Spread Betting v Direct Access - The Annual Revisit

new_trader

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SpreadBETTING has nothing to do with trading. Spreadbets are a moronic product.

(y)(y)

You said it!!


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This is a new thread split off from £10k wipeout
 
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This is simply not always true. some of the spreadbetting firms out there are essentially set up on retail business practices rather than bookmakers ones. one of the spread bet companies i use simply uses your money to take a position in a corresponding future, and makes money on charging you more than they pay in the spread. this is why these companies want you to win, because you're more likely to keep betting, more likely to make them more money. The reality is that most people dont have the capital needed to start trading forex or options in margin accounts, at least at the start. even if they did, their capital would probably be so small that they might as well not "be in the game" you seem to imply by your post that you can influence the market by your position? any retail trader that thinks this is a fool. add to this the fact that in many countries profit from spreadbetting is not subject to tax while profit from options would be subject to cgt, and it becomes quite an attractive place to start. this guys problem is not what method he is using to call the market.
I have done my trading for this week, so I can afford time to post during the day. Spreadbetting is a good option, and a tax officient. For start one does not have to pay tha accountant, waste time and effort to prepare the books, and so on. Secondly, if the spreadbetting firm operated under the EUsregulation or FSA your funds are protected to a greater degree. Those of us who remember Refco, would agree that at the end their Stop loss policy was painful. I would therefore not consider any entity outside the UK, or EU. I got live accounts in both types of institutions, they work reasonably well, with the spreadbetting sometimes performing better then the others.Useful info http://www.trade2win.com/boards/first-steps/32672-financial-spread-bets-profits-taxable.html
Best wishes to all,
2be
 
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This is simply not always true. some of the spreadbetting firms out there are essentially set up on retail business practices rather than bookmakers ones. one of the spread bet companies i use simply uses your money to take a position in a corresponding future, and makes money on charging you more than they pay in the spread. this is why these companies want you to win, because you're more likely to keep betting, more likely to make them more money. The reality is that most people dont have the capital needed to start trading forex or options in margin accounts, at least at the start. even if they did, their capital would probably be so small that they might as well not "be in the game" you seem to imply by your post that you can influence the market by your position? any retail trader that thinks this is a fool. add to this the fact that in many countries profit from spreadbetting is not subject to tax while profit from options would be subject to cgt, and it becomes quite an attractive place to start. this guys problem is not what method he is using to call the market.

One pseudo spreadbet firm(are they back in business yet) charges you a premium for effectively placing futures trades on your behalf. So you wont pay tax on your earnings, but you're less likely to make a profit with the extra cost.

To open a futures account requires no more account margin than the spreadbet firm in question.

It doesn't change the basic flaw in the spreadbetters business model.

My original remarks were about the advfntrader's understanding of the difference between trading and gambling, that trading IS BASICALLY gambling.

That by simply adding risk management, it becomes controlled gambling or less like gambling and metamorphosises into something else.

This is a terminal flaw in his thinking.

Being in the market, is not about my positions being of anymore influence than a butterfly's movements to a hurricane, you're missing the point.

To be a trader, you have to trade the product. A fishmonger has to sell fish. A trader in financial markets has to buy and sell futures contract or the like. If you spreadbet with a conventional firm, you are not trading. You have no position in the market, therefore do not participate in the markets movements. The solid inextricable attachment to the market is of key psychological importance. When you are in the market you better understand the demand and supply dynamics of price and volume. Irrespective of your own position's influence.

advfntrader still hasn't fully grasped his problem. Hence why he like many others is way out of his depth. With a gambler's brain, leaving things to chance by greater or lesser degrees, is the primary cause of failure. No matter what attempts you apply to control the downside.

Everyone that starts out has a long way to go before they understand that psychology is the only thing that will make you money. The TA and risk control etc, is all easy, though it might take months and years to hone it to your style, but the true trader's brain gives no space to ANY concept of gambling.
 
i'm sorry mate but what you say is complete rubbish. Sorry to be blunt, but you've managed to use an unbeleivable amount of words to convey nothing. How can you honestly think that one's thinking is different depending on whether you hold the actual contract or a bet on the same contract. The PnL is exactly the same. The only difference really being that i guess the spread bet doesn't influence the supply and demand in the market...but if they then buy/sell the contract concerned the supply/demand is satisfied. Stop lecturing and think about what you're writing....
 
stop losses dude....i know how hard it is to stick to them....i hate it.....i always want to run the loss and see what happens....but have been nailed for 1400 in about ten minutes....you got to be so thourough. Just think "i like small losses"....and stick to the stops.

