Share Market Wrap 22nd Sept 06 Comment on CFDs

It seems that CFDs have been a ‘hot’ topic for a while with articles and ads promoting how easy it is to make money from this instrument. However, in my experience the people electing to trade CFDs simply do have the knowledge or the skill to trade them. In fact a number of CFD providers have indicated that around 80% of the clients opening accounts do not have the knowledge to fill out the forms let alone trade the instrument, which is frightening in anyone’s book. 

This week Australia’s largest CFD provider, CMC Group, has had to cease accepting new applications while ASIC reviews their product disclosure statement. In my view a number of CFD providers do not fully disclose the risks associated with trading this highly leveraged instrument, therefore I hope the review will change all this because it would seem that the only people making any real money from CFDs are the providers themselves.  

So whats happening on the market.

Last week I indicated that the market would either fall for another week or rise having already fallen for one week as expected. Despite having risen earlier in the week, the market has so far closed lower than it opened this week, although in technical terms we are experiencing what is known as an inside week given that the market has not traded higher or lower than last week. Given this, I am expecting the All Ords to rise next week and continue trading up for the next three weeks until around 15 October. If, however, the market does fall next week, it is possible it will continue to trade down until 15 October.