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ananda77
26-10-2006, 04:17 PM
...free seminar (profit strategies.com.au): 8th. and 9th. November, Sky City Convention Centre; just registered and was confirmed as one of the 150 free entries trading with the CMC Market platform...

...CMC Markets: value ~$4000.-

...see you there and Kind Regards

pimpit
26-10-2006, 05:30 PM
I been to a one in brisbane, its interesting, I decided only to use cmc to trade fx.

Ricardo
27-10-2006, 08:03 AM
I'll be there.
They need some successful traders out there, so its in their interest to run quality courses. It might all be in books and on the web, but nothing like human interaction to inspire and get techniques across.

Still one thing I havn't got my head around. If all CFD traders were consistently profitable, could the company make money from the commissions alone?

ananda77
27-10-2006, 08:32 AM
...well Ricardo, assumptions are, that 80%(!!!!) of traders in the share-and derivative markets are loosing money

...it's hard work, but with a good strategy also rewarding

Kind Regards

peat
31-10-2006, 02:57 PM
I'm booked in and getting a couple of days off work to attend this. Seemed like too good an opportunity to give up.

George
04-11-2006, 05:53 AM
Interesting - this page on another forum raises a query about CMC ie a 40 pip move in a minute in the Euro/USD pair on their platform while there is no spike on an alternative platform.

http://www.mysharetrading.com/2006/05/26/cmc-markets-forex-dealer-discrepancies.htm

I have seen these price spikes in other stocks, ALL for one, and while there seems little doubt that market makers can influence prices, wonder if CMC (also a market maker) can do so while another
platform does not.

Makes a case for only having mental stops (need discipline) but placing electronic sell orders at a high level in case of one of these spikes (play their game).

However, may attend seminar, interested in the forex service.
George.

Ricardo
04-11-2006, 10:04 AM
George, I've come across are a few posts re CMC on the net. Along the lines of what you are saying, but relating to stocks rather than forex, the bid and ask quotes are CMC's, and not the NZX, ASX or whatever you are trading.
They are obviously closely related, but I have seen the comment that if you are short term trading you must use the Marketmaker charts and indicators. If you have a live feed into your own software the signals you get could get you into trouble if you use them for timing your entry / exit via Marketmaker.

Snapper
08-11-2006, 08:30 AM
Hopefully this isn't a Freudian slip!!

Free CFD seminars
If you would like to find out more about CFDs come along to a Free introsuction to CFDs seminar.

The seminar will be an education session, designed to outline the benefits of trading Share, Index, Sector, Treasury and Commodity CFDs on the New Zealand, Australian, US, UK and other global markets.
Learn more >


Where
Date


Auckland Wed 15th Nov, 2006 Register now
Christchurch Sat 18th Nov, 2006 Register now
Hamilton Wed 20th Nov, 2006 Register now
Rotorua Wed 22nd Nov, 2006 Register now
Tauranga Tues 21st Nov, 2006 Register now
Taupo Tues 21st Nov, 2006 Register now

Might go along myself though!

peat
08-11-2006, 08:50 PM
The first day of AIM seminar (Active Investor Methods) :

A roadmap covering a lot of basics , lots of motivational stuff and a few strategies. Tho it was really pushing to sell you more training or expensive software.
Profit Source was the name of the technical analysis software and costing you a mere $4190 NZD. It does look pretty slick tho, it applies EW counts over the charts and identifies patterns for you across the companies it charts. Real time data costs extra but you get 12 months of EOD feed.

http://www.optionetics.com/tools/software/profitsource/

He does give a nice analysis of how to trade waves 4 or 5 however this is using proprietary oscillators and a Range Projector only found on the software. I imagine you could model these yourself tho. The strategy itself is straight forward and systematic ie repeatable.

I certainly am learning things but this course is not purely educational.

George
09-11-2006, 06:58 PM
How do you make money from trading when you don't know how to trade or find it too hard to make money - easy - you go on the road and sell trading software and systems.
A quote from "Fraud in the City" by Rowan Bosworth-Davies
"Fraudsters operate under the idea that anyone who believes what they tell them deserve to be ripped off"

peat
10-11-2006, 08:31 PM
Devon Pearsall did teach some valuable strategies in this course , but huge sell pitch too. All in all - I found it really valuable. I probably wont purchase the software however. Its just a bit too pricey. I know it would improve my trading tho and thats the burn.
And those training courses were expensive, gotta admit sometimes I wondered if it really was "the more you learn the more you <s>earn</s> burn".