I can't take you seriously. You want to run the loss to see what happens?

Thanks for helping me prove the point, you too are out of your depth.:rolleyes:
 
Sorry ucbestp but zigglewigler is right about what he says.

Trading the markets is all about supply and demand so when you take a 'BET' with a bookies or spreadbet firm whatever you want to call it you are simply gambling on the price. You have no influence in the market no matter how many £per point you lay up and no one in the market sees your bets(or cares), only the bookies do, and these are the guys you're playing against.

It's simply betting on a price, no buying of contracts takes place between you and the market of the price you are betting on.
 
Sorry ucbestp but zigglewigler is right about what he says.

Trading the markets is all about supply and demand so when you take a 'BET' with a bookies or spreadbet firm whatever you want to call it you are simply gambling on the price. You have no influence in the market no matter how many £per point you lay up and no one in the market sees your bets(or cares), only the bookies do, and these are the guys you're playing against.

It's simply betting on a price, no buying of contracts takes place between you and the market of the price you are betting on.

Technically in spreadbetting there is not clients direct participating in the market, but the end result for the account holder is the same. At the very least there is some clarity on this, and I suspect that larger trades are hedged by their owned traders. A reputable spreadbetting firm also explains that they are market makers. Interestingly enough, my orders are quite often filled faster on spreadbeting platforms, than on others, which claim to have an automated systemes linked to what??? forex exchange??? my orders take longer to be executed.If they are not market maker, then who they are, just intermediary brokers. If however they are market makers, but not spresdbetting, the client participates in the market is through the market maker, in a very similar way to spredbetting market maker, but differently named.Spreadbetting market makers firms have their own team of traders, and just as well, the clients have to be paid. The other platforms which are not spreadbetting, are also market makers, (otherwise they would have been boiler rooms) also have traders, locked in a sanitised trade rooms. Why then the non spreadbetting platforms need traders, if there is direct and automated clients participation in the market? I would suggest that both set of traders do exactly the same job, which is trading your money, with a larger trades being hedged, just in case, in a very similar way by the both types of institutions. Both type of platforms have duty to fulfill their obligation to the clients, who look for the fair treatment and fast execution of their orders. Unless one is a market maker or have a very large account with the top worlds banks the direct participation in the market seems to be a bit of a myth, as in both cases one participates in the market through the agency of a market maker. Both services are differently clothed, totally agree, but I am of the opinion that the modum of clients market participation is very similar if not exactly the same. To the end user, the services also look similar, and have numerically the same data feed, given one or two pips difference for a very short period of time. I have found that the spreadbetting spreads are constant on the platform/s I use while the other can vary significantly. I also have faster execution on spredbetting platforms then on the other lot apart from one major bank. I would like to say that I am not an authority on the subject of the direct participation in the market, and the above is my "loud thinking". For me one contract of $100.000.00 is roughley £5 per pip, although on a given platforms it appears differently. I also would aknowledge that the tax advantage linked to the spreadbet platform does not exsist in some countries, and in these countries there is les demand for the spreadbetting, and possibly less understanding of this particular trading platform. I agree the name "spreadbetting" itself is not the best, but the taxmen seems to undertand it.
Please exuse the digression from this thread,s main subject.
Best wishes,
2be
 
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You have no influence in the market no matter how many £per point you lay up and no one in the market sees your bets(or cares), only the bookies do, and these are the guys you're playing against.

This is true if the Spreadbetting firm decides to take all the risk for themselves. However, if they decide to hedge a bet, it is reflected in the market.

E.g.

1) Client long 100£pp FTSE -> Spreadbetting firm now short 100£pp FTSE
2) Spreadbetting firm hedges by going long FTSE Future equivalent of 100£pp

In the above example, this is pretty much what happens when you trade CFDs. So it can be said, when a spreadbet is hedged, it has the same effect on the market as a CFD trade.

Spreadbet firms which don't have access to a particular exchange will hedge through a CFD provider who then hedges in the market.
 
This is true if the Spreadbetting firm decides to take all the risk for themselves. However, if they decide to hedge a bet, it is reflected in the market.

E.g.

1) Client long 100£pp FTSE -> Spreadbetting firm now short 100£pp FTSE
2) Spreadbetting firm hedges by going long FTSE Future equivalent of 100£pp

In the above example, this is pretty much what happens when you trade CFDs. So it can be said, when a spreadbet is hedged, it has the same effect on the market as a CFD trade.

