Deal4Free... how do they make their money?

[pkfryer]

Im wondering how they survive without charging? I think something isn't quite above board about it!

For instance, I often get filled for an order much much quicker on entry than when I try and close my position? Seems a strange coincidence. I often end up being requoted, normally against me. Bizzarly if the tick goes in my favour I am kept at the price I close at market, but this never happens when the price goes against me. The spread sometimes gets alarmly wide.

Also, they have layed out the account balance in such a way that it is very hard to follow exactly how much you made for a trade. They bring forward the loss/profit for the day, not the overall loss/profit for the trade. I am sure that it wouldn't be too difficult at all to skim a few pence without noticing easily.

Also, you have to do quick mental arithmetic on trades as the position keeping shows the days profit at the midprice, not the bid or ask, which to be completely honest would be extremely easy to program!

I dont like them and i'm definitely in the market for another platform. I'll keep the account to test systems with but use something else to trade.

Does anybody else use it? And what do you think... you like it? Think they might be a bit dodgy?

 

[trendie]

re: showing profit at mid-price;
Finspreads do this, so do Cantor.
it is a pain, but all it means is that I ignore what they show, and do my own calculations.
similarly, all I am interested in is the actual price I opened at, and the actual price I closed at, and work out my own profit/loss.
Its only a problem if you are doing many trades per day.
I tend to use SBs for multi-day trades.
Spreads too wide for day-trading via SBs.

They are legit, ( !! ), if a bit messy with their approach.

 

[Racer]

"How do they make their money?"

By being the biggest load of (insert any comment you like here).

I have had accounts with various brokers, but never have I come across such as these.
I wouldn't recommend them to my enemy, well perhaps I might draw the line..

 

[allenm]

Rip Off

They make their money on the spread. A wide spread..

If you have level 2 just look at what you are paying. its cheaper to pay commision

 

[Racer]

And if you want to trade, and you are making money.. watch out... you will need to make a cuppa first.
If you want to trade small amounts then shouldn't be a problem... well maybe as long at you just want pocket money, but if you want to trade serious amounts, go elsewhere

 

[Bigbusiness]

I think they make their money by not hedging all of their clients positions. As most short term spreadbet traders lose, they make lots of money.

It is possible to make money day trading but I agree that it is easier to do with only a few trades. Some people are able to scalp trade with spreadbets but the few times I have tried have been quite painful.

As I only place a few trades a day, I have had few problems with them. I have also found the trading platform works much better with broadband and a stable operating system. Some of my problems in the past seem to have been caused by my computer or ISP. I have an Interactive Broker account but still like to spreadbet as I find the low minimum bets sometimes help my trading.

 

[neil]

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[nobrainer]

They make their money in a few ways.They work on the ''well known fact ''that most traders lose money on shares.This is beyond dispute.
They do not hedge all their stock positions individually but if their book is skewed too much in 1 direction , they will buy /sell future positions , say on the ftse as a hedge.
They also make a lot of money thru charging interest on the long positions their clients take and naturally, they have a lot of clients money which earns them interest as well.
If they have clients whom they find tend to make money they will ''discourage''them by holding their quotes, until prices move before offering the client a worse trade.In addition, they will just out right refuse to give a market quote and will offer some useless quote which they know will not be accepted.If all else fails, they have been known to ask their clients to just move their account.
As for the index traders, that's money for old rope for spreadbetting companies.Even more of these clients lose their money far more quickly.A mug's game in general, indices,IMO.
All said and done, they are a great trading vehicle.

 

[LittleWhiteBull]

I too had problems with the stability of the software, not having broadband and only Win98, it just wouldn't operate on my PC. Capital Spreads is much easier as you don't have to download the software, just log onto their website and trade.

 

[pkfryer]

Thats interesting NoBrainer, how do you know about the treatment of winners?

Infact, I wouldn't be surprised if there is something very strange going on as I know for a fact the times I win in a trade are often the times I get requoted and the times I lose my order is taking in a snap.

Also, I've noticed, that sometimes orders have to be placed an incredible distance from the price, much further than I would like. Why can't I place an order thats several clicks away? What difference is it to them? Also, they have refused many of my trades because they say there are no opposite orders to match me (this happens if the trading size is anything greater than a few thousand shares). But I was thinking, they can't match up all trades, how do they managed to place the very first order if that is the case? It does seem very strange.

Deal4Free is so far from free! In fact, we are suckers! They make huge money on the interest we give them for the margin, they make money on our account (and give us a small stippen in return), they give us huge unwinnable spreads and I am 100% sure that they have underhanded methods, subtle enough for us not to be able to challenge but effective enough to screw us!

