Which Assets should you Watch and Trade

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CFD trading mimics share trading with the exception that in a contract for difference, you actually don’t own the underlying asset, unlike company shares, where you do. This is what we call the CFD stock market for trading, and it is definitely a great stocks trading alternative.

What you are essentially doing with CFD trading is buying a contract between yourself and the CFD provider that, depending on your position as (either ‘Short Sell’ or ‘Buy’), will have an entry price when entering a trade, and an exit price when clearing out your trade with an equal opposite position.

One of the key differences between trading a CFD long vs buying a security is that you can enjoy larger leverage features. Contracts for difference are traded on margin, meaning there is no need to tie up the full market value of purchasing the equivalent stock position. This also allows traders to open larger positions than their capital would otherwise allow, but having said this, there is also leveraged share trading available as well, where traders usually have lower leverage capability.

Stock CFD Leverage

CFDs are leveraged products; whereby traders trade stocks with leverage. Leveraged products enable traders to increase their exposure to an underlying asset with the leverage provided by their broker. When it comes to leverage stock trading, it is important to know that when a trade is opened, you only need to deposit a percentage of the value of the position. We call this a margin. Your deposit will usually vary depending on the value of your CFD position.

Leverage might result in added gains should the market move in your favour. But there is also a risk of increased losses if the position moves against you, and trading is performed on stock CFD such as the MetaTrader 4 (MT4) and MetaTrader 5 (MT5) platforms. It is highly recommended to exercise risk management during CFD trading, to make sure you are aware of the risks involved, and are managing them accordingly.

Key Differences

There are also a number of key differences between trading an underlying asset and a CFD:

  • CFDs stocks can be traded long or short, and you are not required to deliver the underlying asset in the event of a short sale
  • CFDs are exempt from the UK stamp duty of 0.5%, although profits are subject to capital gains tax
  • The investor doesn’t own the underlying asset over which the CFD is based, but instead enters a contractual agreement with the CFD broker, to exchange the cash difference in the price between the opening and closing prices of the contract
  • As opposed to holding the underlying asset, a CFD is traded on margin which means that an initial deposit is lodged with the CFD broker, which allows the investor to buy or sell a number of CFDs according to margin computations, which generally allow extra leverage over the stock purchase itself

As a rule, one CFD will be equivalent to one share, except that with contracts for difference, your broker will normally require you to put down a small percentage in the range of 5% to 25% of the total contract value. For example, a share CFD with a stock CFD margin of 5% can gain you an exposure of up to twenty times in comparison to the equivalent deposit capital if invested directly into shares.

Let’s assume you buy five shares in Google Corporation at $400, thus, you would outlay a total of $2,000 ($400 x 5). However, if you bought five Google CFDs at $400, and the margin requirement was 5%, you would only be required to outlay $100, thus leaving you with more money to utilise on other trades.

The net effect is a return (or loss) of 20 times the amount using CFDs in comparison to direct shares, as a result of the leverage factor. Having said that, as CFDs are traded on margin, this means that your broker is effectively lending you funds, and it implies that a CFD trade attracts finance charges if a position is held overnight.

Owning physical shares by comparison does not attract a finance charge, as you are utilising your own capital. Normally, the interest is charged on the full market value of the CFD position, with the rate set by your CFD provider.

Naturally, the downside to geared trading is that you risk losing more than your initial outlay. You can also lose your entire investment if you buy physical shares, and the company becomes insolvent and is liquidated; however, you cannot lose more than your investment.

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Lastly, and this is an important difference as compared with CFDs, generally you have additional rights when acquiring company shares (but be aware of the different types of shares), such as voting rights in the key decisions of the company.

For instance, if you trade a CFD on Microsoft or Volkswagen, you are in effect trading the price difference between your entry price and your exit price. As you do not own Microsoft or Volkswagen shares, you are only speculating on their price moving in a certain direction. CFDs concern only price movements, nothing else, and the contract is between you and your stock CFD broker.

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Please note: Tax treatment depends on your individual circumstances. Tax law can change or may differ in a jurisdiction other than the UK.

