Daytrading FTSE index - order size and instant fill

[kevin546]

Do any of you daytrade the index using futures or CFD's and if so are your orders filled instantly or is there a deal size where you experience a delay in the order being filled.

The reason I post is that since July I have traded the FTSE 100 index daily cash online through CMC (Deal4free) up to £30 per point. When I first joined there were plenty of delays and often you would be given an alternative price. Since then there have been several upgrades and they have recently reduced the spread to 3 points. When I first started out with them I was advised that the orders would be filled instantly and that only very large orders of over £200 per point would attract a slight delay. Since the upgrade all my orders have been filled instantly.

yesterday I put them to the test and traded at £60 a point and found that my orders were delayed by around 30 seconds compared to the instant fill I have become accustomed to. While this was a minor problem I had intended to increase my deal size further but now feel that this could create further dealays.

So from your experience would futures or CFD brokers do any better or is there a deal size where you should expect some sort of delay.

I did consider that one way round this was to reduce my deal size to half and place 2 deals of equal amount, or to trade from 2 accounts to avoid any mark up or delay in the order being filled due to its size.

I know of a full time trader where one of his strategies is to daytrade the FTSE index through futures at £40 (or 4 contracts) per point maybe he selected this figure to avoid attracting to much attention. He aims to get 4 deals per session taking between 5 and 10 points at a time.

I would be interested in advice from anyone with experience of daytrading the FTSE through futures or CFD's or spreadbetting with any ideas on how best to approach this issue.

regards Kevin

 

[mmillar]

Hi Kevin,

I don't trade the FTSE any more but have similar experiences on the S&P. Didn't realise D4F had reduced their FTSE spread to 3 points! Excellent.

D4F operate a computerised 'Auto-Trader' system for smaller bets. From discussions on this board previously I think people have come to the general conclusion that the Auto-Trader works up until about £20 per point, though this varies depending on the time of day and volatility. Don't forget that each £10/point bet on the FTSE is equivalent to a real trade of approx £375,000, so you are trading a lot of money. After about £20/point human traders kick in, which makes things a lot slower, especially in fast moving markets. D4F have recently posted this- http://www.uk.cmcplc.com/spreadbet/guide/re_quote.html - obviously in response to many complaints about requotes. I never get requoted because I use limit and stop orders to get in and out - if your trading style allows it I would suggest you try this. I would guess that D4F would spot you putting in 2 x £30 trades so don't know if this would work.

Away from D4F I would suggest you look at Interactive Brokers. Again, it's been worked out previously on this board that larger trades are cheaper using a direct access broker (like IB) rather than a spreadbet company. A £30/point trade on the FTSE with a 3 point spread is an effective commission of nearly £90. IB charge commission of £3.40 per round trip per futures contract x the number of contracts you do (a number I don't know because I don't trade the FTSE - I'm sure someone else will enlighten us). In any case it will be a lot cheaper. There are, of course, tax implications between using a spreadbet company and a normal futures broker.

hth

 

[kevin546]

hi mmillar

thanks for your reply I see you are based nearby.

I have discussed Interactive Brokers on another bb and from what I understand they are the cheapest for dealing in Futures contracts with a small round trip at £3.40 is very good.

The only aspect that concerns me and in all the discussions I have had regarding dealing through spread-betting or futures/cfd's etc are that spread-betting tends to have a larger spread but becomes cheaper when the tax threshold is reached. I have not traded futures or cfd's so I maybe wrong about this but I suspect trading them with my approach would be easier because of less manipulation (each price bar from the exchange over a 5 minute chart has less movement than that on the CMC site). however I am working on the principle that after tax I still do better with spread-betting.

I have not applied limits or stops in my trading mainly because I daytrade and have a few approaches but my main strategy is to take regular small points for repeated gains. Basically I look for 5 points once it is reached I lock in around 60% of my position allowing the smaller portion to run until I see signs of resistance. I work from the 5 and 15 min charts which provide anything from 10 - 18 deals each session, so there are plenty of opportunities and does not mean you need to cover the complete session.

I do not know if your suggestion would work for my style of trading but I look to make £500 - £1,000 over a 3 hour stint so tax becomes an important issue.

Would interactive dealers still have the same problem with filling a large order?