Also, I read on there site that they won Best Trading Platform... I find this hard to believe!! I think their platform is slow, the graphs are extremely limited and its not intuitive to use. Like a lot of developers now, they are insisting on writing everything in the relatively new developers fad: JAVA. Developers love it and try and convince each other and the public that its "Just as fast as C++". My experience is that it is extremely slow and unreliable! The laughable thing about it... There market maker only works on windows!!!!!! It doesn't run on any other OS! Why write it in a 100% platform independant language when you can only use it on one?? This is the same with where I worked before (Im a developer myself), all the servers were on Unix, the same sun solaris version at that. Every box lovely big powerful ultra sparc boxes, multiple processors, efficient... unix with its gorgeous and powerful system calls. But no, they used java, limited each box to one JVM, didn't allow themselves to use any of the sexy system calls (because Java doesn't allow it) and therefore made the site about 10 times slower. But, hey, developers are just human... and they aren't even that particularly intelligent!

Who here uses just windows mainly? most! Dont think there will be too many Sun Solaris home users and Linux users are way less abundant... and Mac? Please! Dont use Java lazy developers!!

Sorry for that rant! But I really dont have confidence in the IT department of Deal4Free! The platform seems to freeze and doesn't update fast enough and the number of times it wont connect or theres some server side errors. Its alarming when you have a big position and you can't guarantee your broker will be able to handle it. There front end is in java and there backend is in java... ****e through and through!

Deal4Free... ripp of merchants and shabby technically!

 

[Racer]

pkfryer, I wouldn't use or trust deal4 (I really hate using the word 'free' with ref to them).for big positions.
I opened a small account with them to try them out, and am glad that's all it was... !! If that is how they treat the small trades I was doing with them, I dread to think how they would treat my big trades!

I use proper companies for my big trades e.g. 4000 shares RBS or 20,000 AV.

I thought I would give them the benefit of the doubt and not listen to all the other opinions of them, but I was wrong.
So now they don't get any more of my business. I have had enough of them.

 

[ColinRiche]

its a trait of losers that blame there losses on the broker

I see some strange comments from some people regarding cmc

So has their business model changed or what ?

As far as i am aware they are still the same with 2 platforms 1 web based and the other Java based.
They are a Market Maker and unlike all the other SB companies they offer market spreads with the exception when there isn't the liquidity in the market depth, typically low volume stocks.
Anyone having problems getting filled should call them and ask for a quote for a certain contract size.

They make money on the spread and a bit on interest and of course there skill in a portfolio hedge on the futures market. I dont believe their model is to discourage winners and take advantage of lossers. Its based on volume and the more volume the more profit for them.

Some traders make money by scalping the spread many many times a day like in the arcades or in the pits but thats what cmc do every time there clients trade and for relatively low risk.

A little knowlege is a dangerous thing.

 

[kevin546]

I have experienced delays with CMC when placing orders in excess of £25 on the FTSE cash which was explained that these trades are sent to the dealer rather than the lower value trades which go through instantly. I have traded at £25 consistently and at this level have no problems with them. I day trade but have no problem once I came to accept larger orders would always be delayed and given a less favourable re-quote.

It would seem in the case of the FTSE, deals of larger sizes can be placed ( £100 ) for the loss of a couple of points either side on a round trip would be more suitable on the quarter as this avoids interest when holding a long position and if you are holding for 2 + days then the amount of points you are playing for will not be as adversely affected as a day trade. Obviously the loss of a few points either end of the trade is not as good as conventional trading (subject to commission and taxes) but this is about the best you may get from a spreadbetter as most appear to have similar practises. As for the spread quoted CMC and CapitalSpreads are the narrowest when it comes to the FTSE index at 3 when others quote as much as 8 points such as the likes of IgIndex / Cityindex or Cantor. If you are unhappy or cannot make it work for you then you have to move on and accept what Direct Access or other forms of trading can offer.

 

[pkfryer]

True Kevin... too many times in life we complain bitterly but still drink from the same cup! I am in the process of looking elsewhere but am very cautious to move on as I dont want to make the same mistake again. I need to chose wisely. So I'm staying with CMC until I find the perfect broker for swing/short term trading, another for spread betting and maybe a separate one for day trading. I dont know if its possible to have one broker that is good at all three.

If your not happy definitely change... but don't just change for the hell of it, its got to be something better! And I must admit I am not too sure about paying a fee each time I trade. I'm still only at the stage of breaking even with trading so I'm dubious about changing to a commission based broker. Although I realise that a commission based broker will have narrower spreads and probably a better service. But its hard to calculate exactly how much deal4free is costing me per trade with spreads and loan interest AND delays in fills. Its very hard to know how much 'free' costs me? Is it £5 a trade, £20... its difficult to know for sure. All I know is I want to get the best broker I can this time!

Colin
You are right, losers do blame everyone else but themselves. But I think we are all pretty justified in blaming brokers (and market makers). After all they aren't charities and the financial markets make money by skinning us all in very sublte ways. They feed off us, they feed off ever single trade! I have read books where every winner must have a loser to pay him, but I dont think this is entirely true... when we lose, a big chunk disappears into the financial market system! They love us! They feed thousands of greedy ignorant fools the belief that you can't make an easy killing and they suck up our money through commissions, spreads and other stock market manipulations. e.g. The number of times I've placed a stop loss just above or just below the most recent high/low or resistance/support... and the number of times the price has squeezed up to exactly that level before going in the direction I anticipated!! The pros sucker us and thats why a lot of us lose... its difficult to play against the big boys when they have the power to move the actual market price itself!

