The fast-growing spreadbetting market. Is all as it seems?

Canulearntotrade

Junior member
21 1
I am a UK-based freelance journalist and write for various newspapers. I recently wrote a long article on trading for one of the UK broadsheets which a number of people on this forum kindly helped with.

I’ve started looking into another issue and would appreciate any input – on or off the record – from people on this forum.

During my research into the last trading story I wrote I spoke to a lot of people about financial spread-betting.

It’s a fast-growing business, and now has lots of players. The spreadbetting platforms look like the real market. And feel like the real market. But are of course a clever simulation.

The spread-betting companies claim they’re transparent mirrors of the market. And I’m sure some of them are. But some people see them more like casinos – where the house has an advantage. I’ve heard rumours of some spread-betting companies playing tricks, tweaking the spreads, changing the stops, or locking people out of a trade – when someone makes a lot of money.

My question: Is this really true? Can anyone prove it?

(There are obviously lots of spread-betting companies out there and some may be better than others)

Please get in touch with me if you have any views on this and maybe we can have a quick email exchange or even a skype/phone chat about your experiences?
I look forward to hearing from you

David
David.c.robinson@hotmail.com
David Robinson. Journalist and editor. - HOME
 

brasil2000

Member
99 12
Hi David,good article I enjoy reading it(y)

Trialling 'learn to trade' stock market websites: can you get rich quick? | Money | The Guardian

Trialling 'learn to trade' stock market websites: can you get rich quick?
Can you really achieve 'financial freedom' by spending a few hours at a seminar on stock market investing? David Robinson joined fortune seekers at three 'learn to trade' schemes


David Robinson

The Guardian, Saturday 20 July 2013


Who wants to be a millionaire? The 'learn to trade' companies post glowing testimonials on their websites. Photograph: Bill Brown
Tony turned £3,000 into £47,000 in just nine weeks and has retired at the age of 50. Awia was a "bored mum", but is now earning a good living while being "100% there for the kids". Samet made 30% on this first trade, and each day his profits rise. These are just some of the glowing testimonials posted on "learn to trade" websites, which hold out the promise that anyone who spends just a few hours at a seminar can look forward to a future relaxing on luxury yachts in the Caribbean sipping strawberry daiquiris. All you have to do, it seems, is follow a few easy-to-apply trading strategies.

Almost every day in hotel suites across the UK a new crop of would-be stockmarket millionaires sit down to hear from the "professionals" the secrets of trading in stocks and currencies. Over the last few months I've been one of them. Not only that, I decided to put down some of my own money and see how far I'd get following the advice of the so-called experts.

What did the seminars tell me? That investing for the long term, buying low and selling high in the style of Warren Buffet, is old hat. Instead, I should jump into the world of "spread betting", going "long" and going "short", with mini-bursts of activity based on the zigzag of chart patterns. This, I was told, is the "recession proof" way to make money.

But relatively little time was spent actually teaching me about investing. Instead, I and my fellow attendees were encouraged to go on "elite" courses and "mentoring" programmes where we'd learn about how really to make big money – but at a cost of up to £13,000.

It left me feeling that the only people getting rich from the learn-to-trade industry were the learn-to-trade companies themselves.

But as an out-and-out beginner in the world of investment, I admit I have learnt a few things. I have begun trading, albeit with just £500. But am I making any money?

The Wealth Training Company

My journey begins by getting thrown out of the first event I attend.

Hi-energy pop blasts out of the speakers as attendees arrive at a "live trading day" run by industry veteran Darren Winters on a muggy Tuesday afternoon. "Raise your hand if you want to make a load of money," says Winters, who is in his early 40s, dressed in a T-shirt and jeans, and sports a goatee. About 15 people at the seminar in Bermondsey, south London, have turned up for what is advertised as a £400 one-day workshop, but which I received for free after entering a Wealth Training Company competition.

