Lost Trading

[cj12]

I just posted the message below to the spreadbetting boards, but it applies here

If I was to trade a modest 2 time a day trading the Daily Dow future, it would cost me 3 ticks to get in and 3 ticks to get out trading with capitalspreads.Over one weeks trading I would need 60 points just to cover the spread. Furthermore trading 2 times a day. You offer 5 points to trade the daily Dow future,which is no different to fins, cityindex ,or igindex they also off 3 points to get in, and 3 out.

If you want to beat them, offer you clients 3 points to get in and 2 points to get out on a stop. Then this would be a true 5 points spread.For a trader leaving orders with you. I would say 100% of the time they are paying 6 point spread round turn,although you claim to offer 5 point spread.

For the traders out there who can cover 60 points a week for trading 2 times a day,just to cover the spread, good luck.


Regards

CJ

 

[cj12]

Im surprise nobody have comment on my post above, That one would need 60 points a week just to cover the spread, with spreadbetting companies and thats on a modest 3 points to get in and 3 to get out, and this is only trading 2 times a day.

CJ

 

[donaldduke]

The DOW is best traded via SB during high volatility periods (like during 2002).
When there is low volatility the spreads will bite.

The only viable market for intraday SB trading is currencies, GBP has twice the range as DOW and
half the spread.

 

[Roberto]

The only viable market for intraday SB trading is currencies

There are certainly others here who won't agree with this at all. For myself, I know exactly what you mean but I still think it's something of an exaggeration. I particularly like intraday spread-betting, which has been very kind to me for 4 years now, but I admit that overall I'm gradually moving towards currencies and away from indices.

 

[cj12]

Roberto

With respect to you, its no exaggeration If you trade 2 times a day pay 3 ticks either side, over a week it would cost you 60 Points a week just to cover the spread, there no getting out of it. You would need to make 100 points a week just to get 40 ticks profit for you self.

And why may I ask if you are moving to currency

CJ

 

[the blades]

Im surprise nobody have comment on my post above, That one would need 60 points a week just to cover the spread, with spreadbetting companies and thats on a modest 3 points to get in and 3 to get out, and this is only trading 2 times a day.

CJ

Hello cj,

the main point of the thread (IMHO) was debating the merits of using SB for any type of trade. I think most (though not all) agree it is an expensive way to intra-day trade, so as such you're confirming what a lot of us believe. My point is that the formula for calculating the quote from a SB company is fixed and easily calculated. Because of this, there is no extra gamble (other than overcoming a slightly increased spread) than for any other trading method. If you have a longer term time horizon with a higher profit target then the tax free element outweighs arguably higher opening spreads. I do SB indeces, but note that a 6 point spread is still only .06% of the DOW - easily wiped away with tax if your profit target outweighs this.

However, being rather ignorant of other trading methods, what other vehicles are there and at what associated cost? Any advice appreciated.

I think most of us agree it's horses for courses.

All the best.

UTB

 

[DIN]

what does that tell you?

You have answered your own question. It is very difficult to trade the indices intraday via SB. You have to be patient and wait for the set ups / opportunities to come that will give you a big enough reward to take the trade on.

This may only occur a few times a week with the indices, maybe more, maybe less. but I don't always think that you will have 2 trades a day if you are waiting for the better probabilities / sets ups / opportunities - whatever you want to call them.

For the DOW for example, a 40 point profit may only be a 25 point profit on a SB, taking into account the spread and the way the SB company will move the spread ahead of the market. In my experience, this used to happen frequently.

good luck with it.

 

[Roberto]

You have to be patient and wait for the set ups / opportunities to come that will give you a big enough reward to take the trade on.

Absolutely; this is exactly the point. I suspect that "impatient" types get frustrated with this and start losing as a result. IMHO these "high-probability opportunities" have gradually been becoming fewer over the last couple of years. That's one reason I started looking at currencies a few months ago.

