I have been learning CFD trading recently, and I am wondering if someone can give me a quick run down on a couple of questions I have.
Often I find a summarised reply from someone personalised to your question can eliminate hours or searching for information in the wrong places, and help to hone your quest for a comprehensive answer by pointing you in the right direction.
So any replies would be most appreciated.
1.) Profit/Loss - Does the broker rely on people losing money to make money?
- a) CFDs have a spread, how much does that contribute to the brokers profit as a percentage roughly. I.E would they still be profitable if more than say 60% of the customers were turning a consistent profit, because they make enough from the spread alone?
- b) If brokers make profit because most people lose money, is this not an ominous sign of what will happen in the long term to your account?
- c) Is there really a class of trader who IS consistently profitable above luck, and is the difference between those and the majority who lose a knowledge/experience thing. I.E Can a person who is smart and dedicated transcend the expectation of losing.
2) Flexibility of CFDs.
- a) Lets take trading crude oil as an example. With a CFD I can buy when I want, and exit when I want. Instantly. Is there another instrument I can do this with in both an up and down direction?
- b) If yes to a, is there an instrument that does not have a spread, but instead a percentage or one off price?
- c) If yes to both above, Why would anyone bother with CFDs?
Basically my research so far shows that If I could trade like I do with CFD's but without the spread, being profitable would be extremely easy. The problem being that your stop loss has to be to far back because you are starting in loss. 90% of the time my short term trades hit my exit point within 1 - 2 mins... but often they will dip momentarily to my stop before heading in the desired direction. That would be fine if I did not have to put my stop loss so far back because of spread...
My trading without stops has been more profitable, but I am not prepared to trade without them. If instead I could still have the flexibility, yet start off neutral my stops become tighter, and my rate of correctly analysing the trend more often than not results overall in a profit.
Is it a case of "Well duh, that is the point of the spread... if you could trade without it would be too easy."?