Winters is something of a controversial figure. In the mid-2000s his company held events up and down the UK. However, his promotional claims led to a reprimand from the Advertising Standards Authority. In recent years he has had a lower profile, but he is now back teaching stock market trading.

If you type "Darren Winters" into Google it's not difficult to find negative stories. I decided to fudge questions on the course application form about my reasons for attending. Was he really that bad?

He proves to be an engaging presenter and provides some standard advice: stick to stocks in the S&P 500 and the FTSE 350 – there is more liquidity and therefore more likelihood of predictable trade patterns. Always place the same number of trades long (speculating that prices will rise) and short (that they'll fall) so you're covered whichever way the market goes. And never forget to use a "stop loss" to minimise any losses.

But it transpires that he is also seeking volunteers for his "Elite Apprentice Programme", which starts costing as much as a new car, but rapidly tumbles in price – if people sign up today.

A few hours into the seminar my constant note-taking arouses Winters' suspicions. He really does not trust journalists. "The media never reports on us fairly," he says, as I am booted out at the half-way point. So, despite being promised that I'd discover how to "copy our graduate who made £9,940 tax free in seven days", unfortunately I'll never find out. What I do know is he doesn't like hacks sniffing round his business.

Knowledge to Action

The following week I'm at an introductory stock trading seminar run by Knowledge to Action in a plush mahogany-panelled hotel near Westminster Bridge. It opens with a slick video presentation accompanied by a driving soundtrack. The message is clear: the greatest opportunity in the history of mankind is here for the taking.

"How many of you would like to make money from the next stock market crash?" says smooth-talking company representative, Gurdas Singh, to the 35-strong audience. "My guys on the trading floor like it when the market crashes because they see it as an opportunity."

Knowledge to Action's "trading floor" has space to teach beginners, Singh says – and with the right training a "rookie trader" can soon pull in £2,000 a week. "Anyone can do it," he says, "but if you want to be a pilot you've got to learn from a pilot."

The talk is punctuated with references to dream holidays and flashy cars that are within everyone's grasp, although he does stop to outline his trading rules: never risk more than 1% of your account on any one trade and aim for a risk-reward ratio of 1:3 or better.

The seminar is promoting a two-day course that starts costing £13,000 – but ends up being offered at £2,400. Charlotte, a businesswoman sitting next to me, is not altogether impressed. "It all sounds too good to be true," she says.

Knowledge to Action was founded a decade ago by former IT consultant Greg Secker and has trained more than 100,000 people around the world. Students are taught by professional traders on live trading floors, the company says.

I put out some feelers on internet forums used by traders. Had people who attended managed to make any real money? The first to come back to me was a former employee of Knowledge to Action.

"There is very little real trading going on there," he said, in a recorded interview. "The so-called professional traders haven't come from investment banks. They are more likely to be ex-double glazing salesmen."

I was also contacted by Stuart Rice, former marketing head at Knowledge to Action, who said that the two-day training courses, which can pack as many as 60 people into a room, are followed by three half-hour one-on-one coaching sessions. "It's not enough," he says. "The majority of clients leave the courses unhappy."

John Crawley, who attended the two-day stock trading course, told me he struggled to apply some of the techniques he was taught. "I found I was missing basic information," he says. "It was supposed to be followed by one-on-one sessions but this never materialised. The best I got was someone on Skype, but they couldn't really answer my questions. It wasn't worth the money."

Amy Leveson Gower, chief operating officer of Knowledge to Action, disputes these claims. She says: "We are extremely proud of the quality of our education – in 2012 and 2013 Knowledge to Action was awarded best education provider by World Finance Exchanges and Brokers Awards.

"We are concerned you have clearly only spoken to a limited group of ex-employees and clients which will not represent a fair and representative sample of opinion across the thousands of people Knowledge to Action has trained worldwide over the past 10 years.

"There are hundreds of genuine, verifiable, positive testimonials. These are openly and neutrally posted at Learn To Trade - Review Site, many of whom have left their contact details."