About Admiral Markets
Admiral Markets is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world’s most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Top Financial and Trading Documentaries (And Why You Should Watch Them)

It’s always been true that if you ever want to learn anything, listen to the professionals.

In trading, this is no different.

What follows is a list of some of the very best financial and trading documentaries around. Get a hold of any of these, and you’ll be inspired, empowered, and a little wiser when it comes to financial trading.

Trading Documentaries

Billion Dollar Day

A little dated now, this documentary still packs a formidable punch. It looks at the lives of three traders in New York, London and Hong Kong. It’s a real insight into life on the trading floor.

The documentary gets its name because over a billion dollars is traded within 24 hours on the financial markets. It’s a phenomenal feat, and this trading documentary pulls no punches in showing the stress and the anxiety the traders go through in just 24 hours.

People in currency trading view this as being one of the best trading documentaries ever.

Rating: 10/10

Trader – Paul Tudor Jones

This financial guru is well known to anyone who wants to make a start as a trader. He will often be referred to by other people in the world of trading and finance. And that’s because he is nothing short of a legend, including predicting Black Monday.

The master of the hedge fund, you’ll gain plenty of insight in this trading documentary into how he thinks and what he thinks. It’s still referred to regularly as a ‘must-see’ by many trading professionals. Tudor-Jones is worth billions today, and has been on many a ‘rich list’. So he must be doing something right.

Good luck in finding this documentary though, Paul Tudor Jones, bought up most copies of it!* – Source.

Rating: 10/10

Rookie Trader

It may have CNN all over it, and feel, at times, like a news report, but right at the heart of this fascinating trading documentary is nothing short of a real education. It’s well worth watching, not least because it makes perfect sense for anyone who is starting out in trading to learn from someone who jumped in as a beginner.

The documentary follows a CNN anchor who attempts to learn how to be a trader.

We won’t spoil it for you by telling you how the anchor did, but it’s entertaining, informative, and a great way for beginners to check if they actually want that career. It’s not completely hard-hitting, but it’s not trivial either. And at times, even with CNN behind it all, the anchor does end up in situations not that far removed from the atmosphere in your typical boiler room.

For example, if you give it time, it turns out to be a very useful introduction to trading on a stock market. All a beginner needs is right here, and this means tremendous value for anyone who wants to get started. While it may not offer value to more experienced traders, you’ll be hard-pressed to find better trading documentaries for those just starting out.

Rating: 8/10

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Floored

Not every documentary on trading needs to teach you something.

Floored is fascinating, and it doesn’t tell you anything new. But we haven’t seen such a thrilling depiction of what used to happen on trading floors anywhere else.

There’s no real ‘tech’ to speak of here, and the traders are what the old, cliched view of traders were.

Lots of screaming and shouting, lots of male posturing. While a lot of that has quite rightly disappeared, you can tell that the old days in the pit were thrilling, and not a little bit pressured.

Then the trading documentary takes it up a notch.

It shows us the lives of those who are unable to adapt to new technologies in financial trading. It’s interesting to think that massive trades were once done with a notebook and a loud voice. Some of the traditional traders here find it incredibly difficult to cast off the ways of old. And it makes for amazing viewing.

It was created back in 2009, so it does have a little of the ‘dated doc’ feel about it, but that only makes the messages more poignant. These are the true ‘Masters of the Universe’, and to see them in the pit, like a hive of bees after each and every dollar, is truly breathtaking.

Life on the trading floor was never easy.

Rating: 8/10

Wall Street Warriors

A hugely successful reality series, Wall Street Warriors went deep into the heart of the place.

It focused on more than one type of trading activity. It covered all people would want to know when it comes to understanding the life of a trader.

The show was focused on the tough approach the Warriors used to make money. With hedge fund managers, a day trader and a number of floor traders being part of the series, it soon became very popular. One of the Warriors retired at 27, and then returned to the fray to launch her own hedge fund.

Another, Alex Gerchik, is arguably the most famous of the line-up in the TV shows. He became an instant hit with audiences after they found out he’d been driving a taxi for a living. Then he started to day trade, and became rich.