As for CMC of the 3 positions I opened on Friday although there was a delay I got the price that was displayed, only one deal that I did not pursue was re-quoted. I will have to monitor it for now otherwise it would appear to split my deals between 2 companies to attract less attention. Possibly tradindex who have a 4 point spread and a very low margin for the FTSE cash at £15 per point.

CMC only very recently reduced the FTSE cash spread to 3 points after hours it reverts to 4. On individual shares I find CMC very good value certainly the best of the spread-betting companies and if you follow companies that have small spreads, normally 3p or less then the spreads quoted for rolling cash deals by CMC match the quoted share price.

If you feel that using limit or stop may help my approach I would be grateful if you could explain it for me.

regards Kevin

 

[catsdad100]

I suspect that if you are doing up to 18 trades per day with D4F, that is why all your trades are delayed. They do not like this amount, and will punish you with delays if you do it. I know, it happened to me, and took a LONG time to get back to normal again.

 

[kevin546]

I would agree with you, fortunately I do not place that many deals because presently I do not have the available time to spend the whole day sitting at my computer trading.

My reference to 10 - 18 deals was that from the system I use there are that many deals available through the day. Personally I would not wish to trade all day anyway. I feel the best time to trade is 8 am - 11.30am and maybe 1.15pm - 4.15pm. where 3 or 4 deals are easily available.

It depends how long I intend to trade but in an afternoon session I look for 3 deals and 4 in the morning. Once I have achieved my target I close up for the day so if it comes along quickly so much the better.

The whole idea behind my trading was to apply a system that could provide repeated profits and I find taking small pointage I can do this more often than not, which makes each day provides new opportunities and I do not have to worry about what happens during the US market or overnight because when I walk away from my computer I have no open positions.

 

[Trader333]

Spreadbet Costs v IB Costs

Hi Kevin,

I have to say that I would rather pay tax on a profit than no tax on a loss. If you do 3 trades on the Dow a day at £30 per point compared to IB the cost difference assuming a 3 point spread at D4F and £30 per point is as follows:

3 trades x £30 x 3 point spread = £270 with D4F


For £30 per point with IB, this would be equal to around 9 contracts

3 trades x £3.4 x 9 contracts = £91.8 with IB

Also fills with IB are instant and you can set stops where ever you want.

What I would do is determine how many trades in total it would take you to make a profit of £7500 as it is after this that liability to CGT arises and check the costs with D4F and IB.



Paul

 

[kevin546]

Hi Paul

I assume on IB you get a better spread on the FTSE than you do with deal4free. Are you suggesting that IB would also provide an instant fill on higher deals, for example on Friday afternoon I was trading at £60 per point and the fills were taking around 30/40 seconds.

I thought that with contracts there could easily be a delay why they try to find a buyer or seller to meet the requirements of your order. Deal4free claim that the software automatically checks your account for margin and they look at the market breadth and it is this last action that causes a little delay with larger orders.

Regards Kevin

 

[kevin546]

Paul

I have been working with your example and it all really boils down to how much of a bias is taken in the price. If IB produce the FTSE with a half point spread then CMC with a 3 point spread even if they place the FTSE price within this spread there will be at least a point difference in favour of IB.

My figures show that if IB have a 1 point improvement on the profit then even after tax they just come out on top. So if the difference is greater and I suspect it would be at least 2 on a round trip the profit margin starts to increase in favour of contracts.

This of course is on the basis that the CMC price has the contract price within its own spread. I know for a fact that with the US markets this is not the case and they place the spread on the side they obviously feel the direction is going to take. If this also applies to the FTSE then unless you are unlucky the gap could be even greater.

I have also not taken into account that when dealing with CGT you can make allowance for any loss so again this helps to improve the position between IB and CMC.

To move over I will need to consider relying on real time charting of the FTSE rather than the CMC chart as I currently do which will mean an additional expense of around £60 a month.

In your view what do you think (a like for like deal) with IB and SP points differential would be.

regards kevin

 

[kevin546]

As for deal size on the FTSE my enquiries this weekend have shown that for an instant fill I would need to trade at £20 per point or 2 contracts. Unlike spreadbetting companies I assume the likes of IB would not be bothered by multiple £20 orders to ensure a larger position because you would be generating more commission for then whereas SP would get upset.

