To spread or not to spread?

[juanbyte]

What questions are they wiseguy?

I have answered the question of the thread starter and that is that most people will be better off financially trading futures, IMO of course and not try and highjack a thread for personal reasons.

oh, I never said Sb is better than futures , both have their pros and cons. But what I will say is that the method used is the biggest determinant of succes not if you use futures or SB.

Thankyou for this great contribution it really clarifies things, talk about sitting on the fence, watch that you don't fall off.

And regarding

pretty silent for a guy that loves to talk

That seems pretty rich to me considering that I have only made 223 posts over a 2 year period yet you have made 412 posts in just 8 months.


You seem to think that there is just one way to trade the markets, in fact there are many ways to make money. I do not like trading shares but there are many people on these boards that are successful and very profitable with shares, I admire them because I think it is more difficult.

 

[donaldduke]

When i was still wet behind the ears i used to think SB intra day was viable (but only one
trade a day).

But now forget it unless you have a 100% garanteed profit (ie arbitrage)

Dont believe what anyone says, as a speculator you dont stand a chance in the long term,

Sure there maybe people who have made a profit a few weeks or even a few months in a row, but in the
end you can get away from the spread and delayed fills, they will get you in the end and wipe out your
account.

Day trading only became viable when Direct Access was born in the early ninetees with its
tight spreads and instant fills, before that the wide spreads and delayed prices the market makers were
quoting made the game impossible.

Its hard enough making money using direct access, with SB you dont stand a chance.

 

[rossored]

NO , I am right with regards to the markets I trade ( Dax , Cac , Dow ) . you can only trade globex products 24 / 7 , and not other like the ones I do.

Only we weren't talking about the markets that you trade. You said "futures" - I'm pointing out that YM (a future) can be traded out of these hours.

also , as you said liquidity is a problem and only a fool would risk his money in such illiquid markets.

I sincerely hope you're not suggesting I'm a fool.

 

[peterpr]

Do all the SB firms run their own prices or do some use the actual market prices? I'd be interested to know.

SB prices are their own quotes based on the underlying instrument. The problem for punters is that 'based on' gives them a lot of leeway. They will all have their own algorithms & methods for calculating quoted prices real time and you can bet your life they are better at anticipating movement of the underlying instrument price than any individual, no matter how many related charts (futures, volatility, volume etc) you watch. That's why you will never get the underyling instrument market price +/- half their spread in anything other than a static market. They will always be ahead of you on the breaks.

Another problem I found was that, in a static market the temptation to spike their quotes to take out nearby stop and limit orders must be pretty well irresistable. So much so that I used to move stops around regularly to try and avoid the problem - hassle I could have done without. Think about it - if they've only got a few people logged on (and I suspect they can probably even see which instrument their punters are about to 'hit the button' on too!), they can move the price briefly to close trades to their own advantage without much risk of filling other trades at a disadvantageous (to themselves) price. Not saying it's a routine occurence but it DOES happen. I found the problem particulary accute after main market close running up to SB provider close + first thing in the morning for positions held overnight. It is dead easy for them to take another few points on MOST stops and limits IMHO and its a BIG disadvantage for you.

That's not to say that there aren't irritating creases in the DA brokers' offerings as well of course, but at least you are dealing directly with the real market, rather than with a manipulated derivative of it.

 

[SOCRATES]

Talking about irritating creases......does anybody here know what a "black swan" is, or is it an Antipodean thoughtle ?

 

[Roberto]

Talking about irritating creases......does anybody here know what a "black swan" is, or is it an Antipodean thoughtle ?

More Lebanese/American, I think.

 

[SOCRATES]

Roberto, i don't know, that is why I ask as it has stimulated my curiosity. It is not included in any dictionary for traders, that is why I am led to believe it is an antipodean thoughtle, or wordles in popular usage down under, as it does not emanate from my lot, I assure you.

Ah ! And seven posts away from Legendary, to boot.

 

[Roberto]

Dont believe what anyone says, as a speculator you dont stand a chance in the long term

If you've already decided that you don't believe what anyone says, Donald, then there's absolutely no point in discussing it with you. But for the benefit of other people reading, I'll still point out that your post is factually incorrect in many places.

Sure there maybe people who have made a profit a few weeks or even a few months in a row, but in the end you can get away from the spread and delayed fills, they will get you in the end and wipe out your account.

Why, then, are so many successful traders with a real edge and consistent profits increasingly switching to SB to save the Capital Gains Tax? Oh I forgot - you don't believe what anyone says. So all the people here who have been making a living that way (for nearly 5 years in my case, and a little longer for others, I think) are just liars, are we, Donald?

Its hard enough making money using direct access, with SB you dont stand a chance.