Investment Mastery

A retail park in a humdrum Hertfordshire commuter town is an inauspicious place to seek your fortune, but at 9.30am Investment Mastery's office in Elstree is heaving with people, in spite of the Saturday morning sunshine.

"Is everyone excited and wanting to make some money?" asks Allan Kleynhans, a South African in grey slacks and black shiny shoes, who is leading the seminar. On the walls of the low-ceilinged function room are quotes about unleashing your inner potential and colourful images of golden eggs. The 40-stong multicultural audience, aged from teen to pensioner, mumbles back in agreement. "You won't make any money today," he informs us, "but we'll help you to learn.

"You can make money three ways," he continues, as a stock market graph flashes up on the screen. "Markets can go up, they can go down, but they can also go sideways." The trick, he claims, is to seek out trades that follow predictable oscillating chart patterns – and get in and out at the right time.

"You don't have to understand electricity to flick on the lights," we're told at the end of a complex section about "Elliot waves" in the market. "The point is to put a system in place and follow it no matter what."

The recurring theme of this £80 one-day workshop is the importance of having the right mindset: to make money you need to think positive.

"People often have a difficult relationship with money," explains Marcus de Maria, a business consultant who founded Investment Mastery in 2004. "They need to adjust how they think."

At the one-day seminar, Olga, a Polish lady from Hastings, looks confused. "It's going a bit fast," she says.

"Some of you may take up the opportunity to continue your education with us," Kleynhans continues. The details of a two-day course appear on the overhead projector. It costs £3,500. Then the price drops. And it drops again. Suddenly, it's £2,000 if people sign up today. I feel like I'm in Groundhog Day. At the desk behind us, staff members stand waiting with card readers. "Don't let the price put you off," Allan urges. "This stuff changes lives."

Petra Folkersma, an accountant living in the Netherlands, attended Investment Mastery's two-day stock market course last December. "I was a total beginner but the systems were clearly explained," she says. "And the follow-up support really helped." She spends a couple of hours a day researching the markets. "I am now making returns of more than 6% a month," she says. "If you put in the effort you can achieve results."

How did I get on?

David Robinson: 'learn-to-trade' is an expensive way to get information that is often on the web for free.

It was time to put what I had learnt into practice. My starting capital was a modest £500, so I opened a spread betting account (the big operators are IG Index , Capital Spreads, and City Index). Spread betting allows speculators to bet on all the major markets, but without the need to stump up the full value of the transaction because they're not buying real stocks. A spread betting platform simply mirrors the market's movements, although this exposure can still lead to large gains or losses.

"Beginners can learn to trade," says Justin Urquhart Stewart of London-based asset management firm Seven Investment Management. "But it's a bit like giving the chemistry set to the children. They might be able to do a couple of things but they're also quite likely to set fire to the carpet."

To avoid calamitous schoolboy errors, some learn-to-trade companies advise clients to play around on a demo platform for a few months before they start trading with real money. (Online brokers such as OptionsXpress and FXCM provide free virtual trading platforms.)

"People blunder into trading thinking it's easy," says John Bartlett, 73, who has been teaching beginners to trade on his residential courses in Somerset for 15 years. "Nobody is going to become a trader after a two-day course, but they might be able to start trading on a demo platform and build up their confidence before they put their toe into the water with real money."

During my first month of trading I set out to increase my pot by 3% – an achievable beginners' target, according to Investment Mastery. It claims that by reinvesting these gains on a month-by-month basis, clients should have a tidy nest egg after about 15 years. "We are at pains to point out this is not a get-rich-quick scheme," said Investment Mastery's Marcus de Maria.

The first task was finding shares that met the criteria: predictable zigzagging patterns that hit resistance at one end of a chart and support at the other. (Learn-to-trade companies cannot recommend individual stocks for regulatory reasons, but many provide watch-lists to help clients narrow down the options.) After hours of carefully scrutiny, I plumped for a couple of obscure American energy companies, a communications operator and a British home merchandise retailer.