One suggestion I received was to either try 2 deals at £20 with SB or several different accounts otherwise move to the S & P where larger orders is not an issue because of the depth it is traded. Food for thought.

regards Kevin

 

[mmillar]

Hi Kevin,

Just done a bit of research and I believe the FTSE spread is 1 point and each contract is for £10 - again I don't trade the FTSE with IB so not 100% sure. With IB you can often trade 'inside' the spread (meaning you can put a limit order in to buy at the bid or sell at the offer) so the spread can sometimes be reduced to 0.

The reasons D4F and IB are different is because when you trade with D4F you are doing a trade with them, which they then hedge against the market. With IB you are trading actually on the exchange, against other people/organisations who are buying and selling on the exchange. You can trade as much as you want with IB (i.e. do 6 contracts = £60/point) as long as there is someone on the other side of the trade who is prepared to buy from/sell to you. IB does not 'find' other people for you to trade against so there is no delay (except transmission/acceptance of your orders on computers which usually takes less than a second).

Trading higher values with SB companies is not about them getting upset or you moving markets because of volatility. It is about the risk that they take on when they take a trade from you. If you do a £60/point trade on the FTSE with D4F they have to place a £2.25m trade in the market. They are not going to take that trade from you then see if they can place it in the market. They are going to place it in the market then take it from you. That's what introduces the delays.

Again, there is no such thing as spreadbet bias. If you open an account with IB you will see that their FTSE Future prices (from the LIFFE exchange) are exactly the same as the D4Fs FTSE Future prices.

cheers

 

[Henry]

To move over I will need to consider relying on real time charting of the FTSE rather than the CMC chart as I currently do which will mean an additional expense of around £60 a month.

Doesn't have to cost that much - a copy of Sierra will cost you $40 for six months and is infinately better than CMCs charts. If you use IB as the data feed, then the data for the LIFFE exchange will cost you only £20 a month which you will have to pay anyway to trade the FTSE contract.

www.sierrachart.com

H.

 

[kevin546]

Hi mmillar

Thank you for taking the time re this issue. I have to admit I have been quite busy on this and now wonder if every time I take a 5 point profit with D4Free if with IB it would have been 7 points. On an individual deal this does not sound like much but over time the difference could be rather large even allowing for tax.

Maybe you could help me out with this. We now know that D4Free have a 3 point spread on what they refer to the FTSE rolling cash deal. IB have anything from .5 to 1.5 spread (not allowing for limit orders - which I must look into to reduce the spread to 0)

Lets assume when the IB price is 3600/3601 D4Free and the movement has been up then I would expect D4Free to place the price towards the upside at 3599/3602. If we then see D4Free at a 5 point gain at 3607/3610 where could we expect to see IB at 3605/3606 or would it be within the D4Free spread possibly 3608/3609.

This example is based on D4Free playing fair and placing there spread around the IB price (exchange price) with a hedge to one side or the other. However I have seen the US prices outside the exchange price not overlapping it but placed some points way from the exchange price usually hedged towards the current trend.

On the matter of dealing size are you saying that the size of the deal has little or no effect with the speed IB can act other than ensuring there is a buyer/seller to meet this figure. If that is the case then it is better than spreadbetting for easier access to larger deals. I suppose there could still be a problem in filling the order when I come to close.

I had a quick look at the IB site and noticed they have a section on capital protection would you consider dealing in futures to be a greater risk than that of a position with a spreadbetting company. I only daytrade but could I find myself in a position where I would be left having to meet the full cost of a contract unlike a spreadbet where I can just close.

It sounds from your posts that you work from the exchange price but still trade from D4Free, what FTSE chart would I have to work from if I were to transfer from the D4Free rolling cash price to IB.

I must say I always thought I got a better deal trading from SB because of the tax implications but if the point movement is as I have mentioned above then with greater points plus the ability to offset losses against gains (as you are bound to get some) then IB looks better value for money.

Would be very interested in your views and thanks again for your comments.

regards Kevin

 

[kevin546]

Hi Henry

thanks for the info my previous research was based on what I would have to pay for esignal which I found to be quite a good real time charting package and they cost £60 a month.