For the DOW for example, a 40 point profit may only be a 25 point profit on a SB, taking into account the spread and the way the SB company will move the spread ahead of the market

Must say that's (still) not my experience. I find they move the spread according to the futures. SB companies seem to vary quite a lot in this regard. SB is still my daily bread and marge, though (well ... crispy baguette and lightly-salted Normandy butter together with the occasional glass of Chablis, anyway).

 

[chump]

Roberto,
I feel compelled to give you some strategic advice...bin the Baguette and if you must drink it then switch to Red ,maybe a merlot ,Chilean even...that baguette is packed with carbs and sugar and you eat enough and that new young wife will be looking for a new young toy boy

and lord I nearly missed the butter..never, I say never mix high fat with high carb

 

[the blades]

"I do SB indeces, but note that a 6 point spread is still only .06% of the DOW - easily wiped away with tax if your profit target outweighs this. However, being rather ignorant of other trading methods, what other vehicles are there and at what associated cost? Any advice appreciated"


......could anyone elaborate?


Thanks in advance.

 

[pkfryer]

Im considering turning my attention towards SBs for the tax free reasons. I have heard that its not the sort of thing to day trade with, but a short to intermediate term trader should be okay. Roberto is right that the lack of tax would far outweigh the extra spread (what is cap gains here now 40%?).

Not sure how winnings from gambling will be seen elsewhere though, will it be seen as an income if it is your only source of money coming into your bank. And would a place like Malta still charge me income tax at 15%? I use CFDs which have tighter spreads but are considered an investment for some reason and so get lumbered with capital gains which I think is a bit fair considering I never own the underlying share and therefore its actually no difference to spread betting.

I'm wondering whether to declare my earnings from CFDs with Malta (when I live there that is), and place any SB earnings in a uk account. 15% in Malta instead of 40%, and 0% in UK instead of 15.

 

[roguetrader]

I use CFDs which have tighter spreads but are considered an investment for some reason and so get lumbered with capital gains which I think is a bit fair considering I never own the underlying share and therefore its actually no difference to spread betting.

.

I had wonderd about that, CFD's I'm not really familiar with, but with regards to options, the fact that you dont really own anything, futures similarly, and also come to think of it, profiting from a short position. In all these cases, you never actually owned anything.

 

[Jyde]

pkfryer, you have to declare income and be taxed in the courntry you live.
The other question is of course, on a tax free income from UK, who's to know. Depends on any exhance agreements between Malta and UK.

CJ

Edit:
Another thing just sprung to mind in that respect: Since I am not longer a UK resident, the only account type I have managed to maintain with my UK SB is a controlled risk account. Although I really enjoy a lot of not-lost pts on the garanteed stop loss (but how does one know how much slippage one has just saved?), the higher spread is a killer.
Ex. I pay (are you sitting down) 18 (!) on the GBP/USD, and that is enough to put anything less than swing trading time spans into the red.

 

[DIN]

Roberto,

some times when SB the indices they quote a daily future price. do you know what the difference between the daily future and actual future is? I know what the actual future is but am not sure how they calc a daily. and also, if the cash index is based on the actual future rather than the actual index, , then the daily future should have a higher correlation with the actual future than the cash index.?

does that makes sense?

 

[Roberto]

does that makes sense?

It does to me, yes. I think you've more or less answered your own question

The "daily futures" expire daily, but don't have the "adjustment" made to them to allow for the time-difference and perceived direction of the market and just reflect the current "futures price", I think. The "futures" don't expire until their specified future date. So it depends whether you want to hold your position longer-term (i.e. overnight).

Suggestion for you: go to the "Capital Spreads" thread and ask Simon Denham to give you a concise explanation of the similarities and differences between "rolling daily cash", "daily future" and "future", because his will make a lot more sense than mine!

