Making Money From CFD Trading E-Book

Catherine Davey

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 297

Veröffentlichungsjahr: 2011

Beschreibung

Contracts for difference or 'CFDs' have taken Australian traders by storm. Catherine Davey's first book on the subject, Contracts for Difference: Master the Trading Revolution, was a great success; in this follow-up, she shares her real-life CFD trading experiences over a three-month period in 2005. During this time, she manages to turn $13000 into $30000, but her path to success is anything but straight and simple. Making Money from CFD Trading describes not only the reasoning behind and execution of her trading strategies, but also presents an honest, inspiring and often humorous discussion of her emotional journey as a trader. Catherine gives a fascinating insight into the trading experience: struggling to maintain the right psychology, avoiding irrational 'ego trades' and finding emotional balance between depressing losses and big wins. She presents a range of opinions from industry experts and commentators, discussing day-to-day trading issues and sharing controversial market views. This book will give you an understanding of: * simple charting techniques that make money * the unique aspects of trading CFDs * how to exploit the advantages CFD trading has over traditional share trading * strategies for establishing and maintaining a winning mental approach. This entertaining and hugely informative book is a must-read for anyone who wants to know more about CFDs and for traders of any financial instrument who want to take their performance to the next level.

Leseprobe

Table of contents

Foreword

Preface

Introduction

Getting started

Market jargon

My trading platform

My trading method

My stock selection criteria

My daily routine

Week 1: The first cut

What have I learnt?

Do’s and don’ts

Lingo and lessons

Week 2: Lunch is for wimps

What have I learnt?

Do’s and don’ts

Lingo and lessons

Week 3: Into the abyss

What have I learnt?

Do’s and don’ts

Lingo and lessons

Week 4: Wealth god smiles

What have I learnt?

Do’s and don’ts

Lingo and lessons

Week 5: Avoiding Waterworld

What have I learnt?

Do’s and don’ts

Lingo and lessons

Week 6: Addicted to trading

What have I learnt?

Do’s and don’ts

Lingo and lessons

Week 7: My $10 000 week

What have I learnt?

Do’s and don’ts

Lingo and lessons

Week 8: Subliminal messages

What have I learnt?

Do’s and don’ts

Lingo and lessons

Week 9: Trading sucks sometimes

What have I learnt?

Do’s and don’ts

Lingo and lessons

Week 10: Denial and regret

What have I learnt?

Do’s and don’ts

Lingo and lessons

Week 11: Dogs with nine lives

What have I learnt?

Do’s and don’ts

Lingo and lessons

Week 12: Golden sheaf

What have I learnt?

Do’s and don’ts

Lingo and lessons

Week 13: Blonde psycho

What have I learnt?

Do’s and don’ts

Lingo and lessons

Week 14: Out with a bang

What have I learnt?

Do’s and don’ts

Lingo and lessons

Postscript

Hindsight

Index

First published in 2006 by Wrightbooks

an imprint of John Wiley & Sons Australia, Ltd

42 McDougall Street, Milton Qld 4064

Office also in Melbourne

Reprinted in 2006 (three times), 2007 and 2008

Typeset in 11/14 pt Bembo

© Catherine Davey 2006

The moral rights of the author have been asserted

National Library of Australia Cataloguing-in-Publication data:

Davey, Catherine.

Making money from CFD trading: how I turned $13k into $30k in 3 months.

Includes index.

ISBN 1 74031 150 7.

1. Futures. 2. Stocks — Prices. 3. Stock options. I. Title.

332.6322

All rights reserved. Except as permitted under the Australian Copyright Act 1968 (for example a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission. All inquiries should be made to the publisher at the address above.

Cover design and author photo by Alison Fraser, popomo designs

Stock charts reproduced with permission from IT-Finance

Disclaimer

The material in this publication is of the nature of general comment only, and neither purports nor intends to be advice. Readers should not act on the basis of any matter in this publication without considering (and if appropriate taking) professional advice with due regard to their own particular circumstances. The author and publisher expressly disclaim all and any liability to any person, whether a purchaser of this publication or not, in respect of anything and of the consequences of anything done or omitted to be done by any such person in reliance, whether in whole or part, upon the whole or any part of the contents of this publication.

Foreword

by David Trew

Catherine Davey has shown herself to be a true pioneer in the trading of one of the most innovative financial products to ever hit the Australian derivatives market.

Among the most exciting things that I have noted in my role as Managing Director at CMC Markets over the last four years has been the stellar increase in the average person’s level of understanding of trading. To a very large extent I believe this knowledge has driven the incredible growth in the CFD market. With such a remarkable variety of products available to trade it has really been a challenge for us to keep up with the demand. We now have clients trading Australian and international share CFDs as well as numerous other products including foreign exchange and spot gold.

After reading this book (I actually read it twice) I found it inspiring to realise how common the troubles that traders face really are. I am sure that you will see myriad parallels with your own trading experiences while reading this book, just as I did. We all face similar problems when it comes to trading, but it’s how we overcome them that makes the difference.

It is critical that you pick the right CFD provider to put your business through. As the product has grown, so too has the ever expanding stream of providers for you to choose from. It is crucial that you deal with a CFD specialist. This is the only way to ensure that you receive the most appropriate level of service from people who really understand the product. On top of this, make sure that the software that your provider uses allows you easy access to global markets.

