SB on Stock Indices

Yes

The disadvantage of any given spread is generaly less the larger the index, because of the likely larger daily moves the larger index makes.

But where have you found these spreads? They're horrendous and unless you plan to trade very long time periods then you will never survive with them. Look in the 'Broker Reviews' elsewhere on this site for spread betters with spreads of 3 or 4 points. Futures brokers will bring this down to 1 point or so, but you'll need to gain plenty of experience and knowledge first.

I just thought I would offer an opinion.
I see a lot of criticism of SB on the different boards about how expensive the spreads are etc.,
Let me float my own philosophy.
Trading is a business
All businesses involve risk of loss.
Assume betting £1 per point on the Dow.
Spread=10 points. This £10 is your outlay.
The dow moves in your direction and you chicken out and close for a 50 point profit on a day with a 90 point move in your direction.
Don't cry into your beer.
How many businesses will give you a 500% return on outlay in one day or even one week?
As for the risk of loss? Every business loses at some time, on some deal.
You are not FORCED to look at the screen as your losses move through the £300 barrier as I did on one day I would rather forget.

Thanks for the replies guys, this is a fantastic site! The spreads I quoted were guaranteed stop losses with IG Index. The guaranteed stop loss does add a premium of about 3 points I think.

A guaranteed stop loss premium is like a Dixons extended warranty.

Lol nice analogy! Could you expand on that though, is it because trading the indices are less risky thatn an individual stock e.g. it can't get suspended etc.?

Thanks

kensitp,

The vast majority of the time a stop will be honoured exactly by the sb company. The only time you need worry is if the market really flies as the result of an economic announcement (quite rare these days for the indexes to move too far though, but it can't be discounted) or when the sb co is closed and can't exit your trade until they open(over the weekend). So be flat on Friday night and don't trade around economic announcements and all you need worry about is Osama Bin Ladan being 'captured' sometime just before the US elections.

So basically a guaranteed stop will make you feel more comfortable in your trade and every now and again you'll be glad you had it but you'll pay very dearly on the 95/100 trades where you didn't really need it. Much like an extended warranty on an electrical item which only has a 5% chance of actually breaking down but for which you paid 25% of the price for.

Remember, trading is all about probabilities.

I agree stops are a must when SB on the Dow etc but take care where you set your stop!
I have been stopped out alot recently by strange intraday spikes that don't show on the underlying market (I now this has been discussed on another thread recently).
My point being on a good day even being careful with your stop position you can find yourself looking at losses!!
P.S I also use IG and not sure if this happens with other SB firms.

using stops is very complex and unless you are very experienced you will lose money by placing stops

intraday spikes are just signs of short term illiquidity in the underlying