A winner priced out of the market

DaveJB said:
Edster's reply is an example of what I mean - sorry Edster, I'm not having a pop at you here, it's just a good illustration of the point.... SB is the wrong way to trade if you've got a sizeable pot, there is no good reason whatsoever to trade via a middleman whose role in life is to widen the actual spread on a share and to occasionally shift it up or down a little to 'bias' the return over a short period. The SB company is also imparting a small time delay on the deal as well, which frequently causes the deal to close a cent or two away from where it was when you clicked the trade button. So why on Earth would the guy want to mess about pretending to be someone else and sign back up? (Apart from problems moving money around in somebody else's name). The aim of trading is NOT to get even with people you believe have dealt you a crooked hand, it is to make profit. Trading is difficult enough for most without sidetracking into pointless exercises in revenge.

I do apologise in advance Edster, I can understand why you came up with that idea, it's just that it really illustrated the point so very well. I agree with the 'name and shame', in that this is information that would help you pick the SB company to trade with - although more appropriate and useful might be a table listing the size you can win with each before problems arise!
Dave
Click to expand...

No problem Dave. From the original post it stated that Chris only put a £2 bet on which is far from being a 'big player'.
At what point do you go to DA? Do you go on your yearly pips? Overall profit? Or just personal preference?
I just play around with SB really in my spare time and made just over 3500 pips last year (after spreads). The tax-free hassle is a big benefit for me really. No hassle filling in forms declaring income. That's worth the extra 'commission' in spreads for me. Especially now that companies like Capital Spreads are cutting spreads down even further.
If you want to give me figures that'll convince me to go DA then I'd be very interested. I'm always open to suggestions. Especially where money is concerned!!

Cheers,

Edster
 
Camelot said:
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."
Click to expand...


This doesn't make sense to me. If he was a consistent winner than the s/b company wouldn't have had a problem over-hedging him. More money for them, right? If he was 'only' betting £2 a point, then they would have more than happy to copy him in 2, 20, or however many contracts, if he was consisitently profitable.

Either the s/b company in question is extremely stupid, or the details contained in this article don't stand up to scrutiny......
 
HI Edster,
'big' is pretty well decided by what occurs - Chris might only be betting a small amount per point but if those small bets win often enough to generate a noticeable (and I suspect regular) cashflow then you'd have to be aware that there are enough tales like this one to suggest thinking of the next move might be a good idea. If you've been successful, and have used winnings to boost the trading pot, then I'd hope that move would actually just suggest itself as a natural progression.

How much? Depends to a very large extent on what you are looking at for your win rate and how much your average winner is bringing in as profit... you need to be able to trade to return a bigger profit (as tax is now involved). If you know how much you are aiming to turn over, with a profit goal you are comfortable with, then dependent on what you are planning to trade you can work out how big your trading pot is going to have to be... I'm way off that, but I'm confident that if I get to the point where I can't get SB companies to deal with me it'll be because I've got enough stashed to take the next step.

It also matters whether you are trading to live on, or to build a sum up as an investment - I don't need to extract living expenses from trading (just as well <g>) and the master plan is to reinvest and multiply, tax I can't help, but it seems to me that the more people in between me and a share the more odd points seem to be shaved off what I get. Those shavings I view as limiting me in the timeframes I can use because they limit me to only trading when the move is going to be a certain minimum size - no point trading very small moves of just a few cents if the spread is 10c. That 10c isn't a lot if you ride a nice trend, but it can be enough to prevent you trading a good few shares where you can see a swing progressing nicely and would like to take a few cents from it.

None of which is a criticism of anyone, or of the SB companies - they fill one part of the market and provide a low cost entry with nice reward potential... provided you keep a firm eye on the potential to lose quickly of course.

Dave
 
In my own personal experience Spreadbetting is a very grey and cloudy area for the regulatory authorities. Yes, it is stated that spreadbetting is an activity which is regulated by the FSA. The Financial Ombudsman Service is appointed to carry out investigations in response to customers complaints and from time to time the obviously try to do this. The bottom line is that there are not a sufficient number of suitably qualified people available to carry out the duties required to insure adequate regulation. On top of that, the people who do try to do the job do not have a sufficiently finite knowledge of the subject area. The Financial Ombudsman Service (FOS) have been investigating a case on my behalf for the last 14 months. Progress has been very slow. The FOS only final acknowledged, about two weeks ago, that advertising claims, made by the company in question, were admissible as evidence. Initially the FOS had suggested that a customer’s relationship with the spreadbetting company was purely governed by the Customer Agreement. The FOS has only really changed their minds on that point after my legal advisor pointed out that advertising claims made to a consumer are legally allowed to be considered contractual. One would have imagined that an organisation like the FOS would have a working knowledge of basic consumer law before attempting to adjudicate on such matters.