Rating: 8/10

General Financial Documentaries

Alongside the rich field of trading documentaries that have made it easy for professionals to start careers with the insight they give, there are also a number of informative documentaries that offer a glimpse into the world of finance in general.

All of these financial documentaries on Netflix (and other platforms) are well worth seeking out.

Inside Job

This was probably one of the most welcome of the 2008 financial crisis documentaries.

As a financial crisis documentary it managed to successfully portray the details around the housing and banking crisis of 2008. The crisis had huge implications for the way banks are run, and who should be held accountable for the safety of money, whether it’s individual’s money or the money institutions have.

And why was it such a good documentary?

Well, for starters, it focused on the behaviour of some of the people behind the whole thing, and charts the problem as it grows in severity, culminating in the crisis in 2008, with huge trading losses being only the tip of the iceberg.

What’s even more interesting is the opportunity afforded to the viewer.

The audience gains a keen sense of just what happened and why it set off the chain of events. This means that all finance professionals can take away a message from the documentary.

Rating: 10/10

The Ascent of Money

Although the title of this documentary film seems like it’s setting you up for a joke, this particular documentary is nothing short of comprehensive. If you’re interested in the history of money and the financial system, then the title will give you the whole story, literally.

Niall Ferguson takes us on the journey and he is the author of the original book, so you couldn’t ask for a better host.

Key highlights here include a section on the original futures contracts, a Babylonian invention. It only gets better after that, with a focused look at the stuff that makes the world go round. It’s fast, well-paced, and contains enough insight into the world of finance to please anybody.

Rating: 10/10

Trillion Dollar Bet

Now, this is one of those documentaries that anyone can enjoy. You don’t need to be in business or finance to appreciate the human story in this documentary.

Trillion Dollar Bet is not flashy, there are no lifestyle envy segments, where traders roll around in sports cars. Instead, the documentary focuses on the people who came up with a theory that happened to rock the world of finance, albeit briefly.

The formula was the Black-Scholes option pricing model. Two of the men behind this won the Nobel Prize, the formula was that significant. However, the hedge fund the men founded eventually tanked.

A great story about intelligent people feeling the wrath of the markets.

Rating: 10/10

Quants: The Alchemists of Wall Street

Another fascinating look at the science and Maths behind finance and trading. The ‘Quants’ in the title are the maths geniuses who offer formulas and insights to trading professionals. Sometimes this goes very wrong. And the way the documentary questions the whole problem is expertly handled in under an hour.

Concise and fast-paced, The documentary is absolutely essential viewing for anyone who thinks they may have the answer to dominating the markets.

Rating: 10/10

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The Warning

The 2008 financial crisis holds lessons for everyone, not just traders or finance experts, but your average hedge fund manager too.

This documentary acknowledges this, and gives the whole thing a different perspective. It does this primarily through looking at just one woman who was involved in the fiasco.

However, she was not involved in a negative way. She wasn’t responsible for any part of the crisis or market crash. In fact, she could have helped avoid the crisis and bring stability back to the economies that were affected.

Brooksley Born was head of the Commodity Futures Trading Commission at the time, and when the problem became very real, she suggested much tighter regulation.

She wasn’t listened to, and the rest is history.

Since the 2008 financial crisis is widely viewed as a turning point in finance in general, this proves to be a very useful and sobering documentary about the people who control a nation’s money.

The film shows just how damaging a refusal to listen can be, and it’s a true story.

Rating: 9/10

Enron: The Smartest Guys in the Room

The Enron scandal was big, and it implicated a number of top executives in the company, and on Wall Street. It was also perhaps the first real corruption scandal in the history of finance, in that everyone knew about it.

One of the nastiest things that the Enron executives were alleged to have done was to actually start an energy crisis in California.

The idea was to drive up utility prices. The end of Enron brought about the criminal trials of some of the key players. These people were simply exploiting others for financial gain, and there’s nothing in the story that hints at any positive points for the Enron brand.

Kenneth Lay founded Enron in 1985. The documentary makes his part in the scandal very clear.

At one point he denied knowledge of the wrongdoing that he had himself allowed to happen. As if that wasn’t enough, at one point it becomes clear that Lay was authorising a kind of accounting that made his company look good.