FTG
10-11-2006, 09:40 PM
Hey guys that attended the seminar.

How did the trading recommendations that they made go?

Ricardo
11-11-2006, 02:53 PM
The only NZ signal that the ProfitSource software found (using the waves they restricted the seminar coverage to) was a sell for FPA. (with target $3.02 if going short)
I was kicking myself, as I'm long FPA. However, figured I'd short some CFD's as a hedge when I got home on Friday, only to find FPA had closed up significantly both Thursday and Friday.
To their credit, they pointed out more than once no system is 100% accurate.

I'm not buying the software, as I see Elliott wave as just another of many tools, although if this is your tool of choice, ProfitSource seems to make use of the Elliott wave reasonably straight forward.

peat
12-11-2006, 05:53 AM
yeh I was able to look at FPA during the lunchbreak after he identified that trade to short FPA. I almost shorted it but it was going up as I flirted with the sell button, and in fact broke his stop loss of 3.92 in front of my eyes when it gapped up to $4.00.
There had been a profit announcement minutes earlier.
And yeh I dont hold that trade failing against him or the software. Trading is probability.

George
12-11-2006, 07:51 AM
What commission and spread would have been involved with that trade, say for 5000 shares. Also, did they highlight the risks involved?
What costs are involved once signed up? How are they better than warrants?
A friend spent thousands buying Jamie McIntyres option course where my friend concentrated on bull put spreads. Got into WPL just before they spiked down and was exercised. A 10,000 parcel which he had no intention of buying for about $450,000 cost him nearly $5000 in commissions when he sold out - they had never told him about this risk. I had mentioned to him after he won his (first) $600 trade that if he broke even his first year he would be doing well. He didn't understand that, the 600 was so easy, now he knows different.

Not an Elliot fan, but can't see any reason to short FPA with a rising RSI and supports at 360-375 and a slightly rising trend line if you disregard the short spike down to 340 end of September.

Ricardo
12-11-2006, 12:28 PM
George, the commissions were disclosed, but the "risk" of these hitting you wasn't. It's 0.1% with $10 minimum, which sounds like your friend would have been up for close to $5000 if using CFD's through CMC.
Devon (the presenter) did remind us of how much commissions used to be in the bad old days (several hundred dollars for a typical share trade), and how with CFD's we're normally looking at $10.
Most clients apparently have accounts of $5000 to $20,000 so it wasn't really misleading as most of their trades will be of a size to attract round about the minimum.
If you go big-time presumably you have enough brains to work all your costs out in advance. All the risks are laid out in the paperwork you sign when opening an account.

If you fronted up at the seminar with little experience you could quite easily have just heard the good stuff, and come away believing Elliott was the Holy Grail. I would like to get all those present that bought the software back in 6 months and see how they were doing.

It was pointed out that money management was critical. A "winning system" would still loose without it. Hopefully the less experienced took this on board.

Alpine Dragon
16-12-2006, 10:41 AM
Can some one who has used CMC Market's CFD's readily, tell me how their Interest charging system works?

say a share is 10.00 and you buy 1000 of them with 10% margin (100 of your own money, 900 of theirs). Is the interest worked out at:

$900 * ( Interest rate / 365)

every night?

More I'm wondering whether or not this is a possible alternative to using Margin lending for long term exposure to shares of your choice.

Thanks in advance.

Halebop
16-12-2006, 11:05 AM
Interest expense is calculated daily. I'm not sure if interest revenue is?

Keep in mind that CFDs mean you have to use margin at a prescribed ratio even if you have all the cash you need and you should also have the readies available to make good on margin calls. This is a real but hidden cost of margin - you are forced to have lazy money lying around as insurance.

Additionally, CMC make their own market. There doesn't have to be a real long or short share in the background supporting your transaction. This means you are dealing on a promise rather than a guarantee. Being up $10,000 or $10,000,000 on paper is no good to you if CMC go broke as a consequence of sour trades. To me this means the returns you earn need to be demonstrably higher to compensate the risk of market maker collapse rather than plain old vanilla market collapse.

