SSF'S VS CFD'S

[alleycat]

How does one go about choosing the correct instrument to use ? What factors must be taken into account besides knowing that both have serious health warnings.

[STEVE1]

I dithered for a while then chose CFD's as a part time investor because I found close out and roll over just complicated my vision and blurred my concentration, also I know exactly how much interest I am paying. But beware - you need nerves plus extra cash to cover pull backs, stop losses also don't work necessarily in your favour, my last trade went 15% negative then bounced back to 46% positive because I sat it out for 2 weeks and paid the interest. Hope this benefits your decision, but be very careful you can get burnt. Steve.

[SimonPB]

stop losses do work and without them you will bust out sooner or later .. sure sometimes they bounce back and we focus on that fact, but that is not the point .. trading is about protecting capital, ask people who bought AMS at R1500 3 or 4 years ago if a stop loss works or not ..

[#4]

CFD's are far easier to position size - since SFF's work in batches.SSF's are also a bit complicated to work with, because the interest is worked into the price up front - so stoploss positions need additional calculation. Pricing is much of a muchness, and you got the counter party risk issue with CFD's, but with reputable brokers like STB, that should not be a problem. And don't ignore Simon's advise on stoplosses.

[THRESHOLD]

FUTURES are "truer" as the interest is fixed upfront. You pay interest on your position size less your initial margin - as if you had borrowed the money to secure the position. The margin moves outside this arrangement. With a CFD, you pay on the total (less the interest difference between your account rate and the interest rate on your deposit) - you then PAY on the growth in your position value as the bank settles at closeout and re-extends the position. This is paid at "instrument rate." The net effect is that the scale of your loan grows as your position grows. This can work to your benefit in a "short" position. For "longs" - SSF's are cheaper to carry.

[THRESHOLD]

STOP LOSSES seem like a disaster. Every time you use one - the market turns after you have been stopped out. BUT the one time you don't use them - OUCH! Traders dictate the movement of the market and these are their "points" - ignore at your own peril. If you don't like them - then rather become an investor.

[alleycat]

Thanks very much for the input but can a cost comparison be worked out if for example one traded say 10 ssf contracts and 10(or equivalent) cfd contracts on the same underlying bought at the same price and sold later at the same price to see the difference.

[SimonPB]

sure it can

[#9]

I think the difference on average will be marginal. It is not so easy to compare - because you have time to maturity considerations on an SSF - so it depends at what point in the contract lifespan you buy it - I am not sure about this, but I don't think the time decay factor is linear. But for all intents and purposes, the costs are about the same.

[WES]

Stop losses are very important, I have stop using outomated stop losses however, rather use price alerts and then place your sell order yourself, because the professional traders will waste you, by triggering your stop losses, you might experience in a single day "flash dips" created by traders, base your manual stop losses on closing prices.

[#11]

Yes, WES, this is a very important technique. Actually, I use a double stoploss system. I place my automated stoploss at the absolute limit that I am prepared to lose on a trade - but my intended stoploss is higher. I always attempt to exit a trade at my intended stop - therefore giving myself the ability to exit on a pullback.

[alleycat]

Once again thanks for the info especially regarding stops as this has been a problem being stopped out and then watching your trade carry on without you. Coming back to the original question of working out the variables between the two and as Simon says it can be done please can someone please show me how.