CFD Trading Can Be Very Misleading... Here's How!

The topic of CFD trading has always been relatively popular, and rightfully so. The financial vehicle of CFD's (contract for difference) are very attractive and offer a whole lot of interesting benefits. The point of my video is not to bad mouth CFD's or those people who trade them, but rather, inform some of you about how they can be very misleading. If you live outside of the USA, then this video does not necessarily pertain to you; however, if you are a citizen of the USA, then please take some time to watch this video so that you are not mislead. In the world of social media, there are lots of traders out there posting lots of impressive results. Whether or not those results are actually real is a whole other conversation, but for the sake of this discussion, let's assume their trading results are genuine. Even if they are real, for us living in the USA, their results are extremely misleading due to a few characteristics that CFD's have to offer compared to trading stocks or options. I want to share these dynamics with you so that when you are forming opinions and structuring trade plans, you can do so with a full understanding and awareness of how CFD's work. This way, you can avoid building up bad trading strategies that are not based in reality! Let's get to it!

[gorayz]

Explained the concept of CFDs so simply, without getting into the text book of what CFDs are. Great!!

[NICO-Z-TRADER]

Great video. I am a CFD trader. What you say is true but there is also some slippage related to the execution and to the broker. Another difference is that CFDs use leverage and therefore you can trade larger size or mobilize less cash to enter trades depending on how you see it...

[H]

Correct me if I’m wrong but It’s funny how USA allows traders to lose more than what they put in the trade with Options but does not let you trade CFDs 😂

[crazyazn]

In Australia the 2 main day trading platforms are CFD based. I am not a huge fan of it because if you dont know what you are doing, you can rek yourself pretty easily. CFD are only for veteran traders.

[IIIIALBYIIII]

100% agree, great video man. In Australia, CFD is extremely regulated. People complaining about CFD and blaming the CFD brokers are usually bad at trading. Bloomberg's major sponsor is IG markets. Bloomberg will not allow a dodgy cfd company sponsor them.

[kingefrem]

Hi Clay, thanks for another great video. I always click like to your videos and am subscribed! Thank you.
I have traded CFD's the only thing that you mentioned that wasn't correct is that you get filled exactly as the stock market. If there are only 5 shares available at a certain price and the others are much higher. When you click to buy you will be getting it at several prices of what is available for the amount of shares you want to buy. So your fill price can be bad. Thank you!

[jbear]

You did open my eyes to CFD. I've never heard of it and had to look up what it meant because you never said what it actually stood for. Very interesting though. Thanks Clay, keep the videos coming please., Jeff

[benmills]

CFD trader from the UK here... that's not the case. You can only buy as many CFD contracts as there are shares floated.... Where did you get your info on this?

[thegarethofourtimes]

Hey Clay, thanks for the video and everything you do. I am a member of the inner circle and find it really useful as I am learning to trade stocks as an alternative to forex and indices which I am well used to. I am in the UK and trade using CFDs and I wanted to point out two other disadvantages to you:
1. Very often a stock with high short interest (e.g. AMC) cannot be shorted using a CFD account because the underlying stock cannot be borrowed by the broker. I have found this really frustrating!
2. Numerous small cap stocks are excluded as CFDs are leveraged and a lot of <$5 high volatility stocks are blocked from CFD traders. I have found this really frustrating!!
I have however found CFDs really useful for trading the SPY and other major indices. Keep up the good work pal!

[Investing]

You should do a video about CFD, so we can get a better idea of them!

[richard]

Good to find your video and very helpful, as a forex trader I never really understood how they work out the interest for holding positions overnight. I mean with forex the rollover is relatively small being the difference in interest rates between currency pairs. But presumably CFDs have no offset so the interest could be more significant cost to holding open positions for extended periods ?

[JDYT]

Always choose DMA (Direct Market Access ) CFD Broker. You be able to see your orders in real order book in real time & you can place Limit orders to avoid slippage. Never Trade with Market maker brokers Like 'IG Market " who never place your order in the real market.

[eggspanda]

I love CFD's I honestly never knew Americans couldnt trade them

[holio]

Is cfd contract based on real asset or just a gamble between you and the broker

[ronenkarni]

Thanks for the explanation.
I am from Israel and I am a CFD trader. Can you please explain what the difference is?
If I am not trading in real stocks then what exactly am I trading in?
And if I buy a quantity of shares in CFD why does it not affect the volatility of the stock

[afolabireny]

Which do you think is better to trade ?

[BostonIRE]

Thank you. How can the US trader trade CFDs? is there any way?

[oooyess]

Can you trade CFDs using order flow, footprint, TPO and volume profile?

[michaelsaucier]

Good thing it's not all CFDs and that it's mostly real market bc the market prices would never move without liquidity or lack thereof.

[Kawasaki_.]

Can someone pls help me, I use eightcap as my broker on meta trader 5 when I enter a sell position and it goes all the way down I get into the negative and looks like it turned into a buy position?