Placing spreadbet stops

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Devon Womble

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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:
 
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
 
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.
 
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.
 
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?
 
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:
 
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.
 
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
 
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
 
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.
 
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.
Click to expand...

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).
 
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.
Click to expand...

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?
 
deal4free

I had a chat with as deal4free trader the other day about the situation whereby the stop has been activated but my executed trades blotter does not show the stopped trade as being processed. He stated that I am free to cancel this stop only if the following criteria are all met.

A trade has not occurred in the market which was of equal or greater size than mine.

So if I am long at 410 at 500 shares I will be only stopped in a situation in which a trade at 410 goes through at 500 or more shares. A trade at 410 at 499 shares they stated will not stop me out. My experiences at the moment support this statement. This was with regards share spreadbets.

I asked him what will happen if I try to cancel a stop which meets the deal4 free criteria for stopping but my trades blotter does not show this stop has having been processed. Deal4free stated that I would not be allowed to cancel the stop. It appears that they also have people or a system which checks whether someones attempt to cancel a stop is valid or not.
 
"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 "

DW,
I don't follow UK stocks,but no matter it shouldn't make any difference.

How long did you think you would be in this trade for?

What's the typical range for this stock in that timeframe?

Where did you have your intial stop?

After your short entry where did you next forsee you would find buy orders in your timeframe and the one beneath yours?

If I recall you were papertrading D4Free? What's their minimum stop spread on this stock or were you holding a mental stop?

The Bramble,I doubt I am saying anything here you don't already know.
Open volatility...intraday trading with SB...SB spread size + minimum stop allowable vis a vis timeframe for the trade...

I don't know what DW will come back with,but on what I can see already I would say this...he's moved his stop to b/even after just a 6 point move..I was taught don't do that until the move is at least 1.5 to 2 * initial risk otherwise you get whipsawed frequently. On that basis his initial stop would be only 3 or 4 points behind his entry.Two points arise from that,first I thought SB's had wider minumum stops than that and second point is how does this relate to the typical movement on this stock?

Wait and see what he says,but DW what's 'fairness' got to do with anything?.

Cheers
 
I think we are drifting away from the point. I am quite happy to accept that my stops may not be set properly from an experienced trader's point of view - my point is that the SB companies may be abusing their positions and overly adjusting their prices in relation to the underlying market.

However, since other members have stated that, in their experience, stops are not acted upon at these inflated/deflated prices unless a deal goes thru at that price in the market, I will take it (for the time being) that the spikes won't activate my stops.

:D
 
"my point is that the SB companies may be abusing their positions and overly adjusting their prices in relation to the underlying market".

No drifting here. We just have completely different views on the issue. I will not use terms such as 'unfair' or 'abuse' ,because I feel they are irrelevant.The reality is SB's need to make money and have practices to do that. If any person dealing with them can't incorporate that into their trading then they might be better off looking for a different method that meets their requirements.

That's not meant to sound so terse.
Cheers
 
Last edited:
"I originally faced this same dilemma with spread-betting. My system involves risking about 0.5% of my capital per trade and at £1 per point this would mean the stops were too tight for my plan.

As a result, I set up a CFD account. Because you can trade with as little as 1 CFD you can set the size of your position to much smaller values".


This came off another thread from someone who had thought about what he was trying to do in relation to what was possible via SB. Its' pertinent also to this thread.

Cheers
 
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