Spreadbet firms which don't have access to a particular exchange will hedge through a CFD provider who then hedges in the market.

What happens if 10,000 small clients go long@£2/point on the FTSE? Actually, what would you do if you were the S/B company?
 
What happens if 10,000 small clients go long@£2/point on the FTSE? Actually, what would you do if you were the S/B company?

A 1 lot FTSE Future is £5 per tick which works out as £10 per whole point. So you could hedge, if you were worried that these clients were the right side of the market, by buying 2000 lots of the future.

Some other clients will have bet in the opposite direction (short) though, so you would have to balance these shorts against the 20000£pp long first, to get the correct net position which is to be hedged.
 
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One pseudo spreadbet firm(are they back in business yet) charges you a premium for effectively placing futures trades on your behalf. So you wont pay tax on your earnings, but you're less likely to make a profit with the extra cost.

To open a futures account requires no more account margin than the spreadbet firm in question.

It doesn't change the basic flaw in the spreadbetters business model.

no idea what firm you are refering to here, but the one i use has been in business for about 7 years here in ireland doing jus that.as for the business model being "fundamentally flawed", his certainly is as hes lost ten grand! down this page i will link you to someone who has had substantial success using spreadbetting

My original remarks were about the advfntrader's understanding of the difference between trading and gambling, that trading IS BASICALLY gambling.

That by simply adding risk management, it becomes controlled gambling or less like gambling and metamorphosises into something else.

This is a terminal flaw in his thinking.

Being in the market, is not about my positions being of anymore influence than a butterfly's movements to a hurricane, you're missing the point.

To be a trader, you have to trade the product. A fishmonger has to sell fish. A trader in financial markets has to buy and sell futures contract or the like. If you spreadbet with a conventional firm, you are not trading. You have no position in the market, therefore do not participate in the markets movements. The solid inextricable attachment to the market is of key psychological importance. When you are in the market you better understand the demand and supply dynamics of price and volume. Irrespective of your own position's influence.

what difference does it make whether i hold the position, or the spreadbet firm takes it on my behalf, either way my tiny stake is in the market.

advfntrader still hasn't fully grasped his problem. Hence why he like many others is way out of his depth. With a gambler's brain, leaving things to chance by greater or lesser degrees, is the primary cause of failure. No matter what attempts you apply to control the downside.

Everyone that starts out has a long way to go before they understand that psychology is the only thing that will make you money. The TA and risk control etc, is all easy, though it might take months and years to hone it to your style, but the true trader's brain gives no space to ANY concept of gambling.

and how are all your cyclical, sophist arguments going to help him? if you have doubts about the ability of people to make money using spreadbetting, i direct you here.

he has lost a sizeable chunk of moeny and if he is going to ever make any cash in this game, he needs to go back to basics and learn. his plaform for doing that is much less important
 
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2) Spreadbetting firm hedges by going long FTSE Future equivalent of 100£pp

In the above example, this is pretty much what happens when you trade CFDs. So it can be said, when a spreadbet is hedged, it has the same effect on the market as a CFD trade.

this is precisely how my sb firm works
 
A 1 lot FTSE Future is £5 per tick which works out as £10 per whole point. So you could hedge, if you were worried that these clients were the right side of the market, by buying 2000 lots of the future.

Some other clients will have bet in the opposite direction (short) though, so you would have to balance these shorts against the 20000£pp long first, to get the correct net position which is to be hedged.

Jaydee, you have put it well. I can understand some coufusion or even disbelive that those unfortunate traders ( who have to pay taxes on spredbetting) experience, as for example in the US, where the taxes are lower, even so the minimum is 10% above 0.00 income and increasing in stages to 35% accountancy cost excluded! My condolencies to those who are legally obliged to burry such a substancial proportion of the hard earned profit, often staying up throughout the night to trade. Their contribution to the "nanny state" who claims to know better how to spend their money, very often is not well managed, and to them the benifits are seldom apparent in proportion to their contribution and therefore it is a loss.:(
Sleep depravation can lead to a serious codition and confusion.... .... just joking.
Tax advantage in spread betting is a monumantal part to be seriously considerred in trading, whether one's account is small or substancial.
2be
 
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Your right with the tax advantage regarding spreadbetting but few fully understand the complications it can have on their lives.

But, your titled as a gambler and not a trader - call youself what you like to your mates but to the banks and lending houses you are gambling, therefore a gambler.

