Simon I find your explanations a bit weak to be perfectly honest regarding the trade rejections and here's why.
In the example where you lost £2000 because you coulden't hedge quickly enough because the price had moved,why don't you hit the ask straight away but go in with 60 or 70 contracts instead of the 50 ( £500 a point ). You will recover your loss within 5 points market movement max. ( or less depending on the number of contracts you invest ) Mr. Star punter A gets his price and you are making money within a very short space of time ( I take it he makes money overall betting at that level ) and lets face it he is trading by phone you have much more control over the transaction price than you would have online I doubt very much that £2000 losses are the norm. You are in the trade within half to 1 point of his entry ( you might even get the same price or utopia if it moves against him a tick or 2 and get in even better than him ) and everybody should be happy. If he keeps entering the market and the price shoots up each time and he exits very quickly before your losses are recovered then write him a nice letter closing his account and suggest he goes and plays with the large contract on the S&P via direct access,but really there shoulden't be any need for that.
The same principle can be applied to all your other punters.You mentioned the difficulties of selling into a falling market and vice versa then here is a suggestion as a hedge to counter that.
Each day start off in the market ( let's take the ftse as an example ) with 100 contracts long and short at the same time,you now have a neutral position which has cost you approx. £800 to set up in charges ( I would wager that you could negotiate better rates than that ). When Mr. Star punter A comes into the market with a long position at £500 a point you immediately sell the eqivalent number of contracts ( 50 ) plus what you want to risk yourselves as a company in order to start recovering your £800 transaction costs and make yourselves a bit of money,so now you have 100 contracts going long and now only lets say 30 contracts going short. In effect a position of 70 contracts ( £700 a point ) . This acheives the hedge,the punter gets his price, you get a better position instantly ( no £2000 losses now ) and you get to make some money by shadowing his trade. You then go back to neutral by buying the 70 contracts back when he exits.
You keep doing this for all your star punters and also when your book is unbalanced by £100,£200 a point or whenever your threshold is triggered. ( you don't necessarily need to add the extras for the unbalanced book. ). We all get our price,you get instant hedged positions and you can make some money off your star punters. Remember they are the best indicators you will ever get of market direction, if I ran a spread betting business I would love to have these big hitters betting with me,I would double thier stakes by hook or by crook but just get the money on,they are a gold mine.You close all positions at the end of the day ( if you want to that is ) and start again tomorrow the same way.
Why not let your dealers shadow all your winning punters this way,there really isen't any excuse for trade rejections or poor pricing and you get to make money as well and you still have your profits from a balanced book at the end of a day.
OK head back below the parapet wall now.
In the example where you lost £2000 because you coulden't hedge quickly enough because the price had moved,why don't you hit the ask straight away but go in with 60 or 70 contracts instead of the 50 ( £500 a point ). You will recover your loss within 5 points market movement max. ( or less depending on the number of contracts you invest ) Mr. Star punter A gets his price and you are making money within a very short space of time ( I take it he makes money overall betting at that level ) and lets face it he is trading by phone you have much more control over the transaction price than you would have online I doubt very much that £2000 losses are the norm. You are in the trade within half to 1 point of his entry ( you might even get the same price or utopia if it moves against him a tick or 2 and get in even better than him ) and everybody should be happy. If he keeps entering the market and the price shoots up each time and he exits very quickly before your losses are recovered then write him a nice letter closing his account and suggest he goes and plays with the large contract on the S&P via direct access,but really there shoulden't be any need for that.
The same principle can be applied to all your other punters.You mentioned the difficulties of selling into a falling market and vice versa then here is a suggestion as a hedge to counter that.
Each day start off in the market ( let's take the ftse as an example ) with 100 contracts long and short at the same time,you now have a neutral position which has cost you approx. £800 to set up in charges ( I would wager that you could negotiate better rates than that ). When Mr. Star punter A comes into the market with a long position at £500 a point you immediately sell the eqivalent number of contracts ( 50 ) plus what you want to risk yourselves as a company in order to start recovering your £800 transaction costs and make yourselves a bit of money,so now you have 100 contracts going long and now only lets say 30 contracts going short. In effect a position of 70 contracts ( £700 a point ) . This acheives the hedge,the punter gets his price, you get a better position instantly ( no £2000 losses now ) and you get to make some money by shadowing his trade. You then go back to neutral by buying the 70 contracts back when he exits.