I knew nothing about these companies other than the stock looked poised, according to the charts, to make a sharp movement up or down. If the trade went against me I stood to lose no more than 1% of my account. But if I got it right the risk-reward ratio was – theoretically at least – 1:3 in my favour, as I'd been taught in the seminars.

One month later I have made four trades, two "long" and two "short". I made a loss on one trade but got a couple of others right and increased my account by 3% to £515. But that £15 was hard work, with at least a half day spent setting up my account and working out which trades to do. Over the same period (17 June to 15 July) the FTSE 100 rose from 6,330 to 6,586, a rise of 4% – so I actually did worse than the overall stock market. It looks as if it will be rather a long time before I can cash in and retire to the Bahamas.

What I've concluded is that the learn-to-trade industry is an expensive way to mug up on information that is often found on the web for free. However, the classroom environment (and where applicable, follow-up support) can maybe help some beginners learn the basics. But it's only ever a first step on a long, rocky, uncertain road.

"The most important attributes you need to be a trader are patience and discipline," Bartlett says. "Some people are simply not cut out for it. But that doesn't stop some companies selling dreams of easy riches – it's the easiest thing to sell in the world."
 

pboyles

Legendary member
8,072 1,302
I am a UK-based freelance journalist and write for various newspapers. I recently wrote a long article on trading for one of the UK broadsheets which a number of people on this forum kindly helped with.

I’ve started looking into another issue and would appreciate any input – on or off the record – from people on this forum.

During my research into the last trading story I wrote I spoke to a lot of people about financial spread-betting.

It’s a fast-growing business, and now has lots of players. The spreadbetting platforms look like the real market. And feel like the real market. But are of course a clever simulation.

The spread-betting companies claim they’re transparent mirrors of the market. And I’m sure some of them are. But some people see them more like casinos – where the house has an advantage. I’ve heard rumours of some spread-betting companies playing tricks, tweaking the spreads, changing the stops, or locking people out of a trade – when someone makes a lot of money.

My question: Is this really true? Can anyone prove it?

(There are obviously lots of spread-betting companies out there and some may be better than others)

Please get in touch with me if you have any views on this and maybe we can have a quick email exchange or even a skype/phone chat about your experiences?
I look forward to hearing from you

David
David.c.robinson@hotmail.com
David Robinson. Journalist and editor. - HOME
I believe it is true, the difficulty is that to date none of them have been caught, primarily because the authorities have not tried. If you look at retail forex however you will see that many companies have been caught defrauding their clients using some of the methods you mention. They have all been caught by the US authorities though, as SB is not allowed in the US the SB companies get much less scrutiny than would otherwise be the case.
 

pboyles

Legendary member
8,072 1,302
Though I should add that FXCM who are a spreadbetting broker were caught and heavily fined, however this was for defrauding their forex clients not SB clients. Of course they'd never think of doing the same thing on their SB accounts.

Another interesting point is that whilst they were caught and heavily fined they were only ordered to reimburse their US clients, they got to keep the rest it appears.
 

NVP

Legendary member
37,504 1,972
Hey David - good to talk again !

Spreadbetters are Bookmakers .......full stop

My father and Grandfather were bookmakers in the 60's and 70's

They made a "book" on every race they covered .........the name of the game was to ensure they made a small % return on every race by overounding the odds (if they could) and/or by laying off larger bets into the larger money men in the business to ensure they never got stung on a big (losing) bet

to cut a long story short the greedy ones took risks and did not lay off .........taking the risks themselves covering the big bets ...........if it went wrong they dissapeared (under concrete) or ran away .......if it went right they made a lot of money .........lots of money

Spreadbet firms pretty much do the same but make even more money than this...........they can lay off the big bets to the wider market and still take a nice margin on the spread offered ..........and also if they chose they can simply take the opposite side of a trade and just plain gamble against the trader where winner takes all ....no lay offs .....all profit if it works in their favour

the kicker here is that their aint no horse charging over the line to decide the absolute win/lose outcome ...........the Spreadbetter can "control" the price of the market and thereby mitigate any potential losing bets they are taking hits on ...........and maximise the wins ....

