I’m new to CFD pricing, though know a thing or two about price formation generally. I hope the photos I’ve tried to attach a) are attached, and b) someone can explain why on this rock of a planet I am not just underwater, but efffing miles underwater. If this is how CFD platforms operate, they should be banned. You could furnish a Shakespeare with stage notes in a chasm that wide.
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CFDs are using the spread, which is the difference between the buy and the sell price. When you sell (go short) you sell for the sell price, but when you close your position the buy price is used.
Example:
Buy price is 10,00
Sell price is 9,00
You sell 100 CFDs. Which is 900,00. But your position has to close with the buy price, which is 1.000,00. At that moment your are in a loss for 100,00. When price goes up in stead of going down, your loss will go up. With leverage!
Remember that there is a practice account in which you can learn how CFDs work.
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So the red line draw is where you went short by using the SELL. You wanted the price to drop but it went much higher.
In SELL positions you need to focus on the buy green line. You can see the price went up dramatically after you took a short position hence why so much based on your leveraged amount.
You’ll need the ASK 5.12 to fall below your 4.69 to be in profit.
The spread is pretty massive.
It’s easier to visualise the spread on the web platform. You can actually show Phil’s red and green lines on the chart at the same time by right clicking and choosing both buy and sell price.
Also play around with the practice account for a while to get used to the spread, especially now as it has basically doubled in size recently.
Okay - gotcha; and thanks very much for the info.
But a spread of nearing 10% - is that normal on a mainstream name (albeit an equity listed on ASX)? It’s a multi billion market cap blue chip! How can someone make an informed investment decision if the possibiity of the buy and sell divorcing and moving out to different cities is present even in markets where liquidity in the underlying is a given minus a Twin Towers or ban on kerosene-based fossil fuel? And CoVID - if anything, surely must serve to pressure the Buy downwards and/or Sell upwards, no?
its why quite a few of us have been shouting for the past few months about it as the spreads are crazy
It is these days. This CFD platform has been crippled recently and many users have moved away from it. Unless the CEO of Qantas flies into the Eiffel Tower you’ll be in the red for a while.
What’s the FCA’s view on this nonsense?
This is 10% on a global international airline. And Bloomberg reckon’s the current spot is 4.80 AUD, rather than the 5.00 AUD 212 is shitting out.
https://financefeeds.com/fca-claims-interventions-tackled-harm-cfd-market/
CFD provision is a competitive business, so usual market pressures apply. Any CFD provider with abnormally large spreads will find its clients migrating elsewhere.
Pricing differs from platform to platform. Eg IG has smaller spreads but each trade costs a fee of at least £10. Trading 212 has £0 fee.
I don’t trade stocks with those spreads (unless you know something is crashing). CFDs are excellent to trade futures, forex and commodities though.
A CFD provider can define any spread it’s up to you if you play the game.
I would agree the odds are heavily stacked with needing so much movement before you are in green.
Interesting to see what it’s done since the march Covid drop with your short position in red and the current ask in green.
Looks like a bullish run 3 to 5.5 and that would have been the best point to go short. As I too would bet it should be going down from there.
