Banned for winning too much?

[Joey25]

Of course they can hedge the aggregate. But someone who is just taking money from them is not at all helpful... would they be better off with or withot them?

But he's not is he? THEY'RE HEDGED ffs

 

[arabianights]

But he's not is he? THEY'RE HEDGED ffs

You can't hedge someone doing £1pp in the underlying market. You necessarily have an imperfect hedge and you will be happier without that guy.

 

[donaldduke]

Its pretty simple:

A consistent loser will have no problems betting with an SB. They are a profit center. They pose no risk accept perhaps a credit risk.

However the rules for handling winning betters is different:

As long as the SB can hedge your bets you can bet as large as they can handle.

If they cant hedge your bets they will try to limit your size (ie the amount you can win).

In the unlikely event they cant hedge your bets or limit your total winnings they will eventually have to ban you.

It can be no other way.

Each SB company has different ways of hedging and different ways of requoting/rejecting and they will have different thresholds for the level of unhedged losses they are willing to tolerate.

 

[Joey25]

You can't hedge someone doing £1pp in the underlying market. You necessarily have an imperfect hedge and you will be happier without that guy.

Look, I'm sure you're just being contrary , however:

If you hedge 1000 individual positions or hedge the aggregate postion just once, the result is exactly the same.

Even in the aggregate you will have an imperfect hedge nearly all the time as the underlying moves. That's where the trader uses his nouse, balancing the practicalities of constantly hedging against the transactions costs of doing so, and his view on the market.

It's exactly the same for DMA brokers -it's just not practical to hedge everyone's positions the instant they are put on. That's the job of the flow trader.

 

[tar]

Small trades is hedged already by other coustomers bets , they need small traders so their book will be always balanced ( longs = shorts ) , in this case the SB firm makes the spread

 

[Rossini]

Arabianights has it exactly right! The winners trading at small sizes or getting in/out very quickly are just a pain. It may not be costing the SB company if they have controlled there exposure, but if they can get rid of there winners it just makes them even more profit. Is that not obvious?

 

[Joey25]

Absolute nonsense. Believe it if you must, though.

 

[nihil]

Casinos ban the card counter. All the card counter does is train his brain.

Similarly I am finding it frustrating that I cannot use analysis techniques and automatic buys and sells for CFDs because I cannot get at the raw data behind the Flash graphics of the trading platform. The conspiracy theory is that the choice of Flash graphics is motivated by the need to obfuscate the data to stop people using analysis techniques to gain an advantage.

Does anybody know of a trading platform where you can get at the data and automate buys and sells?

 

[Joey25]

All they are doing is adding an extra link in the broking chain, adding their spread to the spread available in the underlying market.

Part of this extra spread is funded by the tax advantages conferred on SB by the government - look how the spreads tightened almost immediately after the CGT reduction. It's just paying the middleman.

I bet most of these requotes are when they can't keep up with a fast market and panic like headless chickens when the IT can't cope. You could see this yesterday after the FOMC, for example.

 

[tar]

look what Capitalspreads director manager said :

Pippin

you would hardly expect us to be running at a loss..... not very secure for client money if we were...I was a propriatary trader for a series of Banks from 1983 to 2000 trading in positions of many hundreds of millions (if not Billions) of pounds. You can be assured that I would not have survived for that length of time if I was bad at it.

Mind you I find it much more difficult to trade my own money... I think that is a very different skill.

Laptop

Our hedging policy has been done to death on this thread... but if we identify winning clients who trade in size then we tend to add them to what we call 'marked risk' clients and do indeed go with them. We have a growing band of major winners who it would be foolish of us to ignore. But if someone was winning a grand a week we probably would not even notice them.
But most of the trades we take counter act other trades (as many buyers as sellers). A good example of this is Wall Street at the moment, we have some 450 seperate positions ranging from £1 to £200 a point and yet the total net position at the moment is £35. The larger we get the more this tends to be the case especially in Indices and FX

if the client is just pipping around in £10 a point we probably would not notice him/her unless we felt they were scalping. In which case we may then turn them from auto accept to trader accept. Again we have a few people who are designated this way.

