A winner priced out of the market

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Old Jan 22, 2005, 6:20pm   #1
Joined Nov 2003
A winner priced out of the market

This weeks investors chronicle has a Buyer's Guide to spread-betting and CFD providers.
This quote is worrying

"One very active spread better is Chris Kobewka
As a better-than-average trader, he does not fit into the normal mould of a loser, and yet he still likes to bet small - between £1 and £10 a point. After placing a £2-a-point position with one leading company just after markets open every morning - and winning most of the time, at market opening times - he suddenly found that the spread-betting company no longer quoted Nikkei prices for the first five or 10 minutes of the trading session.

This account clearly presented a problem for the company concerned. Too small to hedge (as the Nikkei contract is bigger than £1 a point), the account was showing a consistent ability to win. The spread-betting company simply used its power to decide what prices to quote, and when, and then ceased to make a market during the time period concerned. Another firm stopped him trading via the internet after a large monthly gain. This highlights a fundamental problem with spread betting. Essentially, you are betting against the spread-betting company much of the time and, as demonstrated in this example, the behaviour of the company concerned suggests less than 100 per cent neutrality."
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Old Jan 22, 2005, 6:30pm   #2
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Well, if that doesn't spawn at least two interesting lines of discussion - I don't know what will.
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Old Jan 22, 2005, 7:17pm   #3
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Ummm.... don't understand the problem myself. Surely it's a question of picking the right thing to trade, or am I missing something?

If you don't have a lot of money to trade, then buying/selling shares is of limited use, because you own (or owe) the share and the daily, weekly and monthly fluctuations tend to only result in relatively small changes to your overall account value. Spreadbetting involves betting on the price move itself, so a 10c move on share X is as profitable as a 10c move on share Y - there's a lot of leverage in this, and a lot of risk to balance out, and eventually the spreads where the SB company take their piece of the action begin to annoy you... hence posts about SB company spread bias surface every now and again.

To trade small moves for noticeable profit surely something like direct access trading of shares is the way to go? You are back to shifting actual shares around, but as you now have a sizeable pot you can do it in big enough lots to make it worthwhile. SB gives the small punter the advantage of betting on the moves, but they are then locked into a relationship with a single company obliged to take the opposite stance in every chosen trade.

I think that the average SB company, rather than indulging in playing silly B's, might more usefully guide substantial players towards a more appropriate form of investment.


Edited, unsualalyyy, for spelkinge
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Old Jan 22, 2005, 8:05pm   #4
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I don't really understand spreadbetting, but surely if they are regulated then there must be some recourse. Sounds damn un-sporting at the very least.
It is fatal to enter any war without the will to win it.
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Old Jan 22, 2005, 8:20pm   #5
Joined Jul 2003
Originally Posted by DaveJB
Ummm.... don't understand the problem myself. Surely it's a question of picking the right thing to trade, or am I missing something?
Dave, the point Camelot was making was that the SB companies took affirmative steps (one by not quoting a price at the market open the other by stopping Mr. Kobewka from trading via the internet) to stop a specific trader from operating as he was making money (from them). Basically, SB companies acting 'unfairly'.

I would imagine IC would have thoroughly researched their article before publishing and if so I wonder if they named (or could name) the respective SB companies?

That was the first line I thought just 'jumped out' of that first post.

The other of course, is the fact that our very own Chris Kobewka appears to have a winning system. (I presume IC researched all the claims made). Which is good news for Chris - not such good news for his detractors.

Definitely time to move to DA Chris.
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Old Jan 22, 2005, 8:24pm   #6
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Over simplifying perhaps - but there's a difference between what you are entitled to, what you get, and what it's worth fighting for. On paper your SB company says it'll take any valid bet, you then proceed to take 20,000 a month of them and mysteriously your orders seem to fail due technical problems, or the order takes an extra 30 secs to process and the price changes - oddly it never changes in your favour. Now, how do you PROVE they are messing you about? Answer - chuck a lot of money at an in depth technical analysis of computer records, expert witnesses or whatever that combine to persuade whoever is presiding that subterfuge was involved.... then hope the damages are worth the struggle.

OR quit and go elsewhere, which (I would suggest) is what your SB company were trying to persuade you to do all along. Now think about it - the problem is you are too good at winning, so why deal via a middle man at all? Go direct access, trade via the market itself, no fiddles involved. I'm not a whizz on that score, but as I understand it direct access traders have a choice of routes to make their trades, so not only are they avoiding the middleman they are then able to say 'I'll route this order via X' because X is a good route for one type of action, whilst they might route a different way for a trade with a different character....

SB is amateur hour stuff still, amateur traders pay commissions to people who do very little on occasion to earn it, amateur traders can proceed to gain ability and become master traders - master traders, amongst obvious things like actually picking longs that go up and shorts that go down (contrary to what amateurs do a lot of the time) also trade the correct instrument.

Don't get me wrong, I know huge amounts of stuff - but as I progress in trading I've still only got to a point well short of mastery, and I have not had (therefore) to step up from SB to direct access... as master traders do not appear to be chipping in here I'm telling you what I think my next step is likely to be so there will probably be errors in what I've typed. It does seem fairly evident to me, however, that if I consistently make decent profits my next step is to find a way to trade the moves, rather than the 'percentage change in share price', ie make a lot on MSFT moving $0.20, not a bit under 1% on my investment, and so far as I've checked into it direct access seems to be the route for large trades with minimal delay.

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Old Jan 22, 2005, 8:33pm   #7
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Hi Tony,
the last reply wasn't directly addressing your reply, more a case of why I'm perpelexed they guy is complaining the field isn't level when it's obvious where to go next.

This, in my view, is another way to sort amateur and pro out - amateurs whine when they are being cheated effectively, pros learn from it and step up a gear. Yes, the guy has a point, probably, and as we're all in favour of the punter rather than the SB company (who, on the face of it, are not doing what they ought) then they should be tarred and feathered. Now, the FSA and SEC doubtless have numerous cases before them that any sensible person would considfer blatant - they take maybe a decade or two to decide to administer a slap, big deal.

Sure, the guy should bitch about it, but meantime should also be pro enough to move on - it's not a battle he's likely to win, and meantime he's losing money. The only real answer worth going for is this -
Swap to DA or whatever, make a fortune, buy out the SB company, sack the **** lot of them.
Guess what, come the following Monday morning, new staff looks at the new CEO, and the first order of business isn't 'how to be fair' it's 'how to maximise profits'... and guess what sort of idea pops out of the thin air?
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Old Jan 22, 2005, 9:08pm   #8
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Chris Kobewka posts on this site quite actively. He has attracted quite a lot of negative comments from those who do not believe his trading ability. Personally, I have found him to be very straight when discussing trading techniques which I have done more than with many others on T2W.

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