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YourDudliness

5,617 Posts.

1478

07/05/18

00:30

Post #: 32918542
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Originally posted by wilfran1pm ↑

Yes it seems everyone has their own definition of what short term trading is. I think even liking a stock is a bit of a trap but like you I can’t seem to avoid this as well. I use Commsec for general trading as well, but came to the conclusion that a DMA (Direct Market Access) CFD account with FP Markets was the best bet for me.

You will find an intro to CFDs video on the FP Markets web site along with lots of other instructional videos. I’m happy to let you know how my first short trades go, along with charts describing the setup etc. But I’ll have to make some trades first.

In answer to your questions;

You can keep your long and short positions open for as long as you want provided you meet any margin call that the Broker puts on you.

Leverage and whether you can go short or not depends on the individual stock. For BHP I think the current margin is 5% and it is shortable. Hence to open an equivalent capital position of say $100k you would have $5k from your cash account allocated to the trade. If the trade goes in the wrong direction and you are sitting on a loss greater than $5k and depending on the amount you have in your cash account you could get a margin call.

On all long positions you are assumed to have effectively borrowed the equivalent capital cost, e.g. for the BHP example $100k. The Broker charges you the cash rate plus something like 2.5% interest on the 100K, e.g. 4% annual interest on 100k charged for each day your position is open and held overnight. If it’s a short trade they pay you the cash rate minus the 2.5%, e.g. in this case you would only pay 1% annual interest and if the cash rate was greater than 2.5% they would pay you interest.

The Broker also charges a trade commission on all buys and sells. With FP I think it’s 0.1% with a minimum of $10 for their basic account. For their Premier Account (Cash Account > $50k) these figures are .08% and $0 minimum. These cost change with different exchanges as well. My understanding is that the individual Brokers negotiate their transaction charges directly with the various Exchanges. And I’m sure that these charges a far lower than what they charge you and me.

Yes I agree with you, and Einstein who was quoted as saying you can study something for as long as you like but you really don’t know it until you have actually done it.

Talk to you again later.

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I don't think you can appreciatte the amount of quality information you put into that one post. I've placed this thread on watch so will be watching like a hawk. Definitely let us know how you progress. The good and the bad. Hopefully M will kick in with guidance and who knows this might end up as the resource thread that grows into a library tesource for CFD's and other leverage instruments. Or at least blossoms into the go place for those interested kind of like the STT library thread. THAT would be something special!
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