That's your opinion, and you should state it as your opinion, not as fact. It happens to be totally mistaken. There are several of us here making a living that way. And many more in other internet forums, too.

With the sort of trading I do, I make MORE from spread-betting than I could with direct access. And I'm not the only one. Maybe it doesn't suit your trading, but please don't keep describing it as "impossible".

Why is it that on this site some people just can't bear, for some reason, to admit that spread-betting is a perfectly valid and reasonable way to trade?!

It has _much_ better regulation than anything else, in some instances far better customer service, in some instances spreads that are no larger than the alternatives, and it's TAX-FREE, for God's sake.

Obviously it's completely unsuitabel for some forms of trading, but for many people there's nothing difficult or complicated about the decision to trade that way!

_Why_ does an intelligent guy like you apparently have such a problem with this, Donald? It's really very, very difficult to understand!

 

[SOCRATES]

Ah ! Yes Roberto, and the moment you put your head above the parapet and make sensible statements you attract all sorts of contradictors and disbelievers etc., this is very funny. None of them can complain they are not told everything.

 

[Roberto]

Roberto, i don't know, that is why I ask as it has stimulated my curiosity. It is not included in any dictionary for traders, that is why I am led to believe it is an antipodean thoughtle, or wordles in popular usage down under, as it does not emanate from my lot, I assure you..

As far as I know, the "antipodean" connotation is to do with Perth, Western Australia (where it's the symbol of the city, I believe). My slightly obscure reference to its Lebanese/American origins were a clumsy attempt to amuse you by referring obliquely to the nationality of Nassim Nicolas Taleb, the author of "Fooled by Randomness", a book (about trading and other things) in which the concept and its relevance to trading are discussed, and from which many of the online discussions of "black swans" directly or indirectly emanate.

 

[peterpr]

Talking about irritating creases......does anybody here know what a "black swan" is, or is it an Antipodean thoughtle ?

A few suggestions:

http://www.dawlish.com/Pictures/Pictures.asp?pagenumber=1&PictureNumber=78
http://www.bssc.co.uk/
http://www.vjm.biz/blackswan.htm
http://www.bsfv.co.uk/production.htm
http://www.newcastle-arts-centre.co.uk/blackswan.htm

Or maybe it's just a statistical outlier - depends on the context I guess

 

[Roberto]

Ah ! Yes Roberto, and the moment you put your head above the parapet and make sensible statements you attract all sorts of contradictors and disbelievers etc., this is very funny. None of them can complain they are not told everything.

I can understand this happening to you, to some extent, because you have a lifetime of experience, knowledge and understanding of various trading matters which are barely (if at all) understood by the majority of people posting here. I, on the other hand, am a comparative novice with precious little information to impart and far, far more to learn. The very few facts I do state around here are all obvious, clear-cut, easily verifiable and perfectly straightforward. They ought not to be controversial at all!!

 

[SOCRATES]

Oh ! Thanks. I used to have the book here. I failed to make head or tail of it, but that is because, you know, what I say and do is not mainstream. But what is very amusing, is that rather than show my account as has been suggested elsewhere, I prefer to post live and to pin bottoms and tops as they occur in real time, and when prices are going sideways or with downward tilt or upward tilt interruping the progress of the move, and , and, sometimes in advance. This serves to infuriate some people for reasons that baffle me, as I do not do these things to belittle people or for any other reason, but just to show, in a manner that is I hope interesting and entertaining and irrefutably provable that it can be done, and that I do it. I myself do not percieve these things as difficult , so I am perplexed as to why some individuals take it upon themselves to try to prove the opposite, when the date stamp on the post does not lie, and there is ample data available both as recorded prices and as charts to back it up.

Kind Regards,

 

[SOCRATES]

A few suggestions:

http://www.dawlish.com/Pictures/Pictures.asp?pagenumber=1&PictureNumber=78
http://www.bssc.co.uk/
http://www.vjm.biz/blackswan.htm
http://www.bsfv.co.uk/production.htm
http://www.newcastle-arts-centre.co.uk/blackswan.htm

Or maybe it's just a statistical outlier - depends on the context I guess

Thanks for your reply, but what is required is a definite answer defining the obscure phenomenon and what it may imply.

Kind Regards.

 

[peterpr]

Thanks for your reply, but what is required is a definite answer defining the obscure phenomenon and what it may imply.
Kind Regards.

Now now, you are becoming obscure. Your reference to my 'irritating creases' led me to wonder whether or not your 'black swan' query might be a little tongue-in cheek and also connected to something I posted elsewhere a while back. Can't remember it's context but, yep, I'm guilty of using the expression which, perhaps erroneously, I had assumed was a fairly common simile for a statistically rare event.

Just in case I was mistaken in so wondering, I thought it prudent to post some alternative ideas too.

