Placing spreadbet stops

Devon Womble

Newbie
6 0
I have opened an account with deal4free and am paper trading until I am happy to start with real money (if ever) -they don't provide the facility of a dummy account. I have noticed that some share bets tend to spike massively (up or down) at the start of day, normally only for a minute or less but there is no corresponding spike in the underlying share price.

My question is: will this short-term spike be enough to trigger any stop I have set? If the answer is yes, how can automatic stops be sensibly utilised in a spreadbetting account?

:confused:
 

rossored

Senior member
2,103 56
I think you'll probably find that the spikes will trigger the stops - I'd be very surprised if not.

Never traded shares using SB so I'm afraid I cant answer your other question, someone else might be able to.

RR
 

tradesmart

Experienced member
1,286 22
Last edited:

Devon Womble

Newbie
6 0
Thanks for the replies and I apologise for not looking at the 'similar threads' list at the bottom of the page first - not used to finding my way around the site yet.

So it seems that some/many SB firms will 'run' prices deliberately to trigger stops, rendering them pretty useless in my book, this also seems to be a highly questionable activity. I will check out Capital Spreads who allegedly do not change their prices based on stops, and report back.
 

chump

Senior member
2,212 274
Just my personal opinion,but you might think about where might you put your stop in relation to the timeframe you are trading and the risk you have defined has acceptable rather than waste your time worrying whether the SB might run your stop. If you place it right what the SB might or might not do is irrelevant.
 

TheBramble

Legendary member
8,394 1,170
Chump - I think Devon Womble's point is that he is placing his stop appropriately (whatever that may be for them personally), but wonders if the SBs deliberately spike their price to take out ALL reasonable stops?
 

Devon Womble

Newbie
6 0
Chump - As TB says, it doesn't really matter where or why I am placing my stops, if I get stopped out due to artificial price spikes then that can't be fair.

I will give you my real life example - went short on Tate & Lyle at approx 306. A couple of days later the offer price was down to approx 300 so I decided to place a stop at 306 to prevent me (in theory) from making a loss on the trade. First thing next morning, the price spiked to 311 for a minute or less - next minute is was back down to 300. Therefore I was stopped out and lost the 6 points profit that I had built up over the preceeding two days.

Maybe there is a genuine underlying market reason for this but I can tell you that there was no corresponding spike in the midprice (as given on CBS Big Charts) and there was no corresponding spike in the bid price - if there had have been we could play them at their own game and go short at 311, making an 11 point profit in one minute. :confused:
 

richarjl

Junior member
11 0
I trade my spreadbetting via deal 4 free. They administer there stops like this. If i bet at £5 per point that is equal to 500 shares. If I am short then I place a buy stop to close and thus limit my risk. If I sell short at £5 at say £4 per share and place a stop at £4.20 then they appear to only stop me out when the stock trades at 420 on the offer in a volume equal or greater then 500 shares. It seems that they check the underlying market first before applying the stop. So your price could go to £420 sit there and then move lower and if no trades occur at that price then you are not stopped out. I think they have people designated to check and either apply the stop or not.

Earlier in the thread a mention was made of date spikes which appear to be unrelated to the market. Deal 4 free stated to me that these are often caused by a poor signal. For example I trade Nymex crude and deal 4 free calculate a mid price based upon the following calculation. If the contract trades at 35.50 - 35.65 then they add the bid and the offer together and divide by 2. They then add the spread of 8 to the price i.e -4 and +4 to the mid price. If a poor or incorrect bid or offer price is obtained by deal 4 free then when this calculation is carried out the spike is generated. This could generate a bid or offer that creates a spike which shoots through your stop. Deal 4 free assure me that if this occurs then I would not be stopped unless a trade actually occured at my stop level.

I normally monitor all trades that occur in the market I am trading, when I can to ensure that I get stopped correctly and thus fairly. I have yet to be stopped out incorrectly yet.
 

awoodj

Active member
142 0
Deal4free CFD's

I trade with deal4free through CFD's and have seen the same problem in theory. However as one of the previous posts said even though in theory your stop would have been triggered either by a spike or wide spread, which usually happens at times like 8:00am to 8:05am and my guess is these are d4f covering themselves especially in smaller stocks to see what the first trade prices in the actual stock. They do not actually act on the stop until the market has actually traded at that level
 

chump

Senior member
2,212 274
No, I knew exactly what was being referred to and the numbers given are indicative of my understanding.
The difference is we are not looking to trade with SB's in the same way.
My original comment in relation to SB's remains my view.

The view is simple. SB's have to make money. Within that context there will be practices designed to ensure that happens. Clients want to make money,but will only do so if they recognise and make allowances for the SB's practices.

If tomorrow you managed by magic to remove 'spikes' and other practices built into the SB business formula only one of two things are going to happen. One, the SB moves some other part of it's formula for business to protect it's ability to make profit,or two, the SB's are out of business.

If you think you have identified certain practices within the SB formula for business adapt your trading to cirmcumvent it. That's my point.

Cheers
 

cas01

Junior member
28 0
Deal4Free

My experience is similar to awoodj, I have had stops triggered but not executed...so I suspect that there must be underlying business (in relevant size) going on for the stop actually to be executed.

I frequently find their opening prices to be pretty wild, even in FTSE100 stocks, so I leave my pending orders blotter open and cancel any triggered stops within the first 5 to 10 minutes from the open, only to reinstate them 5 minutes later. At least it provides an icentive to get out of bed on a cold morning! :LOL:

C.
 

TheBramble

Legendary member
8,394 1,170
Devon Womble said:
[...]First thing next morning, the price spiked to 311 for a minute or less - next minute is was back down to 300.

DW - Regardless of any deliberate stop running by the SBs, there is a high probability of unusual volatility as the market opens and for the first half hour or so.

You could minimise your exposure to this by just betting intraday (if you want to stay with SB-ing of course).
 

TheBramble

Legendary member
8,394 1,170
chump said:
If you think you have identified certain practices within the SB formula for business adapt your trading to cirmcumvent it. That's my point.

In this instance then Chump, say DW has decided the SB will occasionally use a deliberate spike to take out all 'normal' stops.

What adaptation could you make to your stop setting or trading to limit exposure to that sort of practise?
 
 
AdBlock Detected

We get it, advertisements are annoying!

But it's thanks to our sponsors that access to Trade2Win remains free for all. By viewing our ads you help us pay our bills, so please support the site and disable your AdBlocker.

I've Disabled AdBlock