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May 17, 2008

Comments

Hydro

I can't say anything about drift, but I tried IG Markets' demo recently and noticed the occasional "spike" where the high and low for a period were way off. BHP on 09/06/06, for example - and it seems the 7th of the same month has the same problem. I found these accidentally when testing some software I wrote looking for large range days using EOD data from Commsec.

http://i82.photobucket.com/albums/j265/Hydrostat/bhpcfd.gif

Around the same time, I was stopped out of a Brent crude long position at a price that, according to the low indicated on the main interface, the cfd itself didn't even reach. There could be something about the underlying instrument that I don't understand, though. I'm very new to all this.

Now, I don't think they're going for my stops, but it certainly suggests to me that the longer I hold a position, the more likely it is that something strange happens that triggers a stop-loss. This is unfortunate because IG seems to have an annoying lag/sync problem that makes intra-day trading difficult. Well, it does in the demo, anyway.

Of course, I could be wrong about these events - the spikes may have been confined to the data used by the charting app - but I don't think I'll take your advice of blaming myself just yet. And even it that were the case, I'm not sure I want to try trading with real money using charts that display garbage.

Oh, and I've checked out the Pacific Trader demo and the charts for the CFDs and shares are different. The CFD for Cochlear finished 48c higher than the share on Friday and the candle has a much smaller real body (looks like a hanging man). This the broker's own data, by the way.

THT

CFD charts are Bid or Ask charts they are not trade charts. they will not look the same!!

Hydro

I think I understand. As I said, I'm very new to this.

That would explain the differences between the two charts on Pacific Trader, but would that also explain the relatively large spikes on the BHP CFD chart from IG Markets? Also, doesn't this adversely affect technical analysis given that 1) the charts don't represent actual price movement and, therefore, 2) the bars/candlesticks are often completely different?

whitecloud

An perfect description of a common malaise among folks who don't know what they are doing. They spend energy posting in forums, complaining, instead of investing that same effort into understanding the market they are dealing with and how it functions.

The difficulty with CFD maarkets and Forex markets is they are unregulated, operated by the CFD issuers, meaning they are self contained mini-markets. One reasonable sized stop going off can spike the CFD price a long way from the market if the mini-market is thin and there is no-one there to meet it. The market-maker has no obligation to be there. This can start a domino effect, cascading up and down. It's one of the reasons the majors do not leave large stops in regulated markets over night. If they get triggered they can have a devastating effect. So they dont. Spiking happens occasionally on the SFE about once a year. Some clown goes to market with a medium sized order and sweeps the market down 80 points. In the case of the SFE they will usually cancel all orders above or below the 40 point mark under the orderly market rule. But it does happen. At night there is no underlying market operating.

With stops in CFD and Forex markets you are at the mercy of some clown who panics or doesn't understand what they are doing and the damage they can do to others. That's the way the market works.

Most people will not make the effort to find learn from their mistakes and find out.

Geffro77

I am pretty new to this game, but I was amazed to find out that some CFD MMs use a bid/offer price to trigger your stop instead of the last price. This could be a big trap for the unwary as I assumed that the last traded price would always be used as a stop trigger. This could explain why some people think they have been unfairly stopped out.
Pays to ask the right questions!!

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