No easy money in contracts

Published in the Geelong Advertiser, August 2009 by Dale Gillham

CFDs have been a hot topic for quite some time in Australia with articles and advertisements promoting how easy it is to make money from this instrument.

Clever marketing has certainly been successful in attracting thousands of new customers seeking instant riches.

In my experience, however, many of the people who trade CFDs simply do not have the knowledge or skill.

In fact, many clients I have spoken to struggle to complete the application when opening an account, which is frightening in anyone's book.

In my view, CFD providers do not adequately disclose the risks associated with trading this highly leveraged instrument and when they do, it is in the fine print and written in jargon that most people would not understand.

The question that needs be asked is should the CFD provider be held accountable for individuals who end up gambling with their money when trading in a market where only the educated survive?

So what can we expect in the market?

After more than a week of moving sideways and appearing to find resistance, the All Ordinaries rose strongly yesterday to continue its strong run up since March.

It is now well and truly into my price target area of between 4200 and 4600 points, however, time is passing the point where I believed the market would turn.

The market cannot continue to rise without some form of pull back in price, and the longer in time it rises, the higher the probability that the fall will occur.

Given this, we need to expect the market will fall away soon. Therefore investors need to be patient rather than jump in now thinking they are missing out on making profits.

As a trader and market commentator, I have always found it far better to be overly conservative, as it is not how much you make on any one investment that counts but rather how much you do not lose.

As I mentioned last week, how far the market moves down when it does turn will indicate whether we can expect further falls or whether the market will turn to commence its next bull-run.

Back to Articles