The real cost of a CFD?

[#1]

So much has been said about these instruments, I thought I would give my 2c worth. On paper, they look great 0.3%-0.5% commission shaded into the price, and JBAR rates on the holdings, no STRATE or taxes right? Well someone must be paying those taxes - so where are the costs? The answer is in the spread. CFD's don't allow you to enter into the bid/ask auction. you have to take your position on the extremes. Average spread on JSE topi shares is about 2% of ATR. With a share or SSF, you can enter the auction, and usually beat this. With a CFD, you have to absorb the cost. That equates to a massive hidden cost of up to 4% on the buy sell. bottom line? They are great for keeping transaction costs down, and the best instruments for position sizing (SSF's are practically the worst in this regard) but your slippage costs are potentially huge, and slippage really needs to be factored in to a trading system

[GL]

Ja ou skaaptjop. Ignore anything from a CFD house's marketing department. In fact, ignore anything from any marketing department. Just remember that there's no such thing as a free lunch, so someone, somewhere has to pay all these costs.

[#3]

Well I'm on a trend following system that allows me to give what I buy a free run for quite a while, so a % extra at trading time is not the end of the world for me, but time decay, rollover costs, position sizing and to a lesser extent minimum brokerages on the multiple small positions I have open is a definite show-stopper.

[#4]

Ja Vitorc, that is how i use them as well, for trend catching, and in this respect they can't be beat. Lots of smaller positions spread out across multiple industries. But you need at least a 2 week window - usually longer