Cases like the one outlined on this thread are not uncommon. Some of the spreadbetting companies do not hedge all of their positions. This means that your win is their loss. It could well be that the case highlighted in IC is based on someone who was trading a ‘grey market’. (For those people who don’t understand the term, a ‘grey market’, it is a market which is made entirely by the spreadbetting company. This could be an index which is quoted ‘out of hours’ for example.) Therefore it is possible that the customers position simply can not be hedged. This means that they assume the full risk. Therefore if someone is very good at calling a particular market then it becomes financially sensible for the quoting company to move the goal posts slightly until the customers advantage is lost. The experienced dealer knows that there are several ways of ‘moving the goal posts’. Refusing orders or delaying executions are just simple examples of a company gaining an unfair advantage over a customer. The problem for the customer is explaining that situation to the regulatory authority in a manner which they will understand.

Steve.
 
Indeed,
the mere fact that the system isn't completely automated introduces the potential for skulduggery - it doesn't even have to occur for the customer to feel aggrieved... as recently as Friday a price moved 4c against me while the 'close the bet' window sat on screen advising me that my trade was being dealt with. Now I don't think for a minute that this was anything untoward - the point is that a computer would match my close request to an exisiting open bet, fetch the price, and complete the transaction in less than a second... including humans in the actual trading loop will always offer the company opportunitites for making life difficult for winners, and encourage individuals to imagine their SB company has nothing better to do than to scalp a couple of quid off somebody who is doubtless not even on their radar.

You need only read Jesse Livermore's story to realise that the same things are happening now as happened in 1915... as for the FSA etc I have no faith in their ability whatsoever, ... as a general rule if your case is so watertight a deaf, blind mute couldn't pigs it up you are probably okay, otherwise don't hold your breath.

Dave
 
Camelot said:
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."
Click to expand...

hmmmmmm well io the guy was constantly winning surely the SB concerned would just hegde buy buying one contract (if the guy is doing £1 per point) as they would then make money from over hedging a consistent winner!!!! I think the article is rubbish!!!!!!
 
Dave,

I was about to mention "remenicences" when I read the end of your post. The SB companies are no different to the old bucket shops. I trade with SB companies at the moment and will continue to do so until they make it clear that they don't want me there any more, then, just like Jesse Livermore I'll move on to the real market.
 
stevespray said:
.
Cases like the one outlined on this thread are not uncommon. Some of the spreadbetting companies do not hedge all of their positions. This means that your win is their loss. It could well be that the case highlighted in IC is based on someone who was trading a ‘grey market’. (For those people who don’t understand the term, a ‘grey market’, it is a market which is made entirely by the spreadbetting company. This could be an index which is quoted ‘out of hours’ for example.) Therefore it is possible that the customers position simply can not be hedged. This means that they assume the full risk. .
Steve.
Click to expand...

As far as I know Finspreads does not trade shares after hours so, as I see it, you cannot trade
but they can stop you out if you have clicked the "their quote" box. If you have clicked the "market " box then you are locked in until the next day. I cannot see how they can lose and do not understand if they do not hedge our bets. All types of bookies hedge their bets once they have taken on all the risk that they want., why should the financial ones be different? There must be another reason that we do not know.

Split
 
Roberttral.......the article is spot on.The point of the article is to ilustrate the lack of neutrality that spreadbetters exhibit.
There are quite a few traders on T2W who have found it impossible to trade with spreadbetters such as CMC cos we consistently win.They don't hedge eveything and its much easier for them to just 'discourage' consistent winners by making it impossible to trade in the same mannar as other other traders eg. not allowing any good trade size or just by requoting a silly price regardless of the order book.
I've now had the same problem with saxo who have basically just closed my account down. I shall stick to direct access trading until the next 'sucker' company comes along who thinks its easy to fleece the ordinary punter.Come on Barclays...about time you released a quote driven online cfd platform!!
 