I realise that the D4Free charts are not as sophisticated as proper charting companies offer but I have been able to work from them and so avoid any cost in this area.

I noticed from the IB site that both esignal and sierra charts were mentioned so I will have a look at both. For the moment I will see how I go this week with D4Free as I did not get re-quoted on the deals above £20, otherwise I may have to modify my trading until I can set something up with IB. At least I need to monitor the price of both IB and D4Free to see if IB do actually beat the tax issue otherwise even with a better spread D4Free would be better.

regards Kevin

 

[Trader333]

Hi Kevin,

Boy have you been busy posting today. In trading the FTSE I would be surprised if you were not able to get filled immediately for market orders and at the price you want for limit and stop orders, but I cannot be sure. I can only let you know that it has never been a problem for me. A good experiment, if you can do it, would be to have both the D4F and IB setup and place trades at the same time, see where you get filled and also close at the same time and see how it all performs. This is the only way that you are going to be able to do a direct comparison.

As Henry says you can use the IB platform as a live datafeed into certain applications and this is a definite plus because it reduces your costs.

I know you have done a lot of work on comparing costs and I would also look at scenarios when it all goes wrong. So if the market moves against you by just 5 points at £10 per point then you are down £80 with a SB company. With IB you would only be down £50 and so you are down 60% more with the SB company.

One thing if you are setting up with IB be prepared for a painful application process including online tests and lots of form filling in.

Good Luck


Paul

 

[mmillar]

Hi again,

The confusion on spreadbet bias is caused by this monster they call a 'Cash' bet. It is not an equivalent to the 'real' index, nor is it supposed to be. But everyone thinks it is. The reasons SB companies offer it is because they can fiddle the books and produce a smaller headline spread. This 'Cash' bet is based purely on the Futures price - it has no relation to the 'real' index. If the Future goes up by 20 points then so does the 'Cash' price. However, Futures are more volatile then the 'real' index so the 'real' index may only have gone up by 10 points. This is what you are seeing when you say you see them moving their prices away from the exchange price. It is just not possible for a spreadbet company to offer a price that is different from the market, because they would be arbitraged to death.

If you trade with IB you will be trading the FTSE Future. Which is exactly the same as D4F’s FTSE Future (UK100 Index Mar 03 Q Bet). There is no equivalent to a SpreadBet companies ‘Cash’ price.

On dealing size, if you can trade it with an SB company then you can trade it on the exchange. SB’s are, after all, just an intermediary, standing between you and the exchange, taking their cut. If no-one on the exchange will deal at a particular price, then the SB wont give you that price either. If you trade with IB you are dealing directly on the exchange with no intermediary. They are charging you commission for the use of their computers to access the exchange, that’s all. You close your position at the end of every day in exactly the same way as you do with D4F.

Capital protection – again, trading with SB’s is trading futures. So your risks are no different between using an SB or IB.

This is beginning to sound like an advert for IB. Which is bizarre because people on this board have in the past accused me of working for SB companies! I have accounts with both D4F and IB. D4F I use for ‘longer term’ trades and IB I use for scalping. As Trader333 says, IB is a nightmare to setup an account and their customer service is atrocious. But lots of people seem to go for it because of the increased profits, especially in scalping mode. However, tax is a big issue and is different for every individual.

cheers

 

[kevin546]

Hi mmillar

yet again thank you and to everyone who has posted I must say I have found this site very useful it makes a change not to read absolute rubbish but to deal with the questions at hand.

I contacted IB today and they basically said what I had come to expect, that the deal will be action very quickly, if it is a larger amount then the order may get part filled at different prices but nevertheless the order will be filled quickly. A larger margin is required (£2,500 per contract but incorporates the equivalent of a 50 point management position) than I use with the D4F cash bet but that is usual.

If I am to continue above £20 pp then IB looks to be the right choice for speed of the order alone. The tax issue is important, clearly the spread offered through IB is lower than D4F, (while on phone it ranged between .5 - 1.5p) the position concerning tax can be overturned if the price given by IB is better on a round trip by 1p per trade (as an average) then the profits increase dramatically in favour of IB. As has been suggested I will need to compare both at the same time to see if there is at least a .5p slip on the spread by D4F. Combine that with the ability to offset any losses against capital gains tax and IB win hands down, and as someone also suggested a loss position with D4F maybe more severe than with IB.