Thats life .........
N
 

barjon

Legendary member
10,601 1,740
David

As NVP says, SB companies are bookmakers who set their own prices and thus hold the reins of power to adversely affect their clients' interest if they so choose. Complaints that they do so are many and varied and whilst many of those appear to have validity there are also many that do not and reflect the client's misunderstanding of how the market and trading platforms work.

Certainly the dice is loaded against the client - you only have to look at terms and conditions to see how carefully SBs protect themselves from any possible disadvantage that may arise. From the clients' perspective that is "unfair", but can equally be seen as normal and sound business practice.

For those who offer the MT4 platform (which is, of course, fed by their prices and not the markets as some assume) there is the infamous virtual dealer plug-in which can be used to the unfair disadvantage of clients. It may be worth you getting an expert to run their eye over the attachment which explains its use.

My own view is that the reputable companies offer a pretty good service, particularly for the small punter who really has nowhere else to go and would likely lose much more (trading is not an easy money activity :LOL:) if they did. Yes, they shave money from clients; overnight charges, dividend adjustments, wide spreads and minor slippage etc where that occurs, but that's the cost of doing business with them. No different from any retail/wholesale activity really.
 

Attachments

CityMasterTrader

Member
77 2
In some cases SB is appropriate, in others not. There are pros and cons. I find that with big liquid stocks you tend to get pricing pretty similar to the underlying. With smaller illiquid names it is more prohibitive/erratic. I often hear people complain but it turns out it's because they have had a hard time trying to trade volatile small caps. Remember leverage was designed to magnify small returns using momentum not make big gains bigger. Don't forget tax benefits too. If you can make sizable profits on SB surely you're prepared to give up some of it on bad pricing in order to keep all the rest from the tax man.
 

Canulearntotrade

Junior member
21 1
The fast-growing spreadbetting market. Is all as it seems? Reply to Thread

Dear all. Thanks for your replies and kind compliments about my last article. Spreadbetting is a big subject and its easy to get bogged down in the 'science' of the subject -- interesting as it is.

The key thing I'm interested in is whether allegations and rumours that some providers will deliberately play games with an individual client when they make lots of money are true. And whether I can prove it.

On a number of occasions I have heard rumours of people suddenly being locked out of the platform and tweaking the spreads for an individal client if he or she has got too good at playing the SB system.

If I could find a number of examples of this then it could be argued it is systemic despite the SB provider claiming it was a glitch etc

Please keep your comments coming. And please feel free to contact me on my private email or by private message if you would prefer to discuss discreetly.
Thanks again.
David
david.c.robinson@hotmail.com
 

ffsear

Senior member
2,149 436
The only trick they play is convincing the man on the street that trading is a quick and easy way to make a fortune. They draw in people who know next to nothing about financial markets.

As for tricks such as tweaking spreads for an individual client , This is not true. 95% of traders lose money, and its not down to the broker playing tricks. They lose because they don't know how to trade. All the broker has to do is keep them playing
 
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Shakone

Senior member
2,458 665
In one spreadbetting firm, I have had trade entries (market orders) rejected, 6 or 7 times in a short space of time, pause a second or two and then rejected. I've seen an ask price move clear through my buy limit order, then rapidly reverse and I wasn't filled. Most disturbingly I was rejected several times from exiting a trade (again market orders) while price moved to lessen my profit in the meantime as I clicked furiously to exit. This is all with one spread betting firm. Unfortunately I can't prove it as I didn't record my screen. I just closed my account instead. Alternatively, another spreadbet firm has never done anything wrong (as far as I can see) on any trade I've taken.

