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Wednesday, August 3, 2016

CFD’s VS. FUTURES: YOU DO THE MATH








It’s a well known fact the Mrs. Watanabe’s of the world are not a “happy bunch” of ladies; first getting shellacked in the Yen carry trades of 10 years ago, now suffering the brunt of negative interest rates, and now watching declining or stagnate world stock indices. Throw in consistent losing trades in crude oil & gold into the mix, and is it any wonder they are collectively scratching their heads in disbelief.

So, as a “public service”, Yours Truly is making the algorithms available to anybody [even Mrs. Watanabe if she knows what’s good for her!] with free downloads or online viewing of the various algorithms along with important documentation. And where can Ho Lee Sheet & Wat Dee Fuk [along with other traders worldwide] get this financial porn? Easy Peezee; just take your eyes on a walk over to the right hand column and go to “Download Links” and click. All the files are for free at “box.com” and can be either viewed online or downloaded [no sign up needed; just click and view or click and download]. And just so you know, there’s a lot more files on the way.

Which brings me to today’s discussion; should I trade futures or should I trade CFD’s? For my money, it’s an easy answer; CFD’s beat futures hands down. Why? Take a look at the comparison table below of the CME versus LMFX; 2 glaring facts stand out. 1) much more favorable margin requirements, and 2) far greater flexibility in terms of risk management because you can easily adjust your volume levels to fit your trading style.




In the case of gold, specifically, you can trade spot gold in 1 Oz. increments [0.01 lots in the volume box on the MT4] with margin of 1% per Oz., giving up approximately 1 tick to the futures market [where the liquidity provider bank hedges] on fills. For me, if you’re losing money because of $0.10 per Oz., you’re doing something wrong! This is a market that consistently puts in daily ranges of $15 - $23 per Oz. [that’s 150 ticks – 230 ticks], so don’t sit there and tell me that 10 cents matters; it doesn’t.

With the SP500, you’re effective spread with commissions [round turn] is 0.42 index points; since the futures have a minimum spread of 0.25 [and forgetting whatever rate you pay with an FCM for commissions], you’re paying LESS THAN 1 TICK for access to a market that is 1/5th the size of the futures with approximately 80% less margin needed in your account.

SO, WITH THE OTHER MARKETS, DO THE MATH MRS. WATANABE!

Our “long only” Gold PAMM [managed money] will be ready here in the next few days; the added cost of the PAMM structure is a major problem for money managers, and makes some markets not worth trading or unavailable [hello stock indices & crude oil]; however, since spot gold is considered part of FX, the added cost of trading gold inside a PAMM for all of my clients is only $0.08 per Oz.; and that makes it the most attractive, lowest cost, consistently volatile market traded. Details on the Gold PAMM will be announced when it is ready; in the meantime, over in the “Download Links” section of the website is the link to open an LMFX account, which you have to do first anyway before you can have a PAMM account and participate. So, don’t wait until the last minute to sign up.

One more thing: I’m putting the incentive fee back at 17% of profits to make my PAMM one of the lowest cost structures for investors on the planet; this obviously puts a little more money into your account.

And now for commentary on today’s gold action.

Yup, Al Bundy pretty much sums everything up; sitting here watching this crap waiting for 1) August to be over with, 2) BOE interest rate meeting, and 3) Friday’s NFP to be released, it isn’t surprising there isn’t much interest right now.

So, today’s action? Well, I made one trade, and I had to wait for what seemed like a week. I mentioned in the algorithm manual, that you have to be really careful about buying any kind of waterfall or even down move when there is less than $13 per Oz. range; today points this out in spades, as the M1 had several small waterfalls on the way down, which I didn’t buy because of the small nature of the daily range. Starting at $12 per Oz., I’ll give it a shot, but I would much rather buy waterfalls with ranges for the day higher than $15 per Oz. When you wait, you probability of success is much greater than it is when the range is below $12 for the day.

Now, the chart below doesn’t really show a waterfall to get long, but 2 factors entered my trade thoughts; 1) NFP and the BOE loom tonight and Friday, and we have seen long stops get run for well over 2 hours with plum being under yellow the entire time, and 2) the market coming back and engulfing the 3 previous lows in one M1 candlestick. As the chart shows, I didn’t make all that much on the trade [about $1.30 per Oz.], and the range is still a paltry $12 and change with about 2 hours to go until the close. If I was trading the PAMM, I more than likely would have skipped this trade, and afterwards written the day off as a non event before key reports.

Have a great day everybody!
-vegas

OPEN A DEMO AND/OR LIVE ACCOUNT AT THE LMFX LINK IN THE “DOWNLOAD LINKS” SECTION OF THE WEBSITE TITLED “OPEN TRADING ACCOUNT – DO IT NOW!”

OUR LMFX GOLD TRADING PAMM WILL BE READY AS SOON AS LMFX GETS THROUGH WITH UPGRADES TO ITS PAMM SOFTWARE! WE ARE VERY CLOSE; OPEN YOUR LIVE TRADING ACCOUNT TODAY, FUND IT, AND BE READY TO PARTICIPATE!


 










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