firm failure. The SIPC is non-profit organization funded by its member securities brokers, created by congress in 1970 to promote confidence in the US securities markets. The coverage is event-neutral in the sense that it replaces missing securities and cash whether they disappeared in an earthquake, fire,flood, or were stolen by a broker. Missing securities are replaced at their current market value which may be a fractionof their previous value.

To meet its obligations, SIPC currently has $1.25 billion of capital which invested in US Treasuries as required by law. It also has a $1.0 billion private syndicated line of credit to draw on should its capital be exhausted. On top of that, it has $1.0 billion in line of credit from the US Treasury.

To cover losses beyond that, brokererage firms have arrangements with the following insurers:

1. CAPCO (Customer Asset Protection Co.), which is a insurer of 14 brokerages, claims that it has no dollar limit on excess SIPC coverage; yet, if you desire to specifically inquire what the financial backing is for each customer coverage, president Frank Lagerstedt labels such information as "proprietary." Lagersterdt has legal backing for withholding the information. The New York State Insurance Dept has repeatedly denied my Freedom of Information Act (FOIA) request for CAPCO's financial information.

In fact, CAPCO declines to provide any information about its capitalization. The New York State Insurance Department denied Bloomberg Wealth Manager's FOIA to see the firm's financail statement, citing New york Insurance Law, section 7003 (c) (3). Under New York Insurance Law, section 7003 (c) (3), the information filed by a captive insurer in its application for licensing is "given confidential treatment and shall not be the subject to public inspection... except to the extent the superintendent finds release of information necessary to protect the public..."

Furthermore, it is not known how much reinsurance CAPCO has or how much of the member premiums go to boosting the company's capital. Also, CAPCO won't disclose whether memeber firms are required to ante up addtional capital if a large claim drains its resourses. Moreover, none of the company's officers explain how its "risk remote" potential liabilities are quantified. It is strongly believed that CAPCO is unable to quantify the risk for the same reasons the commercial insurers couldn't. For that matter, the company is most likely undercapitalized.

Member firms belonging to CAPCO are: Robert W. Baird, Bear Stearns, Credit Suisse First Boston, A.G. Edwards, Goldman Sachs, Edward Jones, Legg Mason Wood Walker, Lehman Brothers, J.P. Morgan Chase, Morgan Stanley, National Financial Services, Pershing, Raymand James Financial, and Watchovia Securities.

2. Lloyd's of London offers $150 million per customer but no more than a total of $600 million per broker-dealer for customer losses. Its client firms are Ameritrade, E*Trade, Merrill Lynch, Charles Schwab, Smith Barney, Citigroup, T.D. Waterhouse.

3. XL Insurance insures for up to $600 million in total customer losses. Its member firm is UBS Financial Services.

If brokerages are going to use excess SIPC coverage for their customers, don't they owe an explanation of how they intend to provide it? It is highly suggested that excess SIPC coverage is little more than a marketing tool for brokerages that say they offer it. Most brokers claim that they purchase insurance for the sleep-at-night factor, and that excess SIPC has always been a nice enhancement for clients.

It is my personal adamant belief that rather than considering the amount of excess SIPC coverage a firm carries, an investor should place more emphasis on its financial strength. - 23159

About the Author:

Dr. Jack Haddad, MD, MBA has been professionally trading the stock market since 1997 and had an annualized return of 39.4%. Dr. Haddad has recently launched MD Capital Management, an Investment Fund with Charles Schwab. The fund utilizes option hedging techniques to generate returns while minimizing risks. For more info, visit Jacks online group: MD Capital Management.

Forex Australia- Robots or Scams

By CFDREPORT

Forex Trading Australia Today the Forex Market has become very saturated and confusing with all the choices and options, both online and offline to begin your research on trading and making money. Where do you start and unless you have several free hours I couldn't list all of them here. In the market place today we can find seminars, articles, workshops, video tutorials, and books on the topic of how to make money currency trading. Everything from honest forex trading ideas, forex reports to Forex Scams. So if we are new to the market how do we not get ripped off?

If you decide to go with a broker, it's wise to consider all the various brokers' systems available to you before making your choice. If you are looking for the best Forex Broker have a look at the CFD FX Report they have recently reviewed all the Forex brokers in the market and come with who they believe to be the best you can view here The CFD FX REPORT

A well designed trading system will reduce your work dramatically. This in turn gives you time to focus on studying the market and plotting your strategy.

If you're like me however, there never seems to be enough time in the day between my family obligations and work to put in the serious study it takes to master the Forex market.

It is a pretty steep learning curve, and it can be pretty daunting at first for someone just learning how to trade. There is one more way to make money currency trading. It's probably the best bet for beginners and those of us who are pressed for time. The process is an auto-trading system, generally called a Forex Robot.

There are many of these Forex Robots out there, but they aren't all created equal. Many of these so called automated systems are nothing more than scams.

In other words, all Forex Robots are not created equal. I recently had a friend call me who had been trading on the currency market for some time, and was making some pretty good money trading Forex the traditional way. He excitedly told me that he had recently found a Forex Robot that was recommended by a fellow trader.

He went on to tell me that although he was skeptical of these automated Forex Robot systems, and believed like I did that most of them were scams, he decided to give it a try. The results were nothing short of brilliant.

However you need to find a product that you feel comfortable with. Feel free to visit the CFD FX REPORT as they may some good systems to look at.

Before you invest in any of theses products however, make sure you find out what the risk/reward profile is with the trading software you are looking at.

As an example, some of these software products come with risk/reward ratios of 2:1, while some even have a risk/reward ratio as high as 35:1.These ratios are not acceptable, and you need to look elsewhere, otherwise you'll lose all your trading funds pretty quickly.

Any automated trading software that comes with more than a 1:1 risk should be avoided like the plague. I want to emphasize that there are great Forex expert advisors and trading Robots that can make you good money, but you need to know how to recognize them, I have suggested a couple of places to start your search, but please do your own research.

It has been conclusively proven that automated products which adopt strict and professionally set guidelines and that will never allow you more than a 1:1 run, reduce the risk of destroying your trading account.

Did you know that there are average people out there making between $3500.00 to $4000.00 per mont trading the Forex market? How are they doing it? Find out how a powerful and "smart" Forex Robot is creating life-changing incomes for many people who have never traded the Currency market before.

Enjoy the Forex Market and all that it has to offer and have fun trading.

Happy Trading - 23159

About the Author:

The CFD FX REPORT