Floating loss "transferred" to swap on WTI Oil

Akuaku

Recruit
Messages
3
Hello members,

I'm trading on a demo account and decided to trade WTI CFD.
The data feed from the broker is very weird and very far from the data elsewhere (on Tradingview).
I went long (bad decision) and the trade's floating loss got bigger. But I was hoping that with OPEC's decision it would reverse.
1587165275101.png


However I found out this gap. I was basically back to break even. Except that the previous floating loss was transferred to swap!!!
Note the last trade.

1587165396368.png


Is this standard or some broker manipulation?

Thanks
 

compu-forex

Sergeant
Messages
149
There is a valid reason why this happens. Most CFD's are synthetic derivatives that extract their pricing from an underlying instrument. Often the CFD pricing can "drift" away from the underlying asset, especially as the contract approaches expiry....I assume this is because the CFD has variables in the pricing(like time before expiry) that do not affect the underlying asset.

When the contract expires, the broker has 2 options:-

1. Close your trade. Generally they will introduce a new contract where you need to open you position again.
2. Rollover your trade into the new contract without closing it.

The moment the new contract is available and priced, the pricing should match the underlying asset. Using your long as an example, the CFD has drifted well below the price of the underlying asset. You can see the new pricing involved a massive jump in price. As you can imagine, the broker needs to find a way to reset the pricing without affecting the underlying position which is why they charge a 1 time swap equivalent to the change in price.

You have already noticed that the floating loss was transferred to swap. This is a good example of the price reset at work. The price is rolled over to the new contract without affecting the value of your position. I know this may appear as the broker messing with you but think of it this way.....the underlying asset did not jump in value, so the increase in price was not justified by the underlying asset. Also think of how you would have felt if this was a short position and the price reset occurred. A short position would have paid an equivalent amount of swap to the trader to compensate for the price reset.

This jump will happen every time the contract expires, so you should pay attention to expiry dates. Some brokers will just close your position which can be just as shocking if you do not expect it.

As a side note many CFD's can start their pricing quite far off the underlying asset and the price converges towards the price of the asset, producing a potential arbitrage opportunity. Unfortunately brokers will apply swap charges in a way that removes this arbitrage.
 

compu-forex

Sergeant
Messages
149
This is absolutely wrong. The term floating is used for a reason. When the price goes back up floating losses decrease. Negative swap doesn't.
It's like you didn't even read my post. You asked if this is a standard practice or broker manipulation. It is a standard practice whether you think it is wrong or not.

But don't take my word for it.Use google to search for cfd rollover information.

You can also read this article :-

https://www.axi.group/ae-en/blog/ma...ic-cash-vs-futures-cfds-what-s-the-difference

So, did your contract rollover or not?
 
Last edited:

Tahntaman

Private, 1st Class
Messages
41
This has been a common trend and if you want to see the truth then you should check the reviews of the various brokers on google playstore. If you read the critical reviews then you will realise that some traders complain about losing trades when they go live even though they were succesful in their demo account.
 
Top