You keep doing this for all your star punters and also when your book is unbalanced by £100,£200 a point or whenever your threshold is triggered. ( you don't necessarily need to add the extras for the unbalanced book. ). We all get our price,you get instant hedged positions and you can make some money off your star punters. Remember they are the best indicators you will ever get of market direction, if I ran a spread betting business I would love to have these big hitters betting with me,I would double thier stakes by hook or by crook but just get the money on,they are a gold mine.You close all positions at the end of the day ( if you want to that is ) and start again tomorrow the same way.
Why not let your dealers shadow all your winning punters this way,there really isen't any excuse for trade rejections or poor pricing and you get to make money as well and you still have your profits from a balanced book at the end of a day.
OK head back below the parapet wall now.
capitalspreads
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jbat
we had one client with 2 accounts hit us in a total of £500 (2 x 250) we were looking to get 50 contracts away ...
simon
we had one client with 2 accounts hit us in a total of £500 (2 x 250) we were looking to get 50 contracts away ...
simon
What about my suggestion to sell rather than buy in order to hedge Simon and the potential there for you to trade and make money following your star traders surely that far out weighs these losses you say you make trying to get a hedge on?
Unless of course you are already doing some or all of what I suggested already,if that is the case then it smacks of greed.
Don't get me wrong I am not here to knock Capital or anybody else,just trying to find a solution to the problem.If you offer a price and somebody wants to trade at that price it should be honoured. I am suggesting ways to make this happen.I am a bit suprised by the shortness of your answer considering everything I wrote,I would love to hear your full comments on the posting.
1 point spreads are brilliant and make a massive difference especially to short term traders.The theory is there for all markets to have reduced or even 1 point spreads following a successful hedging template. Imagine the business you would drum up with the lowest spreads ?
Unless of course you are already doing some or all of what I suggested already,if that is the case then it smacks of greed.
Don't get me wrong I am not here to knock Capital or anybody else,just trying to find a solution to the problem.If you offer a price and somebody wants to trade at that price it should be honoured. I am suggesting ways to make this happen.I am a bit suprised by the shortness of your answer considering everything I wrote,I would love to hear your full comments on the posting.
1 point spreads are brilliant and make a massive difference especially to short term traders.The theory is there for all markets to have reduced or even 1 point spreads following a successful hedging template. Imagine the business you would drum up with the lowest spreads ?
fxwinner22
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actually there is a point here Simon - most of your punters lose money with the odd trader making it - you could quite easily offer zero pip spreads and still make a killing as the balance of the book means you don't often have to go into the real market.
zero pip spread would attract all the suckers.
zero pip spread would attract all the suckers.
Jbat001
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minx said:
Lol - point taken minx. I suppose it depends on your timeframe and market. If you're looking for a swing trade, and trading something like the USD/Scandinavian like I do, the loss of a few pips is unimportant if the total return is in the region of 400-500 pips for the trade.
On the other hand, if you're trading the FTSE intraday and fighting for every last pip, it makes more of a difference.
Horses for courses, eh?
capitalspreads
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klw
sorry i placed the comment before i saw your message
you have to remember that whilst the currency and indices are big markets they are not our biggest. Most open positions are in equities and most are long. It is very difficult to say if our equity traders are 'good' traders simply because they have been long for the last 3 years and have made shed loads of money. We have a hedging strategy that has worked very well for us (i have commented on it in the past).
As an example this month has proved to be very very good for clients they (you?) are up hundreds of thousands of pounds. But our heding strategy has made us much more than this from the exchanges. Your argument would have merit if all we did was quote a few markets but we dont. We quote 3000 different financial markets. We cannot have an opinion in all of them so we have an opinion in NONE. The dealers follow the hedging rules to the letter. This means that we can be sure in the long run that we will give ourselves the best chance of making money and not having huge P/L swings day by day.