The only problem with that was the nature of the accounting. Enron was declaring untrue accounts, with projected, and inflated profits. The film is based heavily on this sequence of events.

Rating: 9/10

25 Million Pounds

This fascinating documentary focuses on just one man, Nick Leeson.

Leeson was a trader who managed to ruin Barings Bank. This bank happened to be a bank that held money for some very important people, including the Queen.

The story of the situation was a major part of financial history. Leeson went on to be an infamous trader, one of a select few million dollar traders, and the full story of his exploits was made into a successful movie, called Rogue Trader, which starred Ewan McGregor.

One of the best financial documentaries around, 25 Million Pounds is well worth watching.

Rating: 8/10

All of the above will provide a fascinating and insightful viewing experience. And all of them have messages around day trading and the world of finance in general. Of course, there will be many more financial and trading documentaries to come, but these particular titles have set the bar high.

Invest time in them, and see if it doesn’t change your perspective on finance and trading in general. We think the whole experience definitely will. And if it’s an education in finance and trading you’re after, you can’t get better than those on the list.

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Step 1: Break the financial matrix

If you think trading is hard, you’re right. It turns out that up to 80–90 percent of non-institutional traders (those who don’t work at financial institutions) lose money when trading . This high percentage has prompted regulators to force brokers to publish data about their clients’ losses on their own platforms. That’s why you’ll find the following language on the websites of countless investment companies: “Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider.”

These warnings don’t really solve the problem, and have been about as effective as GDPR cookie compliance (i.e. they have virtually no effect whatsoever). If anything, the broker is just fueling the potential client’s desire to beat the odds: “Are you one of the 21 percent?”

It is increasingly difficult for traders to beat the market due to the rise of “algo trading,” which virtually eliminates any chance for mere mortals to make money trading on a short-term basis.

It is also becoming increasingly difficult for traders to beat the market due to the rise of “algo trading” (the use of computer algorithms), a strategy that virtually eliminates any chance for mere mortals to make money trading on a short-term basis. If you have ever tried trading a company’s earnings the market will have moved before you had a chance to react (as the below graph demonstrates).

Day trading is now the least profitable way to trade, as only advanced supercomputers can now benefit from world news and company earnings. A trading floor no longer has 200+ sweaty middle-aged men throwing their hands up in the air like Hollywood wants you to believe; they have been replaced by machines implementing financial artificial intelligence, commonly known as FinTech.

So why do people still think day trading will make them rich? This can be explained by the fact that day trading is widely advertised as an effective strategy by the mainstream brokerage industry and financial media. Once it is shoved down retail traders’ throats, they cave in to the constant propaganda and lose money quickly by sticking to unprofitable strategies whilst utilizing the “education” offered by the brokers, which is code for “learn how to give me all your money in the fastest way possible.”

Day trading is now the least profitable way to trade, as only advanced supercomputers can now benefit from world news and company earnings.

The entire industry is based on suckering desperate individuals into a false narrative. They say it is easy to make money—all you have to do is trade on charts with no fundamentals and you’ll be sitting on a beach sipping a piña colada in no time. But let’s ask the obvious question here: If trading were that easy, why isn’t everybody doing it?

The truth is it’s almost impossible to make money if you are a retail trader; the small percentage of people who do succeed have had sufficient training and education. Realising you are stepping into a financial matrix where everything being thrown at you forces you to lose money instead of gain, is the first step required to making informed decisions.

Step 2: Learn how the “smart money” consistently predict the market

It’s important to understand that two herds exist in the financial markets: the dumb money and the smart money. “Dumb money” refers to nonprofessional investors, “smart money” to institutional investors who work at investment banks and hedge funds. These professional individuals use the same processes to create trade ideas and views on currencies, commodities, stocks, and bonds. Their strategies only differ from each other in terms of the assets they decide to trade.

Since the smart money are analysing the same data and following the same indicators, a smart money herd mentality is created. The internet allows outsiders to get a glimpse of that mentality—to predict what the smart money are doing and what position they may take on a certain asset.

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