This in itself holds many drawbacks and if spreadbetting for a living then one would need to be very liquid cash as this is pretty much all you could do. Banks dont lend to gamblers as a general rule so mortgages ect are extremely difficult to get if not impossible without at least huge deposits and extortionate interest rates.

In England most people have credit of some kind, cars, sofa's, kitchen's, credit cards, loans....the list goes on. If gambling this list disappears along with the credit and your credit history will take a dive the longer you are 'out of work'.

If spreadbetting or Direct to market one has to determine their own life style and work out which would be more cost effective for now and the future.

Just because its income and capital gains tax free doesn't always mean that it works out for the best financially. It's an important step to make whether one should gamble or trade for a living, the outcome is rarely the same.
 
Your right with the tax advantage regarding spreadbetting but few fully understand the complications it can have on their lives.

But, your titled as a gambler and not a trader - call youself what you like to your mates but to the banks and lending houses you are gambling, therefore a gambler.

This in itself holds many drawbacks and if spreadbetting for a living then one would need to be very liquid cash as this is pretty much all you could do. Banks dont lend to gamblers as a general rule so mortgages ect are extremely difficult to get if not impossible without at least huge deposits and extortionate interest rates.

In England most people have credit of some kind, cars, sofa's, kitchen's, credit cards, loans....the list goes on. If gambling this list disappears along with the credit and your credit history will take a dive the longer you are 'out of work'.

If spreadbetting or Direct to market one has to determine their own life style and work out which would be more cost effective for now and the future.

Just because its income and capital gains tax free doesn't always mean that it works out for the best financially. It's an important step to make whether one should gamble or trade for a living, the outcome is rarely the same.

I do agree with you that there are other consideration to be taken into account, and not just tax advantade of spreadbetting. I have got other stable sources of income which take care for the credit rating and so on. If one is relying for income only from trading and there are not other provisions for it, then one has to seriously consider how to arrange the financing of house purchase and other general expenditure. I suppose one could create a Limited trading company and throw into it some expediture, or trade as a sole trader. One could also have several accounts, and be taxed only on the ones that need to be taxed. If one goes for the mortgage, there is no escape from having a record of taxable income, sadly that is the fact of life. At this present market conditions it is financially better to rent then to be owner occupier of the morgaged property purchesd on the spike of the current market cycle,a property, which untill fully paid belongs to the bank anyway. I know this is an oversimplification of a very complexed area, and I feel sorry and am concern for the people not being able to afford a reasonable house. In essense I do agree with all that you have pointed out.
2be
 
Tax advantage in spread betting is a monumantal part to be seriously considerred in trading, whether one's account is small or substancial.
2be

Tax advantage :LOL:

You have to make money in order to pay tax or feel that you have gained a tax free benefit...let's make that clear. Are you saying it is easier to make money trading through a S/B over Direct access? I am saying that the answer is an unequivocal NO! You cannot scalp with a S/B firm, that is certain. There are many other reasons why DA is far superior to S/B in every way associated with TRADING.

Why not play roulette..I believe winnings at a casino are tax free.
 
Tax advantage :LOL:

You have to make money in order to pay tax or feel that you have gained a tax free benefit...let's make that clear. Are you saying it is easier to make money trading through a S/B over Direct access? I am saying that the answer is an unequivocal NO! You cannot scalp with a S/B firm, that is certain. There are many other reasons why DA is far superior to S/B in every way associated with TRADING.

Why not play roulette..I believe winnings at a casino are tax free.

I trade (or gamble on, who give a ****) UK stock through spreadbetting. I do so because it is cheaper to do so than holding the shares outright. I have proved this to myself beyond doubt. So I am unequivocally saying that in some circumstances it is easier to make money spreadbetting than DA.

I trade (or gamble on) US stock through direct access, because it is cheaper. I see no difference between somebody who uses one over the other and I consider us all gamblers of some sort. I'm happy with "gambler" the title, either way.

That some rubbish the tax advantage of spreadbetting says an awful lot (to me) about how much money they're actually making.

UTB
 
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It would be interesting to ask people the following question.

What would you rather?

1) To make much more money than you are making now, or
2) To pay less(no) tax on the money you are currently making.

I'm fairly sure I know which one most people would choose.
 
It would be interesting to ask people the following question.

What would you rather?

1) To make much more money than you are making now, or
2) To pay less(no) tax on the money you are currently making.

I'm fairly sure I know which one most people would choose.

I'll go for a third choice - to make more money and pay less tax on it. I've outlined the way I do it above.

UTB
 
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