Trade Costs

Pound foolish said:

Thanks for the replies. It is shares I am trading and I dont want to do spread betting.

I like the fact that if I get a buy wrong I can hang on until the price recovers (However long that may be). OR I can take a small loss because I got it wrong.

CFD and spread betting look too risky for me!

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Shanghai said:

There are several issues there. First of all spread betting doesn't have to be any riskier than buying shares directly. You just need to put up less money to control the same amount of shares. If you understand about money management and risk control then there are no problems with spread betting.

In addition are you buying UK shares (you seem to be from the UK)? If so then you have to pay a 0.5% tax on all share purchases in addition to the broker's commission. With spread betting you don't have this cost either.

Thirdly does your broker offer the facility of a stop loss so if the price goes below a certain figure then your trade closes automatically? If not then you want to be sure that you can watch the screen often. Again with spread betting you can do this automatically.

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Pound foolish said:

Yes I am in the UK buying UK shares. I like the idea of having more with less outlay. Does this mean though if I get it wrong the whole outlay will need to be paid at some time. hence my adversion to the risk.

i klnow about stop losses but it is still a loss, you never actually own the shares do you?

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Shanghai said:

Lets take the example of a long trade on ANTO. Current price is 558. Lets say I want to go long at 10 pounds a point with a stop at 510. If the trade goes against me I can stand to lose 480 (in fact if it gaps I could lose more but that's a different discussion and you can have guaranteed stops to address this). IGindex is current stating that you will need a deposit of 814 pounds in your account to make this trade.

If I was to buy the shares directly this would mean I would have to pay 558 x 10 = 5580 (plus commission slippage and tax). So the outlay is less with SB. However that should not be your main concern. Which ever way you decide to trade you should limit your risk to 1-2% of your account. So in the example above you should not make the trade unless you have an account of around 24K.

For your last point you are correct, you never own the shares.

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Pound foolish said:

Is this done over a single day, two days or any stated period??

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Pound foolish said:

Are the quoted figures based on the max loss? ie. £10 a point is 10 x 48 = £480 where does the £814 come from? How can you lose to this?

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Pound foolish said:

If it goes up 50 points you make £500 right, but if you bought the shares you would need to buy 1000 (1000no x £0.5 = £500) of them (£5580.00 + comm and SD) to make the same?

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