The problem with your model is that you would have us take huge risks. We are not clients, we cannot risk all our money on the chance of our clients getting it wrong (or right) and if we get it wrong, ce la vie, we live to fight again. CS must follow its policies otherwise our investors would quickly lose confidence in our strategy.
We have risk parameters which we must not break. These are our overall hedging criteria. Following 'Star traders' just means that we dont lose to them not that we make money from them. In the same way that a bookie on the rails at doncaster will lay off his risk we are no different. When Goldman Sachs make some huge $5Bln Private Equity backed deal do you think that they take the full risk themselves? Of course not, they take what risk they are happy with and sell the rest on to other banks/pesion funds etc.
To say that we must abide by a price on the web no matter what is an argument that you could use against the exchanges or FX platforms. The fact that it is not your fault that you missed the price on an exchange deal cuts no ice with LIFFE/CBOT/CME etc .... Spread Betting companies, unfortunately, are the visable face of exchanges. There is actually somebody you can complain to. We do our absolute best to get the best price we possibly can out to our clients. Sometimes you get a failed fill (not often) but certainly you will get the trades more frequently than if you were trying to hit bids or take offers on the exchanges where you are competing against thousands of other dealers for the same small volume on a price.
In an ideal world, yes, we would like to take every trade that gets placed but, unfortunately, we do not live in an ideal world. I would love to be shown an audit trail of the transactions of any active trader using any platform where he/she got every single trade ever attempted. The only way this could happen is if the trader only ever placed 'market' orders. In which case he/she would suffer slippage with the market.
Simon
sorry i placed the comment before i saw your message
you have to remember that whilst the currency and indices are big markets they are not our biggest. Most open positions are in equities and most are long. It is very difficult to say if our equity traders are 'good' traders simply because they have been long for the last 3 years and have made shed loads of money. We have a hedging strategy that has worked very well for us (i have commented on it in the past).
As an example this month has proved to be very very good for clients they (you?) are up hundreds of thousands of pounds. But our heding strategy has made us much more than this from the exchanges. Your argument would have merit if all we did was quote a few markets but we dont. We quote 3000 different financial markets. We cannot have an opinion in all of them so we have an opinion in NONE. The dealers follow the hedging rules to the letter. This means that we can be sure in the long run that we will give ourselves the best chance of making money and not having huge P/L swings day by day.
The problem with your model is that you would have us take huge risks. We are not clients, we cannot risk all our money on the chance of our clients getting it wrong (or right) and if we get it wrong, ce la vie, we live to fight again. CS must follow its policies otherwise our investors would quickly lose confidence in our strategy.
We have risk parameters which we must not break. These are our overall hedging criteria. Following 'Star traders' just means that we dont lose to them not that we make money from them. In the same way that a bookie on the rails at doncaster will lay off his risk we are no different. When Goldman Sachs make some huge $5Bln Private Equity backed deal do you think that they take the full risk themselves? Of course not, they take what risk they are happy with and sell the rest on to other banks/pesion funds etc.
To say that we must abide by a price on the web no matter what is an argument that you could use against the exchanges or FX platforms. The fact that it is not your fault that you missed the price on an exchange deal cuts no ice with LIFFE/CBOT/CME etc .... Spread Betting companies, unfortunately, are the visable face of exchanges. There is actually somebody you can complain to. We do our absolute best to get the best price we possibly can out to our clients. Sometimes you get a failed fill (not often) but certainly you will get the trades more frequently than if you were trying to hit bids or take offers on the exchanges where you are competing against thousands of other dealers for the same small volume on a price.
In an ideal world, yes, we would like to take every trade that gets placed but, unfortunately, we do not live in an ideal world. I would love to be shown an audit trail of the transactions of any active trader using any platform where he/she got every single trade ever attempted. The only way this could happen is if the trader only ever placed 'market' orders. In which case he/she would suffer slippage with the market.