If you are prepared to borrow funds to go long in shares and have the readies to support margin calls then CFDs can be superior in one respect. Franked dividends are paid as gross interest. While most people get excited about "tax free" dividends in reality you are better off getting a grossed dividend and paying tax later. Depending what country you trade from (and the vagaries of your local witholding tax system?) cash flow is superior when receiving a gross payment rather than netted - much easier to pay your margin interest bill with a 9 percent grossed dividend than a 6 percent netted one and only clawing the difference back at tax time.

Ricardo
16-12-2006, 11:25 AM
Halebop
From your response to the last query you seem to be up with the play.
You may be able to answer something that I havn't got a black or white answer on yet. I asked a CMC rep how they made money, with the obvious answer "commissions".

My own thinking is that its trickier than that. As they are market makers and do not necessarily buy the underlying shares, when you buy 10,000 CFD's at $10 each, margin 3%, the interest you pay on the $97,000 you supposedly "borrowed" is pure cash in hand for them, as they have not committed $100,000 into buying the shares your CFD is for. They lose some of that on short cfd's, but most clients are long, and the interest they pay is lower than what they charge.

As Daryl Guppy notes in his CFD ebook, it is similar in many respects to the bucket shops of earlier times.
(This is not to say they are bad, as they are now regulated, and our cash is in a trust account.)

Have I got it right, or totally off track? Your thoughts please.

Halebop
16-12-2006, 12:50 PM
I'm really not up with the play. I've talked to CMC in Australia & New Zealand. I've analysed their published financials in the UK. I can't for the life of me determine where specifically they make money (remembering they have to make money off me - I'm the only one paying cash). Here's what I can determine from published materials and comments from CMC staff:

They proprietary trade. Having a database of customers and knowing the aggregate short or long positions would allow them to take hedging, supporting or opposing positions in the same physical markets. While this is a legitimate risk management tool I suspect it can be used as a profit maximization tool. Who would be the overall loser in this process?

They charge a fee per transaction that exists only on their system and doesn't have to be passed through or shared with a clearing house or market operator. This means the fee, as low as it is, could easily be very proftiable even after removing call centre, internet development and software support costs.

As you say, they charge interest. If their proprietary trading is risk neutral versus contracts written, then the interest charged is "free money". Your $97,000 loan to them exists only on paper - there is no real asset involved. If they can hedge your $100,000 trade in physical wholesale markets using options or similar, then their cost might only be hundreds of dollars per annum versus the thousands they charge in interest. Also, the bigger their customer base, the less hedging might be required as opposing customers self hedge the aggregate risk but everyone pays the interest to CMC all the same. A fantastically profitable business model that becomes proportionately more profitable as they grow bigger.

Overall though I was unimpressed with their feedback on how trades were covered - i.e. How certain was I that my "profitable" position was going to be covered? They ummmed and ahhhed when I asked if they trade against my position which I think would reflect that they hedge or trade against at least the aggregate position. Finally, the interest rates were in the ball park but not especially enticing. If you have a house or other physical assets it would be cheaper to mortage those and buy physical shares without the need of keeping some margin call cash at hand.

Disclosure: I'm not keen on borrowing so am not a natural customer for a CFD provider.

Halebop
16-12-2006, 03:51 PM
quote:Originally posted by aspex

Halebop,
With respect, I think you have missed the vital point.
'If you have a house or other physical assets it would be cheaper to mortage those and buy physical shares without the need of keeping some margin call cash at hand.'
The costs of doing the above are massive and you would not do it short term. With the CFD concept, the costs are known and simple even if you consider them costly. Compare your $20 in and out to even the fee to get a mortgage. Also would you raise the mortgage and invest the same day?
It is all a matter of getting the brain around a concept.

Aspex if I have an asset with a mortgage secured by a revolving credit facility or similar hybrid my extra cost is only the interest paid on additional monies drawn down - on a bricks and mortar asset this interest even with the additional "revolving" fee would still be about what the CFD provider charges. If your credit is good the cost could be lower, not higher - but of course this relates to the fundamental concept of borrowing and risk analysis. Those who least need to borrow (or who in fact don't borrow) enjoy the best rate offers.

