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DMA or Market Makers Questions and Answers

Contracts for Difference FAQs

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Q. So are there different types of CFD providers?

Q. What is direct market access and how does trading inside the spread works?

Q. What is the difference between a direct market access broker and a market maker provider?

Q. Given the advantages of DMA over a quote-driven platform why would anyone want to use a quote-driven broker?

Q. Is it a good idea to steer clear of market makers?

Q. How safe are client funds?

Q. The small print on CFD/spread betting accounts worries me…

Q. Why do brokers reserve the right to close out a short position or change the margin requirements?

Q. Maybe this is why most of the providers insist on only taking on ‘intermediate’ customers?

Q. Do you have any general advice in dealing with providers?

Q. Does my broker hedge all client CFD positions as opposed to spread betting?

Q. As I understand that some CFD providers hedge their client positions on the stock market by shadowing client trades…don’t they get charged stamp duty?

Q. Comparing Listed CFDs to other derivatives and normal contracts for difference what outweighs the other, risk out of the way?

Q. What are your thoughts on options?

Q. European online brokers do not offer equity and index options to retail traders like their USA counterparts do. True? If so, why?

Q. Are CFDs in the UK the equivalent of what options are in the USA?

Q. What about using CFDs in conjunction with options to minimise the risk?

Q. I have seen mention of the Greeks in options…but what are they?

Q. A CFD seems to be very much like a single stock futures contract, what’s the difference?

Q. What are Binary CFDs?

Q. Are CFDs better to trade than options? Should I trade CFDs instead of options?

Q. I’ve heard about a strategy where one trades CFDs using puts?

Q. What do you think about writing covered calls, while short selling the stock as a hedge to your position?

Q. What are Covered Warrants?

Q. What is the difference between Covered Warrants and Turbos?

Q. How do CFDs compare to Warrants?

Q. What is the difference between Covered Warrants and Options?

Q. What’s the difference between stocks and futures?

Q. What are stock futures?

Q. I’ve read that trading futures is better than equities for a small-time starting trader because far less capital is at risk…

Q. What are stock index futures?

Q. How do CFDs compare to futures?

Q. Is a Trust able to invest in CFDs?

Q. Are CFDs allowed in Sipps?

Q. Are there any advantages of trading a Contract for Difference (CFD) in a Self- Invested Personal Pension (Sipp)?

Q. Can you give me ideas on how to research stocks?

Q. But how do you predict the market direction?

Q. What technical indicators do you use to help you predict the market direction?

Q. What is Value Investing?

Q. But why do you believe Value can work?

Q. I’m looking to trade companies that are undervalued but fundamentally sound? How do I track such companies?

Q. What is best: using technical analysis or fundamental analysis to formulate a trade plan?

Q. How long does it take the average person to learn how to trade well?

Q. Should I trade intraday or end-of-day or both?

Q. But do you do any kind of mental preparation?

Q. Why is there so such volatility in some markets?

Q. But how difficult is day trading? How long does it take to be successful?

Q. What do you think about swing trading?

Q. Any recommended firms for retail scalping of Dow or related?

Q. How do you improve your trading strategy?

Q. What is risk appetite and risk aversion?

Q. How do you (as an amateur) win against institutions armed with analysts and access to a ton of information and other services?

Q. Small Cap vs. Blue Chip Stocks. How do they compare?

Q. Do you have any CFD trading tips to be successful and succeed at CFD trading?

Q. What qualities do successful traders have?

Q. Why do traders lose?

Q. Why do so many traders wipe out their account?

Q. Why do people think they can trade without doing their homework?

Q. Do I have to accept some big losses in the beginning?

Q. How come elite traders succeed and continue bouncing back even after repeated failures?

Q. I am very new to the CFD trading scene and am finding it difficult to pin point a trading strategy that I may be able to adopt as a full time venture…

Q. I would appreciate some advice or tips on when to exit a losing or winning trade?

Q. You start with £1000. You make £1000. You then lose £1000. Considering only the result, have you lost money or are you back to where you started?

Q. I am trading the indices but my stop loss is always getting hit!!

Q. Is it possible to become a millionaire trading CFDs?

Q. What is the tax situation in Australia?

Q. Is it the trading date or the settlement date that is used for the financial year come tax time?

Q. Any tax advice for someone located in the United Kingdom looking to deal in USA shares?

Q. If shares are traded within SS ISA regardless of how many times you buy and sell or whether you realise a capital gain or not, you do not need to report back to the HMRC right?

Q. Is there a problem selling shares that are showing a loss and buying them back same day to reduce capital gain this financial year?

Q. What happens tax wise if a person bought 1000 shares some years ago and then purchased and sold a further 500 within 4 weeks for a profit?

Q. Is CGT and stamp duty taxed differently if shares sold within a short period of 10 days?

Q. Can I transfer my UK shares to an overseas broker and so then claim they were overseas shares in the process?

Q. Can I file a claim to the tax authorities against CFD losses incurred in my trading?

Q. When paying capital gains tax on shares what expenses can you claim against it?

Q. If I lost money in the stock market last year and had no other job do I need to file a tax return?

Q. I have been trading in a CFD account and incurred losses in 2007 and 2008 but am in profits this year. Can I deduct my losses from 2007…

Q. If you pay CGT on profit from shares in 2007 and then make a loss in 2009, can you offset the loss and get some of the CGT paid back?

Q. I have recently been dealing frequently in CFDs. Applying share-matching rules would be very complicated…

Q. I’m in the UK and bought most of my shares in 1997, therefore is my CGT allowance shared out between 1997 – 2010…

Q. Regarding offsetting share losses.. If you have sell shares from company A at a profit and a few months later buy and sell shares from company B at a loss, can you offset the loss from company B against profits made from company A?

Q. I have just been wiped out for the second time. Am I some kind of trading freak?

Q. Why do I keep making such stupid mistakes?! What can I do to avoid them?

Q. Would you recommend using an advisory brokers service?

Q. Are there any funds which use CFDs in their investment portfolio?

Q. Why are CFDs not permitted in the USA?

Q. Will CFDs ever be allowed in the USA?

Q. I know that USA residents are not permitted to do CFD trading but currently I’m in Mexico and I have a temporary residence card (green card)…

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