It's going to be hard to find good proof of this, as there are plenty of defences available - customer internet connection, their servers had a temporary problem, price had moved between the time of clicking the order and when they received it so it was rejected, my limit order wasn't filled because they had a false tick and so on. Good luck with the article, hopefully it stimulates regulators to look more into this.
 
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pboyles

Legendary member
8,072 1,302
The only trick they play is convincing the man on the street that trading is a quick and easy way to make a fortune. They draw in people who know next to nothing about financial markets.

As for tricks such as tweaking spreads for an individual client , This is not true. 95% of traders lose money, and its not down to the broker playing tricks. They lose because they don't know how to trade. All the broker has to do is keep them playing
This is the same argument that was always used when people complained about dodgy slippage in FX, 'don't blame the broker', 'slippage is normal' blah, blah, blah. Then several FX brokers were fined for doing exactly what had been alleged all along. Now because the same brokers have not been caught defrauding their SB clients we hear these excuses again.

Does anybody really think that a broker caught using asymetrical slippage on their FX platform was not doing the same thing on their SB platform? Why wouldn't they?
 

Vasco da Banana

Established member
699 121
While it's true that most punters will lose with no interference, SBs still can't resist the opportunity to move the goalposts and impose T&Cs allowing them to get away with it.
 
C

cablemonster

0 0
I understand what you are looking for and why. I am sure spread bet companies are cheating customers in subtle ways which will be hard to prove. The days of designer slippage and designer prices are largely gone imo. The underhand stuff now is things like price shading and asymetric slippage, relatively small stuff that will add up over time. Dont hold your breath on the regulators catching them either these are the people who just worked out LIBOR was 'rigged' when everyone in the industry knew this. Google worldspreads, basically they havent got a scooby.

As NVP says the main money with spreadbetters is made acting as dealer and laying off the size that could hurt you. After all if you take a real market say FTSE futures most people will still lose even if you let them trade with zero commission. Why? overleverage, poor money management, unrealistic trade expectation and above all a lack of understanding that the market is out to shaft as many people as possible. Think about it, price goes up we cant all be long and still go up can we, we need to shake out some weaker longs to go higher. If people weren't shaken out the market would cease to exist, thats what it does, point being many punters blame the bookie but in reality they just dont understand what they are doing.

The learn to trade industry is filthy with the occasional genuine service provided by ex market pros with real experience. Quite frankly trading standards should shut these 2 bob chancers down, its borderline fraud.

If I were a journo and was looking to increase my standing / sell more papers I would probably choose the subject of energy price manipulation. Be careful though there are powerful people who have vested interests and it could end in tears.

Dear all. Thanks for your replies and kind compliments about my last article. Spreadbetting is a big subject and its easy to get bogged down in the 'science' of the subject -- interesting as it is.

The key thing I'm interested in is whether allegations and rumours that some providers will deliberately play games with an individual client when they make lots of money are true. And whether I can prove it.

On a number of occasions I have heard rumours of people suddenly being locked out of the platform and tweaking the spreads for an individal client if he or she has got too good at playing the SB system.

If I could find a number of examples of this then it could be argued it is systemic despite the SB provider claiming it was a glitch etc

Please keep your comments coming. And please feel free to contact me on my private email or by private message if you would prefer to discuss discreetly.
Thanks again.
David
david.c.robinson@hotmail.com
 

random12345

Established member
793 280
Aye, I've not noticed anything untoward with the spread betting company I've used in the past (IG ), but all they're doing is selling relatively complex instruments to clueless punters. They make futures products etc incredibly easy to access at low margins when they shouldn't be.

I've often thought trading should be made a profession with privilege to practice in order to quash these snake oil salesman with their courses and to have an active institute for complainants, but then that ruins the odds of a poor boy off the street making it big on his own (not that you hear those stories any more) and replaces crooks with an elite. Oddly many people prefer crooks.
 
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