 

[Thirteen]

"I do SB indeces, but note that a 6 point spread is still only .06% of the DOW - easily wiped away with tax if your profit target outweighs this. However, being rather ignorant of other trading methods, what other vehicles are there and at what associated cost? Any advice appreciated"


......could anyone elaborate?


Thanks in advance.

taken from Malcolm Robinson

The two biggest selling points (of sb) are no commissions and no capital gains tax. There are many different costs to trading, commissions are one and the spread is another (especially when you have to trade at the market as you do with spread betting, with futures you have the choice of joining the bid or the offer). Commissions are important for an active trader and as an active trader you can get them very low, but lets assume they are £8 per round turn for futures and lets assume that the spread in FTSE futures is an average of 2 points. If the spread with a spread betting firm for FTSE is 6 points and assume that we are trading £10 a point we can compare the two trading vehicles.

Last week (written Nov 2001) I made an average of 2.42 points per contract traded and I traded 48 times. That is, for each contract I bought and sold I made £24.20 before commissions, assuming my commission rate is £8, I made a profit of £16.20 per contract traded, which is £777.60 net profit if my average size per trade is one contract.

Had I had the same success trading with a spread-betting firm, with a 6-point spread, I would have lost £1718.40! Now I would rather pay tax on a profit that no tax on a loss.



the above is as clear as it can be explained - others have also explained this.

Abuse edited by CM- last warning thirteen.......

 

[Thirteen]

Abuse edited by CM- last warning thirteen.......


typical. no warning to blades when he comes back then eh cm.

id watch out if 1 were u. u seem to already embarrassed yr self by coming 2 wrong conclusions about that nice mr bramble. do u not learn from yr mistakes?

4 those who wunder why - my comments were suggesting that blades is obviously intellectualy challenged (hey is that nice & pc 4 u cm?) as he consistently asks the same question despite having benn given the answer numerous times - yet has the audacity to criticize and attack those that help him and give him answers to his basic question

maybe blades is on a wind up mission? maybe blades and cm are the same person with multiple nicks? :cheesy: :cheesy: :cheesy:

 

[Sharky]

Thirteen, despite our warnings you continue to be disruptive on the forums. Unfortunately I have no choice but to suspend you account for 7 days, you can still read the forums, but you won't have permission to post. There won't be any more warnings after the 7 days has elapsed, next time you're account will be permanently banned.

 

[DIN]

come in no 13 your time is up...........

you need to chill out man. You've obviously got too much time on your hands.

 

[the blades]

taken from Malcolm Robinson

The two biggest selling points (of sb) are no commissions and no capital gains tax. There are many different costs to trading, commissions are one and the spread is another (especially when you have to trade at the market as you do with spread betting, with futures you have the choice of joining the bid or the offer). Commissions are important for an active trader and as an active trader you can get them very low, but lets assume they are £8 per round turn for futures and lets assume that the spread in FTSE futures is an average of 2 points. If the spread with a spread betting firm for FTSE is 6 points and assume that we are trading £10 a point we can compare the two trading vehicles.

Last week (written Nov 2001) I made an average of 2.42 points per contract traded and I traded 48 times. That is, for each contract I bought and sold I made £24.20 before commissions, assuming my commission rate is £8, I made a profit of £16.20 per contract traded, which is £777.60 net profit if my average size per trade is one contract.

Had I had the same success trading with a spread-betting firm, with a 6-point spread, I would have lost £1718.40! Now I would rather pay tax on a profit that no tax on a loss.



the above is as clear as it can be explained - others have also explained this.

Abuse edited by CM- last warning thirteen.......

yes, so what you have confirmed, which was never really a debatable point, is that for low profit target, high frquency trading, you are better off avoiding SB. Could anyone find a post, by any member, suggesting otherwise?

However, with bigger profit targets and longer time horizons.........yawn....refer to above.

Thirteen - at no time have you offered any advice. I have posted my trading style above and asked for alternative methods to lower my dealing costs. You can't enter this in an adult way, possibly because you aren't an adult.


UTB