Finally, you need to choose a company that can provide you with an education. CFDs require a higher level of trading knowledge than normal share trading, so you need to learn from those who deal with the product everyday. Having a grip on the simple things can help guide you through the constantly changing world that is derivatives trading. It is virtually impossible to overemphasise the difference that education makes to any aspiring trader.

Catherine really drives home the need for all traders to protect the money that they have. Being ruthless in your use of stop-loss orders (or in some instances guaranteed stop-loss orders) is simply the best way that you can safeguard your capital. As Catherine attests repeatedly in this book, taking a defensive stance when looking after your money will enable you to trade day after day, year after year, and remain profitable over time. In fact, the greater number of risk management tools you can use when trading CFDs as well as their many fundamental similarities in terms of trade execution makes CFDs in many respects a worthy alternative to traditional equities.

While Catherine undertakes trades in this book over very short-term periods, hers is not the only approach. For many people, CFDs are taking the place of more traditional leveraged investments such as margin lending. Their migration stems from the great flexibility inherent in this product, which easily allows for investment over many different time frames. Catherine’s use of CFDs in this book only serves to demonstrate that an extraordinarily diverse range of investors can satisfy their financial needs by adding CFDs to their trading portfolios.

This book will show you real, first-hand experiences Catherine has had trading CFDs. You can’t help but notice how, when combined with a first rate understanding of the market, CFDs enable a degree of trading flexibility that is simply unattainable elsewhere in the market.

It is truly a privilege to write the foreword for what has been possibly the most frank account of trading in the internet age that I have yet read. We now stand at the brink of what will no doubt be a very exciting period in time for retail traders and Catherine Davey has captured this perfectly. I am waiting expectantly for her next volume.

Preface

I wrote my first book, Contracts for Difference: Master the Trading Revolution in 2003. I had stumbled upon contracts for difference or ‘CFDs’ when I was writing a story for InvestorWeb in 2002. Back then CFDs were virtually unknown in Australia and attracting no media attention. Less than a year later, my book had hit the stores and the revolution was well on its way. Now CFDs are the hot new product for private traders, with a fan club from every corner of the trading and investing world, including former futures traders, hedge fund managers and of course traditional share traders. When I started writing my first book there were just two CFD providers in Australia; now there are around half-a-dozen, and the number has continued to grow during the time it has taken me to write this book.

My dream had always been eventually to trade for a living. CFDs made that goal seem much more attractive and easier to attain.

I joined the swelling ranks of CFD traders in 2004, paring back my freelance commitments so that I could realise my ambition. I quickly discovered that the difference between writing about CFDs and actually trading them was significant. Having spent six years working as the in-house technical analyst for InvestorWeb Limited (IWL), I had considered myself a competent market commentator and analyst. At different times in my career I had traded shares and other derivative products, admittedly with mostly limited success, but I believed I had accumulated enough experience to avoid some of the pitfalls the average trader faces. I was wrong. Not only did I have to negotiate all the old traps again, but I also had to become familiar with the unique aspects of CFD trading.

The core of this book is a trading diary I kept over a three-month period in 2005, trading CFDs full time. Between the end of June and the end of September, I turned $13 000 into more than $30 000, but it was not easy. My path to success was not simple, or straight, and I did not hit the ground running. Before I started writing this book I was in a losing cycle, which continued as the first weeks passed. I made many obvious mistakes from the outset and continued to make many of these same mistakes as the book progressed. There was one point at which I thought seriously about giving up on both trading and writing the book. I spent time crying on the shoulders of friends and family. I questioned my ability to trade and my self-esteem took a battering. I think these feelings are common to all traders.

It has been my aim to provide a book that not only describes a practical means of potentially making money from CFDs, but also presents an honest discussion of the emotional journey. I am hoping my honesty will comfort and inspire anyone going through the inevitable emotional downside we all encounter at some stage and with a certain amount of regularity in our trading. I hope, too, that the positive lessons I have learnt will inspire you.

Catherine Davey

Sydney, 2006

Introduction

What are CFDs?

Contracts for difference or ‘CFDs’ are a derivative trading instrument — their value is derived from or determined by the price of a stock being traded on a market. When you enter into a contract for difference with a provider, you are in effect taking a bet on a stock’s future price action. You enter a contract or ‘open a position’ when a particular stock is trading at a specific price; the CFD provider agrees that when you close the position, terminating the contract, it will pay you the difference between the stock’s starting price and the price it is currently trading at.

For example, if the price of Telstra shares is quoted on the Australian Stock Exchange (ASX) at $4.35, a Telstra share CFD will be quoted at the same price. If you buy 100 Telstra share CFDs at this price, and Telstra shares subsequently trade at $4.40, you can close the position and take a profit of $5 — the difference between the underlying shares’ initial value of $435 and their subsequent value of $440. If, on the other hand, the price the shares are trading at falls to $4.30, and you close the position, you will lose $5. You don’t own shares in Telstra at any point in this scenario: you are only speculating on their price movement. CFDs mirror the price of shares, allowing traders to take advantage of share price movements without actually owning physical shares.