Simon
capitalspreads
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fx winner
in a perfect world
i think we have to leave the dreams for another day
Simon
in a perfect world
i think we have to leave the dreams for another day
Simon
Phil Mibbutz
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fxwinner22 said:
Some of this has been said before, and it's true! You can already get 'zero spreads' on FX, apparently...
minx
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Jbat001 said:
Exactly the point I made in an earlier positing. If you're after the big winners then spreadbetting is perfect but if you're trying to nail every last tick then DMA is where you should be. People should work out their net profit (in ticks per trade) across hundreds of trades and then decide whether the tax-free characteristic of SBing makes up for the spread. If not then why are you spreadbetting? If it does then SBing is perfect to keep your hard earned cash from Gordon the Robber and his latest "investment" binge..... 🙁
minx
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gle101 said:
Ok so it depends on the products you trade and who you trade with but my commissions on my most heavily traded product are around 1/15th - 1/20th of a tick so its a total non-event. Afaik, IB are pretty good for retail commissions? If you are trading a lot of US commodities then your commission rates will soar but the bottom line is how many ticks are you making per average trade, if its high then SB, if not then DMA.
EG: Average Ticks Per Trade= 4, DMA spread=1, SB Spread=3. After the spread your average ticks per trade on DMA =3 and SB=1 so already you are better off with DMA (inc commissions) and paying Gordon his blood money. If your average ticks per trade is 20 then SB is much better as you'll have +17 ticks Vs +11.4 after-tax DMA.
FXSCALPER2
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fxwinner22 said:
Exactly! I never bought this b'ollocks about 'oh, we can't hedge it', etc.
capitalspreads
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phil
not often zero.... usually 1 / 2 / 3 pips wide (depending on cross) plus comms. For most people comms are around 40 bps a side. so the spread becomes 2/3/4 for a round trip. Minimum size is normally the eqivalent of £10 a point and margin requirement is much higher.
So apart from all of the above you may get a better trade price but may very well lose it on the ancilliaries.
Remember that FX platforms have a nasty habit of widening the spread substantially over data releases and I do mean substantially. Which can have the nasty effect of taking out a stop even before the number is seen.
Simon
not often zero.... usually 1 / 2 / 3 pips wide (depending on cross) plus comms. For most people comms are around 40 bps a side. so the spread becomes 2/3/4 for a round trip. Minimum size is normally the eqivalent of £10 a point and margin requirement is much higher.
So apart from all of the above you may get a better trade price but may very well lose it on the ancilliaries.
Remember that FX platforms have a nasty habit of widening the spread substantially over data releases and I do mean substantially. Which can have the nasty effect of taking out a stop even before the number is seen.
Simon
capitalspreads
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fxscalper et al
price in market 1.9488/1.9490 price on zero spread 1.9489/1.9489 client trades selling £50 a point at 1.9689.... please tell me (without hoping that the market moves in my favour) how I can make a profit to run my business. Assuming no move in the market the client is sitting on a zero p/l immediately whilst I am sitting on a 1 pip loss. Answers on a postcard please.
And before anyone states that we have more losers than winners, I am afraid to say that I cannot run a financial business on that expectation.
Everyone goes on about 1 pip spreads on differing platforms but the point is that this 1 pip spread is caused by a multitude of market makers on the platform. RBS will quote 1.9485-1.9488 whilst Morgans are at 1.9486-1.9489 and UBS are at 1.9484-1.9487 etc etc etc... the net effect is that the spread is just 1 but the individual market makers are quoting 3 wide. We are in the position of being the individual market maker. The point here is that for individual market makers the price is 3 wide and they quote and trade on that basis.
Simon
price in market 1.9488/1.9490 price on zero spread 1.9489/1.9489 client trades selling £50 a point at 1.9689.... please tell me (without hoping that the market moves in my favour) how I can make a profit to run my business. Assuming no move in the market the client is sitting on a zero p/l immediately whilst I am sitting on a 1 pip loss. Answers on a postcard please.
And before anyone states that we have more losers than winners, I am afraid to say that I cannot run a financial business on that expectation.
Everyone goes on about 1 pip spreads on differing platforms but the point is that this 1 pip spread is caused by a multitude of market makers on the platform. RBS will quote 1.9485-1.9488 whilst Morgans are at 1.9486-1.9489 and UBS are at 1.9484-1.9487 etc etc etc... the net effect is that the spread is just 1 but the individual market makers are quoting 3 wide. We are in the position of being the individual market maker. The point here is that for individual market makers the price is 3 wide and they quote and trade on that basis.
Simon
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