A Lesson in Leverage

One of the main advantages of CFD Trading is the ability to apply leverage. The most important part of trading with CFDs is to understand how they work and how the leverage can act like a double edged sword. A trivial topic to discuss but an important lesson to reiterate. CFDs can be traded long or short, as such you can lose out either way if the market goes against you. What is leverage?

The Cost of Holding a Position

When you trade with derivatives, especially utilising Contracts For Difference's (CFD's) your break even price is dynamic.

If you trade with options and similarly with warrants, there is time decay to consider. With CFD's as well as forex contracts, the price of holding a position is much simpler than dealing with delta's that define decay with derivative instruments such as options.

Read the full article: "The Price of Holding a Position"

CMC Markets Down

When looking for CFD dealers and stock brokers you want them to be perfect in everyway here was a glitch that occurred with CMC Markets. Here's a preview:

Volatility and Share Trading

Volatility is an Important Aspect of Short Term Share Trading: I realised early in the game of share trading that my trading style called for volatility. Since my capital was limited I was playing with leverage, be it with CFDs or warrants. Everyday that ticks by, holding the CFD or the warrant costs me interest. To limit my interest costs I needed to find stocks that were trending and were volatile enough for me to pocket myself some profit. You can find some of my target list of stocks to trade in this target list. According to CMC markets records BHP has been the most traded stock on their platform for a few months running now. The reason is that this stock is cheap enough to trade with and it is highly volatile.

My Hit List for ASX Australian Stocks - 3 per cent margin CFD

This list of the stocks are on my hit list. They are (or I think that are) on the top 20 stocks of the Australian Stock Exchange (ASX). But the main reason why I've sifted thse 20 stocks is that my broker gives me the largest leverage with these stocks. At 3% down with CFDs they are the lowest margin rates around. Although you are liable for more interest, they provide you with higher risk/reward ratio - hence you must have a tight risk management strategy before you start trading these stocks with CFDs.

ANZ - Australia & New Zealand Banking Group Ltd
BHP - BHP Billiton Ltd
CBA - Commonwealth Bank of Australia
FGL - Foster's Group Ltd
IAG - Insurance Australia Group Ltd

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