Simon

ofcourse Capitalspreads is very small compared to IGindex ...

 

[Rossini]

Absolute nonsense. Believe it if you must, though.

I don't need to believe it, as I have nothing to do with them any more.



But if it is nonsense then what would be the reason for SB's to dealer fill anyone?

I have 2 computers next to each other (one for backup), they both use the same broadband, where both using the same browser etc. I had someone enter the trade at the exact same time as me, at the same size and on the same market. I was not filled on an account that was nicely profitable, but the person on the other PC that was using a new account was filled instantly. Not only that but the two accounts would 'see' 2 different prices once one account was in a position.



If what you are saying is true then is this coincidence?

 

[Joey25]

I don't need to believe it, as I have nothing to do with them any more.



But if it is nonsense then what would be the reason for SB's to dealer fill anyone?

I have 2 computers next to each other (one for backup), they both use the same broadband, where both using the same browser etc. I had someone enter the trade at the exact same time as me, at the same size and on the same market. I was not filled on an account that was nicely profitable, but the person on the other PC that was using a new account was filled instantly. Not only that but the two accounts would 'see' 2 different prices once one account was in a position.



If what you are saying is true then is this coincidence?

I can only go by the one I trade with.

They even came up with a risk management rule for cross-margining, specifically tailored for me so that I could do more size. Before that they used to just add the underlying and the hedge.

Yes, for this product (options) I am on dealer-requote, but more often that not I get the same or better price than the platform originally said. I have only gone as high as £400 a point, but the liquidity of the underlying is poor.

Like I said, the one I use has a commitment to instant internet fills at "their size" (for vanilla products).

I don't know about the other firms.

 

[stevespray]

Everyone talks about 'hedging' but hedging costs the firms money in terms of execution costs + spreads + slippage and therefore they generally try to keep this to a minimum. If a firm does hedge, which obviously does happen especially with the smaller houses, then the firm must impliment some kind of rule structure for the efficiency of its hedging policy. If a firm has identified a larger successful client then it might actually hedge that client on a trade by trade basis and simply make its money on the wrap (the extra which the firm adds to the market spread). This just leaves the firms own book on each market which obviously represents the net client positions of otherwise unhedged client positions - this it has to handle differently because the firm cannot afford to, both financially and in terms of man power, hedge or unhedge as each individual trade goes through. The firm therefore will decide to hedge based on two factors, i ) a time based examination of its net client book, or ii ) if its book becomes too heavy in one direction.

So short term trading is disliked (if you are a winner) because it cannot efficiently hedge your positions. For example if you trade inside their average 'time base' in terms of book hedging.

The firms will use terms like 'scalper' but that term is generally subjective. In the firms terms any client who makes money from them in such a manner which cannot be hedged would represent 'scalping'.

Steve.

 

[new_trader]

Arabianights has it exactly right! The winners trading at small sizes or getting in/out very quickly are just a pain. It may not be costing the SB company if they have controlled there exposure, but if they can get rid of there winners it just makes them even more profit. Is that not obvious?

Do the maths and you will see this is just utter nonsense.

Assume 2 traders on the S&P500.

One goes long £10/point @780.00 and exits@790

A 10 point move.

Trader makes £100 -(spread 0.7x10) = £93-
Spread bet company takes £7 from the total.

------------------------------------------------------------------------------
Trader 2, a scalper goes long £10/point @780 and exits@782

Takes 2 points = £20 - £7(spread) = £13
Spread bet company takes £7 from the total.

Running total: Trader = £13, S/B company =£7-

Goes long again £10/point @782 and exits@784
Takes 2 points = £20 - £7(spread) = £13
Spread bet company takes £7 from the total.

Running total: Trader = £26, S/B company =£14-

Goes long again £10/point @786 and exits@788
Takes 2 points = £20 - £7(spread) = £13
Spread bet company takes £7 from the total.