If it comes down to a $10 or $20 difference in execution costs then we really aren't talking much money and that is still ignoring the execution risk of dealing with a market maker in theoretical securities. (The difference in charges could be viewed as an insurance premium you are paying for buying a real security rather than a theoretical one). If my sharebroker goes under I have the painful experience registering my shares with another broker. If my CFD market maker goes under my shares don't exist at all.


quote:Originally posted by aspex

Example: If I own 10000 TEL which is say $47000 and I see TEL fall by 10 cents over the day that is a $1000 immediate loss of capital.
If I started with $5000 in a CFD account and a financing charge of $4700, the fall is still $1000 and requiring me to add some cash to avoid a wipe out. However the other $42300 is either still in TEL (Case 1) or I have some in the bank or equivalent assets - maybe (Case 2).The differences are:
a. I am paying $11.00 each day as interest (possibly tax deductible)
b. If I want to sell my TEL I pay at least $30 and probably more v $10 to clear the CFD
c. If I raised a mortgage previously and sell the TEL the cash sits on deposit at less than 5% after tax compared to the 8%+ on the mortgage.

Flexibility is the watchword

Telecom Shares $47,000 and Cash $0
vs
Telecom CFDs $47,000, Cash $42,300 (7.2%) and Margin -$42,300 (9%)

The shares and CFDs return the same income, the only difference is that one is franked and the other is grossed.

The cash on deposit returns $3,045.60 @ 7%, while the margin returns -3,807 at 9%. A net cost of $761.40. (I'm ignoring the fact that you need to keep cash on deposit with the market maker to meet the margin call and they pay a lower overnight rate rather than a term depsoit rate, so net costs would likely be worse than presented).

Tax deductability? At a 39% marginal tax rate your $292.95 tax return cost you $761.40, still a net loss of $468.45 and before you get to make the deduction you are assuming the risk that there is other income to deduct against.

So the only logical argument for making the CFD investment is that you believe Telecome shares will rise in value faster than the interest rate. In other words it is simply leverage with the attendant risk / reward trade off but the additional risk that the market maker might no

Halebop
17-12-2006, 08:51 AM
Aspex I'm not ignoring flexibility. I just don't see a cost / benefit advantage. If the underlying share is liquid there shouldn't be any problems quickly executing a buy or sale within an acceptable price range. If the share is illiquid a CFD provides a benefit but that share is going to be more volatile anyway so even "market value" becomes subjective. In terms of hedging I can use options, short selling or any number of hybrids in a physical market. My physical shares can also be lent out or borrowed against. It would be a brave lender who did the same for your CFD equity.

In theory leverage should provide higher returns but this can only be true in cases where where the extra borrowings were also invested rather than sitting around lazily as cash. Over time I suspect if volatility was factored in any qualitative study, outperformance would be eaten up in the instances where dips swallowed not only capital but also the ability of investors to make margin calls.

Ricardo
17-12-2006, 10:43 AM
Halebop
Thanks for your comprehensive reply.
I consider how the CFD provider makes income to be of some importance as the risk of dealing with them would be related to their financial performance and stability.
That CMC glossed over something I considered important caused me some concern. One of their staff actually said how it works doesn't matter. To me it does matter. If I can't see why something is viable I am reluctant to touch it.
Seeing that CFD providers are growing astronomically, particularly in Australia, certainly indicates the business is profitable, so "investing" with them should be safe.
You confirm what I suspected to be the means of generating income. In reply to a query about performance of the Marketmaker trading platform, the CMC rep at the Auckland Profit Strategies course said they routinely have 15,000 users on the platform simultaneously (I assume worldwide), so that would equate to quite a hunk of commission income, even with index trades being commission free.

You've raised an interesting side issue with Aspex. For most people the merits of the various approaches to investing and margin are irrelevant. The big appeal of CFD's is to emulate Catherine Davy, and turn $13,000 into $30,000 in three months. Similar returns may well be possible with options, but for most this is too complicated.
CFD's seem an easy way to riches with very little starting capital.