What's New
By Colin Twiggs
May 23, 2008 8:00 p.m. ET (10:00 a.m. AET)
This newsletter is subject to Incredible Charts Terms of Use.
World Indices & UK Stocks
Click on Securities in the chart menu and you can now select World Indices and UK Stocks.
Data is updated after the US market close, so unfortunately will be of limited use to European readers. We are making progress with our intra-datafeed which will offer US, UK, Canadian and Forex updates throughout the day. Data will be delayed from 5 (Forex) to 20 minutes. More about this in our next update.
Stock Screener
We have expanded the list of indices that you can use as filters for your stock screens. The screen will be restricted to component stocks of the index.
Here are the expanded list of indices available for US stocks.
And for UK stocks.
We also added Optionable Stocks to the list of ASX index filters.
We have been slow to respond to requests for additional stock screen filters, but have now expanded our development team and look forward to reporting more progress in our next update.
Trading CFDs
CFDs (or contracts for difference) are not available in the US but are immensely popular in Australia, Canada and the UK.
What Is A CFD?
A CFD is a financial instrument (derivative) used to trade stocks on margin and has the same price movement as the underlying stock. You do not own the physical stock. The CFD is merely a contract with the CFD provider whereby you will be paid if price moves in your favour and where you will pay the CFD provider if price moves against you.
CFD Opportunities & Pitfalls
Opportunities:
Low Commissions
With a standard commission rate of 0.10% and minimum commissions as low as $10.00, contracts for difference (CFDs) offer a low-cost entry to share trading. Commsec, Australia's largest online broker, by comparison offers commissions of $19.95 on trades up to $10,000; $29.95 up to $20,000 and 0.12% above $20,000.
Shorting Stocks
CFDs also offer you the option of shorting stocks at the same low commission rates, enabling you to profit from falling as well as rising markets. Shorting via CFDs normally offers a wider selection of stocks than the +/- 200 normally available through your online stockbroker.
Convenient Finance
Leverage is built into the CFD product, making finance more convenient than arranging a margin loan through your broker.
Low Margins
Margins range from 5% on the ASX 20 to 10% on the ASX 200, compared to the one-third required by online stockbrokers such as Commsec.
Guaranteed Stops
Guaranteed stops are one of the biggest advantages of CFDs. For a fee you can insert a safety net below your stocks, guaranteeing your exit at a set price. This protects you from stocks gapping through your stop loss levels in a thin market, and your stop orders being filled at much lower prices. Like insurance on your house or car, most of the time you will not need the guarantee, but it can save a lot of money if you ever do.
No Time Decay
There is no time decay with CFDs as there is with options: the instrument does not expire at a set future date.
Read more: The Pitfalls Of CFD Trading
Are You Getting The Best Deal From Your CFD Provider?
Compare your CFD provider to others in the market, with detailed analysis of:
Know Your Trading Style
What type of personality style are you? And how does this suit becoming a trader? Most of us are a mix of several different styles — both good and bad. See if you recognize any of the following.
Enthusiastic
Some tackle trading with enthusiasm, following the promise of easy money. Sooner or later they fail and, blaming either their broker or training course provider, they give up in disgust.
Withdrawn
Some blame themselves: "I suck at everything — so why do I bother trying?"
Persistent
Some when they fail, remind themselves that no-one ever won by quitting. They persevere, but repeat the same mistakes over and over again — and are left wondering why they don't achieve better results.
Searching for the Holy Grail
Some pursue the perfect trading system. Always switching from one system to the next. Always latching on to the latest fad. Or following the guru of the month in the vain hope that they have the answers.
Hesitant
The yips, a golfing term, are not only experienced by professional golfers who freeze over a putt. There are darts professionals who struggle to release their dart — and traders who cannot pull the trigger. They wait for the perfect set up, allowing pressure to mount until it impairs their performance — ensuring that they do fail.
Blinkered
Some keep scant records of their trades and can only tell how well they are (or aren't) doing from the depleted state of their bank account. They prefer not to reflect on their failures as it makes them feel anxious or depressed.
Paper Trader
Some religiously follow the market, keeping copious records and constantly trialing new systems — without ever buying a stock.
Reckless
The opposite approach the market with supreme confidence, committing their entire capital when just starting out. That is about as sensible as entering a professional boxing tournament after just a few lessons at your local gym. The market will ruthlessly expose your inexperience.
Read more: Successful Trading Styles
Feedback is the breakfast of champions.
~ Kenneth Blanchard.