Running total: Trader = £39, S/B company= £21-

Goes long again £10/point @788 and exits@790
Takes 2 points = £20 - £7(spread) = £13
Spread bet company takes £7 from the total.

Running total: Trader = £52, S/B company= £28

------------------------------------------------------------

Ok, hypothetical examples can be tailored and you could argue that a scalper might make more trades in the same 10 point move, but be honest, which of the above would YOU prefer as a client if you were a S/B company?

 

[stevespray]

Ok, hypothetical examples can be tailored and you could argue that a scalper might make more trades in the same 10 point move, but be honest, which of the above would YOU prefer as a client if you were a S/B company?

The answer to your question would depend on exactly how profitable the client who made many trades (during the 10 point move) was - which is exactly the question asked at the start of the thread!

Steve.

 

[new_trader]

The answer to your question would depend on exactly how profitable the client who made many trades (during the 10 point move) was - which is exactly the question asked at the start of the thread!

Steve.

If you say that "S/B is non-professional" in this forum you will get bombarded with abuse. From this you can only INFER that those people (or some people) are making a good living from Spread Betting. If so, it makes this thread pointless or it makes many people in this forum complete liars. Your pick.

 

[Joey25]

If you say that "S/B is non-professional" in this forum you will get bombarded with abuse. From this you can only INFER that those people (or some people) are making a good living from Spread Betting. If so, it makes this thread pointless or it makes many people in this forum complete liars. Your pick.

You just can't cope with being one of a very select group of punters with a <95% win rate, NT :cheesy:

 

[stevespray]

If you say that "S/B is non-professional" in this forum you will get bombarded with abuse. From this you can only INFER that those people (or some people) are making a good living from Spread Betting. If so, it makes this thread pointless or it makes many people in this forum complete liars. Your pick.

I know people who've worked on 'the inside' for years. They all say similar things. They do have massively successful clients who make seven figure tax free sums most years. This IS NOT done via scalping but by either position or swing trading. Some clients hold positions for TWO YEARS! Your paraphrase that "S/B is non-professional" is hugely subjective - How are we to rating being 'professional'? Is it size? Is it because you win often? Is it because you win big?

All people are really suggesting is how it really is - that is that the firms DO look at clients and examine trading activity and then, if they feel the need, they take steps to make things more difficult for that client.

Steve.

 

[arabianights]

Look, I'm sure you're just being contrary , however:

If you hedge 1000 individual positions or hedge the aggregate postion just once, the result is exactly the same.

Even in the aggregate you will have an imperfect hedge nearly all the time as the underlying moves. That's where the trader uses his nouse, balancing the practicalities of constantly hedging against the transactions costs of doing so, and his view on the market.

It's exactly the same for DMA brokers -it's just not practical to hedge everyone's positions the instant they are put on. That's the job of the flow trader.

No one will allow you to 'scalp' in the way the banned traders try to 'scalp' spread betting companies for exactly the same reasons. And a DMA broker will not guarantee you a fill unless you are willing to go to market.

Or look at it this way, what possible advantage do the spread betting companies derive from these small traders? Two things: either they help balance the spread betting company's book or they are appalling and give the SB company money. An accomplished scalper making a grand a week and twenty trades a day is neither helping balance the book nor giving the spread betting company money. Why on earth would they want to keep them?

 

[Joey25]

No one will allow you to 'scalp' in the way the banned traders try to 'scalp' spread betting companies for exactly the same reasons. And a DMA broker will not guarantee you a fill unless you are willing to go to market.

Or look at it this way, what possible advantage do the spread betting companies derive from these small traders? Two things: either they help balance the spread betting company's book or they are appalling and give the SB company money. An accomplished scalper making a grand a week and twenty trades a day is neither helping balance the book nor giving the spread betting company money. Why on earth would they want to keep them?

Maybe because they buy at the offer and sell at the bid?

(That's rhetorical by the way).