With £20 pp as the apparent cut off for SB companies before the order fill slows has anyone attempted deals just over this figure such as £25, £30 or £40 to see if sometimes they go through just as well as £20 or under.

regards Kevin

 

[kevin546]

Just a quick update I have been trading since my last post with CMC as I battle to get through the application process with IB (phew) and have placed a range of order on the FTSE cash in the value of £20 - £50 and have found the time to fill orders while not fast is reasonable at these prices and have yet to be requoted following about 15 deals.

On an entirely different topic I noticed on another dated thread (Trading for a living) that it was claimed that you are liable for tax through profits on spreadbetting if it is your main source of income. Has anyone here any knowledge of this. I was looking to continue trading when I take early retirement to boost my monthly pension but of late the profits I have achieved would be in excess of the pension.

Any views or experience welcomed.

 

[oatman]

Hi Kevin,

I've only just noticed this thread but see that you are scalping Ftse Future. I do similar and don't like overnights. I'm surprised nobody has mentioned the Pats J-Trader(which I use) which will give you instant execution, via your broker's computer directly into Liffe. Just type in a search and there are some demos and info. I also run Tenfore Satellite feed(Internet feed available as well), for RT Futures with a chart package. (£948 pa+Liffe fees+vat.) .http://www.tenfore.com/
The trading screen gives you depth of market 10 ticks in either direction. The size you're talking is no problem.
I realise you are concerned with tax but I think this would suit your style and maximise your profits.

Good luck,

 

[kevin546]

Hi Oatman

Thanks for your info I have had a quick look and it does look to be good although from the price you quoted it would appear you are having to pay for it. What are the round trip costs for the FTSE.

People have been advocating Interactive Brokers because they are direct access so the orders are filled instantly and but they are also very cheap; a round trip deal on the FTSE contract is only £3.40 (£1.70 an order). At present I want to just concentrate on the FTSE I think it is best to know something well rather than to diversify and in any case I am daytrading not investing.

I have yet to use Interactive Brokers so I have no personal experience of how they perform but they appear to offer a smaller spread than the spreadbetting company and quicker fills for larger deals so this appears to be the best way forward for daily deals looking for 5-30 points. I intend to keep my CMC account open and compare for a while but like the idea of using them to double up. Using them more for a positional day trade staying in the trade for more of the trend to take profit closer to the upper level of the price move rather than at the first sign of it fading as I do at present.

As for charting having taken advice I have just signed up with Mytrack for the data feed to run Sierra charts. They may not be as good a charting package as your own but value for money they certainly come up very high. My costs for this are as follows
Mytrack $29.98 about £20 a month, Sierra charts $40 for 6 months which is about £4.75 a month. When I eventually get signed up with Interactive Brokers and trade futures I will need to add the Liffe exchange so another £20 that makes my monthly costs £45 or pa £540. I can also run Sierra charts through any number of feeds so will be able to double up with Interactive Brokers for no extra cost to support Mytrack if there are any problems with them. With CMC as well that means I would have 3 sources of data to support an open position.

I mainly wanted access to the lower indicator CCI which I find invaluable. The only downside I have from the Sierra charts are that it does not provide a grid-line from the time axis and that during the current tick period on the chart the CCI line or bar does not update until the period is concluded. I would have liked a facility where the indicator like the price is always moving to represent the up to date position at anytime. However the way I get round this is to monitor shorter tick time charts alongside my main chart reference. Minor gripes for what is a very reasonably priced bit of kit. You will not it is only when I add on the LIFFE exchange does my expense increase the package would otherwise be just under £300 pa and I don't think you can be that for index trading particularly the FTSE cash.

Regards Kevin

 

[trendspotter]

It looks as though I'm going to have to switch to IB and Sierra charts judging by the previous replies! Am I right in assuming that IB will provide a free realtime tick feed to Sierra charts for FTSE Futures?

Is it possible to configure Sierra to produce an audible alarm say when two ema's cross..or are about to cross?

Is it easy to set up SC to trade ema crossovers automatically through IB.

Do I need a degree in computing to set all this up?


I would welcome any comments and assistance.

Thanks