 

[bluetipex]

Okay, I'm getting the message now, D4F may not be such a good alternative to Finspreads. What's your take on Capitalspreads? Most people seem to rate them very highly. At least they have a represntative who frequents this forum, so we can give him a grilling!

I don't know about Finspreads, I've never used them. I can only comment on Tradindex and D4F. D4F wins with comsummate ease. I'm happy SB the DOW intraday using D4F. I will also consider Direct Access in due course. I still maintain that there's not much in it: D4F spread of 4 points, no other costs. TwoWayFutures spread only 1 point plus commissions. I find the D4F platform excellent.

However, one should always maintain an open mind on these matters...

 

[the blades]

waste no time considering the contents of your epitaph.

UTB

Edit;
but again, back on topic,

why does one method have to be better than the other. It's not that difficult is it? Calculate your average profit per trade (use the SB model so you factor in ALL SB costs), volume of trades and hence projected profitability for the year. Calculate the cost of CGT, and compare this with the cost of any spread differential. Which method gives you the best return? For me it's spreadbetting - this is fact, not opinion.


SB will not be the best method for many other "traders". But one doesn't have to be "best", does it?

Edited to remove quote from 1lotwonder

 

[fhb22266]

I don't know about Finspreads, I've never used them. I can only comment on Tradindex and D4F. D4F wins with comsummate ease. I'm happy SB the DOW intraday using D4F. I will also consider Direct Access in due course. I still maintain that there's not much in it: D4F spread of 4 points, no other costs. TwoWayFutures spread only 1 point plus commissions. I find the D4F platform excellent.

Right, so D4F is okay for intraday on the Dow. But they skew their prices aparently, does this not deduct more points on your gains or add points to your losses? Have you been successful with D4F?

 

[fhb22266]

A couple of more queries have surfaced since reading the replies...

Tell me if I've picked this up wrong:

Direct access companies quote the actual prices of specifically, the cash Dow (INDU), they do not skew.
You pay a commission on each trade.
Some DA companies have a small spread as well as comission?
When you place a trade a stop loss or a close, it's executed immediately or as fast as the internet connection?

Some people prefer DA and some SB for intraday trading.

You can trade 24hours a day on SB firms but not with DA?
Deal4Free and Capitalspreads are recommended, D4F has a low spread and CS doesn't skew prices. D4F may also 'spike' to trigger stop losses but CS have not done this.

When I looked at Capitalspreads popular markets I couldn't find a Wall Street daily cash only the Wall Street rolling. Do they not do the daily cash Dow? Excuse my ignorance but what is the Wall Street daily rolling?

 

[peterpr]

Direct access companies quote the actual prices of specifically, the cash Dow (INDU), they do not skew.

There is only one DJIA (INDU) index. You cannot trade the index itself anywhere - only a derivative of it. The most liquid derivatives are the futures and options of the index quoted directly by various exchanges. With a DA broker, you are always trading the derivative itself. There may be 'slippage' in filling an order (if 10,000 orders hit a system at once they get filled on a first come-first served basis - depending upon the type of order of course) - so for an 'at market' order, the market may have moved by the time it is filled + lots of other 'creases'. The fundamental thing about exchange quoted derivatives is that, for every buy, there has to be a sell.

With SB's you are one step removed from the market. You are again trading a derivative - but the SB's own which is really a derivative of a derivative, and your buy order does not have to match with a seller. But the SB company does need to hedge the risk that your buy exposes him to. He does that by a combination of matching buys and sells and hedging with the corresponding future - AFTER the event. In other words he hasa book that needs to stay within certain risk parameters. That gives him a lot of incentive and scope for jiggery-pokery that seldom works in your interests

In fairness to the SB's - their interests are not best served by jiggery-pokery. In the main their profit is from their spreads + the odd tick here and there on filling limit and stop orders.

Some DA companies have a small spread as well as comission?

Not real DA brokers. If you are dealing directly with an exchange, spreads move dynamically according to market conditions. SB's move there own spreads themselves - again according to market conditions.

You can trade 24hours a day on SB firms but not with DA?

Not as simple as that - A can of worms in fact.

When I looked at Capitalspreads popular markets I couldn't find a Wall Street daily cash only the Wall Street rolling. Do they not do the daily cash Dow? Excuse my ignorance but what is the Wall Street daily rolling?

The thing is, what do YOU understand by the 'daily cash DOW'?
They're pretty much the same thing - But they are SB's own prices based on calculations of risk around the main index

I think the argument over which is 'BEST' is a sterile one. As long as you understand what it is you are trading + the pitfalls then I'm certain it is possible to implement profitable strategies with both. You need to understand the working of both to utilise them to best effect though.