The Australian regulator ASIC is finally investigating the disclosure of Contract for Difference (CFD) market makers. This action is well due because customers are not being adequately prepared for trading CFDs. It is really a form of high-stakes gambling. Unless you know what you are doing there is a strong chance of losing a lot of money.
My advice to clients investing in CFDs is to use them as if you were investing your own money, i.e. on zero leverage, and then slowly increase your leverage in increments as you become accustomed to the product. When many people do is:
1. Abuse this market leverage and are never comfortable trading with it, so they overtrade
2. Abuse the leverage and set stops, and always find that they are being stopped out, ie. mostly losing trades
3. Not using stops and losing great amounts on trades, particularly if they have been enthralled by an earlier big gain.
------------------------------------Andrew Sheldon www.sheldonthinks.com