I didn't realise until recently that the spread was actually an artificial mechanism for the sole purpose of give the market makers there bread and butter. That there is actually only one underlying price, and they slap the spread on to take 1/2p or a few pence off us for every share traded! Just shows my ignorance of the underlying market processes!

 

[JonnyT]

I cannot beleive you are blaming a Java App.

Agreed 10 times slower than C++ but you don't need the speed in Trading Apps to that degree as the internet is your bottleneck not the Application.

Java does have many plus points, not least its memory handling resulting in more stable code.

I have programmed in both and have to say Java is easier to maintain and debug.

JonnyT

 

[nobrainer]

''I dont believe their model is to discourage winners and take advantage of lossers. Its based on volume and the more volume the more profit for them.''

LOL!! Sorry Colin, but that's a load of rubbish.CMC do not like successful volume based daytraders and def. discourage them.They are a spreadbet firm ,if you win, they lose!! Surely , that's not hard to understand.I still use cmc cos I think they provide a fantastic platform for a certain type of trade which is more medium term .For daytrading ie. scalping in any reasonable size they are not worth bothering with once you have initially fleeced them and they have noticed ie. honeymoon period.
Like many other good traders, I've taken cmc to the cleaners in the past and now low and behold , I can barely day trade with them .......that's fair enough, they are in the business of making money and don't want want the likes of me.
95% of my trades are thru gni and etrade thru direct access where both cos. have a vested interest in me doing well and make their money from my commissions.There is no conflict of interest and this is the route all long term ''wannabe'' uk stock traders should aspire to esp. if they need to make a regular yearly six figure return.

 

[kevin546]

pkfryer

At first the problem associated with larger orders both annoyed me and held me up. I felt that CMC should be able to go some way towards providing you with similar trading conditions to that of exchange trading. Now I do not expect like for like but a reasonable service where they offer basically the same but add on a few points which they already do with the initial spread. When you attempt to trade above the level of NMS then you expect additional prices but it would seem the spreadbetters impose these restrictions at much lower levels which in turn ensures you are not playing on an even or close to even playing field. I have been able to work my way round this problem and sometimes just like resolving problems with your trading in the early stages as you progress you need to sit back and work out the problem you are confronted with.

The main problem for spreadbetters is the game is stacked heavily against you when trying to day trade through them, so in order to find one that meets all your requirements it will depend on what style of day trading you are trying to implement. Swing trading and longer term should not be a problem because speed of order fill becomes less important except when trying to get out of a position gone wrong. I would think that if you are to hold a position for more than 2 days then you might as well trade the quarter, that way you are not subject to interest and only use the rolling cash for the day trading. Of course your potential gains will be reduced from what was originally available from the screen price if ther eis a delay to fill your order and it gets re-quoted or you are paying the quarter price with the price set x amount away from the exchange price. But I do not think there is anyway round this problem other than moving eventually to conventional trading.

I know some swing traders have moved onto US shares the main Dow ones because the US commissions are really low, something like $1 per 100 shares regardless of the share price. As commissions go you will not better that from an ordinary account in the UK.

Direct Access offers the easiest way to day trade due to the better spread and the speed of the fill. You can also consider larger orders so you have to way up the hidden cost with CMC. At present I continue to day trade with them. They offer the FTSE with a 3 point spread compared to the LIFFE futures regular spread of 0.5 - 1.5 so they make on this deal straight away. But with a spread of 3 to bat against instead of the previous 6 - 8 a few years ago it can be done.

I have to admit I am looking at CapitalSpreads who match the spread and I here good things about Spreadex although they would not be suitable for day trading as they are not online but could be fine for swing trading or longer. CityIndex is another company where they offer good customer service but they have an online limit of £50 for the FTSE so I suspect for day trading purposes I would have a similar problem. There is only one way to find out and dip your toe in the water, if you find what your looking for then it has all been worthwhile. If you find that from spreadbetting you have to adapt as best you can to make it work so be it or consider direct access and establish if paying tax and commission with larger orders provides greater profits than trading through CMC with lower value orders without tax.

Kevin

 

[kevin546]

Nobrainer

Your post is not the 1st I have seen concerning very successful traders who have the spreadbetting door effectively closed in their face by the companies. I know this is off subject but many have praised Interactive Brokers (who I have used to day trade the FTSE index) If you have any knowledge of this company what makes you happier with GNI and Etrade. The costs with Interactive Brokers are said to be low at £1.70 a FTSE contract making the round trip £3.40 for £10 a point £34 for £100 and so on.

Kevin

 

[nobrainer]

Kevin, I don't trade the ftse/dow or any other index.I just trade uk stocks.I don't spreadbet either.I use the normal CMC CFD platform together with my direct access platforms.
For my type of very short term trading,these are the best trading platforms I'm aware of.

 

[kevin546]

Nobrainer

What benefits do you feel the CMC CFD has over the spreadbetting one and why do you consider GNI and Etrade so positive. No hidden question, I am interested to see if they are better than IB although I think there charges maybe higher than IB although low costs do not always add up to better service. Thank you for the reply.

Kevin