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I haven't followed all this thread but I think SB Companies just like traditional bookies do not like winners. Traditional bookmakers luv you when your loosing, but rake up a winning streak and they soon turn the screw. Especially online, its so easy for them to sought out the winners and rig their site software to make the winners give-up (and go elsewhere) in frustration. In my view its a disgrace. Because there are so few consistent winners they know that any complaints/bad publicity will be short lived.
 
All bookies, as several have pointed out, have allergicic reactions to winners - not every bet is hedged. In fact if I were running an SB company I'd figure that most players lose, and I'd be more inclined to hedge persistent winners provided it wasn't too much hassle to do that.... but with humans in the loop I'd still be paying an employee to process bets for somebody I was taking very little money off - whilst I could happily hedge part of what the average punter is busy losing, and increase my margin no end.

Call me cynical, but I've heard far too many similar tales from people I consider reliable to believe that all bets are hedged (some, probably, are in such limited fields that they can't be hedged) or that SB companies are happy to see a persistent winner clocking in each day - I don't doubt that they're happy to see them for a while, but not if they proceed to take a nice wage off them religiously every week. I think it's possible that SB companies start out planning to be all sweetness and light....

Dave
 
no no no

SB's do NOT hedge a large part of their books . how do you think they make super profits ?? old hat .
 
Trader333 said:
Agreed, it even says as much in the annual reports of some of them.


Paul
Click to expand...


yes , and yet we keep getting this again and again , the mistaken belief that SB somehow hedge most of their bets .

I suppose the implication is that going with a broker will improve your chances of winning by a big margin .

I don't agree with this , the improvement may be marginal so it won't automatically make you a winner.
 
wisestguy said:
I suppose the implication is that going with a broker will improve your chances of winning by a big margin .

I don't agree with this , the improvement may be marginal so it won't automatically make you a winner.
Click to expand...

I don't think that that is the implication. I think that the implication is that SB tries to force winners to go to brokers by making trading difficult.

What surprises me is that they prefer to weed winners out, rather than hedge their bets. So far, my betting is not so good as to have had any experience of this. Maybe I should be optimistic and hope for it to happen!

Split
 
Seems like the only company that you could trust properly then is one that's phone trade only and doesn't ask for your account number until after you've requested the quote (hence no bias). That only points to Spreadex (which is one of the two that I use). Spreads aren't too bad either (although not as good as Capital Spreads).
e.g. CCL June:-
CS - 15 pips
Spreadex - 17 pips
Cantor - 30 pips (!)

Edster
 
Edster said:
Seems like the only company that you could trust properly then is one that's phone trade only and doesn't ask for your account number until after you've requested the quote (hence no bias). That only points to Spreadex (which is one of the two that I use). Spreads aren't too bad either (although not as good as Capital Spreads).
e.g. CCL June:-
CS - 15 pips
Spreadex - 17 pips
Cantor - 30 pips (!)

Edster
Click to expand...

I use cantor some of the time, they dont ask for your account number until they quote the spread, although there is a possibility of them pricing you out on the online trading system. They do say that they try to hedge against all risk as far as is possible.

As far as the spread on cantors products goes, they are on the large side, but they have a very good customer service and they have never given me any hassle, so in some cases it's worth paying, but I do also use capital spreads for when trading costs will be a big issue, like day trading.
 
Wisestguy,
for all I know bang on - I really have no idea if they hedge partly, lots, minimally... I would just have thought that plain old commonsense dictates that a bookie would 'hedge' (lay off) bets from competent players and cover bets from the majority who lose.... I was into horse racing about oooohhh 30 years ago and much of what happens in SB I suspect matches what was 'common knowledge' then in racing. That similar occurrences appear in Jesse Livermore's 'Reminiscences (etc)' merely emphasises this to my own personal satisfaction.

I suspect people like Capital Spreads, ie the newer kids on the block, start out figuring they can do well on the spreads etc then get seduced by the dark side.... I'm pretty sure I met Darth Vader at Haydock park in 1976....

Dave
 
Splitlink said:
I don't think that that is the implication. I think that the implication is that SB tries to force winners to go to brokers by making trading difficult.

What surprises me is that they prefer to weed winners out, rather than hedge their bets. So far, my betting is not so good as to have had any experience of this. Maybe I should be optimistic and hope for it to happen!

Split
Click to expand...


they sometimes follow the winners bets , ie ) winners buy Dow @ 105670 , SB follows suite .

other than that ego gets in the way of the individual dealers and they tend to kick out the winners.
 
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