Spread Betting v Trading & Recommendations

[F_Barrone]

Hi all, first time post but I've been looking at this forum as a guest for a while now. Some fantastic posts and threads - very informative.

I've been slowly getting into trading over the past year and hopefully want to start trading in the next few months... if I'm ready!

Anyway, I was wondering if anyone had any strong opinions on Spread Betting, other than the tax incentive. Is there any one SB company that people would recommend highly while also be suitable for a trading virgin like myself

I've had a good look on the forum and ProSpreads seems like a good bet (sorry!)... however, does anyone have any other recommendations or strong opinions for or against any particular SB company, or indeed the whole SB idea.

Thanks in advance.

FB


PS: I probably should have added that I'm only looking at SB as an option to cut my teeth on before I get into proper trading... I intend to start SB'ing with a capital of $300-400. Am I correct in saying that SB'ing will give me a higher return/risk than trading will for such a small capital.

 

[No one Knows]

Spreadbetting is the avenue ive been considering for quite a while now. The main advantages are obviously tax free, simple £/pip bet. The main problem is that how can you trust the institutions that are taking your orders when they dont hedge most of there smaller trades ( less than £10/pip). Ive seen some convincing arguments about these firms skewing their prices and spiking out stops on "out of hours trading".

Fortunately it has recently come to my attention that fxcm are now offering spreadbetting to its uk customers and they make a point that all their trades are "No dealing desk" and are hedged directly into the market via their computer system. As they are directly hedging you can only trade in round 0.1lots which is about 60p/pip. Unlike spreadbetting where they allow £1/pip min and any amount above/pip.

I am currently trialing fxcm's 30 day trial of their platform for spreadbetting sofar looks good.

regards

Mark

 

[windsurfing_stew]

Hi FB,

I've got 5 Spread Betting accounts in the UK and 2 in Australia. If you choose the right provider and manage your money correctly you should get a better result (including UK tax benefits) by spread betting.

It's worth nothing that you may not want to have more than £50k in any one spread betting account as this is the limit of the UK FSA's partial protection.

There are many things to look out for and weigh up such as overnight finance costs, spreads, product range, margin requirements, customer service and the platform.

One thing to be VERY careful of is 'stop-hunting'. This is a process that some less reputable providers do to improve their profitablilty. Consider an example where stock X is trading at 1.00. You and a stack of other traders have a stop set at 0.97. What a less reputable provider will do is spike the price to 0.97 before it instantaneously rises back to 1.00. This triggers your stop essentially selling a position for 0.97 with an underlying value of 1.00. Clearly this not the case for all providers or all instruments, but worth watching out for never the less. Check past charts against the underlying carefully. I prefer longer term spread bets (1 day to 2 weeks) rather than intraday for this reason.

Having seven accounts I obviously have my opinions on which spread betting providers work best for me but ultimately everyone has to research and choose for themselves. GFT UK have been good for me to date. They have a good platform and excellent service. Having said that, I am by no means advocating that anyone chooses a provider based on my say so or without doing their own research. And, what works for me may not work for you.

 

[lancenicolase]

There more than 10 reputable financial spread betting brokers now and this number grows every day. As you're new to spread betting you need to understand what's the most important thing for you in a broker, is it tight spreads, good customer service, high leverage?
As you're new to trading I'd recommend you don't use a lot of leverage but look for tight spreads.

 

[jansher21]

There more than 10 reputable financial spread betting brokers now and this number grows every day. As you're new to spread betting you need to understand what's the most important thing for you in a broker, is it tight spreads, good customer service, high leverage?
As you're new to trading I'd recommend you don't use a lot of leverage but look for tight spreads.

I would agree with the other posts here. Generally speaking most of the spreadbetting companies are pretty similar and the choice of company won't really impact your profitability.

My recommendation to new traders, is to find a mentor / good signals service with precise entries/exits that will keep you profitable to begin with and help you learn the ropes.

That is the path I took and it helped me (after alot of initial heartache!) to become profitable longer term.

I can suggest some good sites that give profitable signals and free trials / low cost. If you are interested, feel free to get in touch.

If only we could take all the traders and try and show them the way to profitability ! - but everyone is different and everyone must tread their own path.

Best of luck to you.

 

[Merceron]

Have switched to SB in the last month after one year of trading Japanese equities, so I'm still a newbie. For what I have learnt thus far, the big differences are:

- Speed of execution. There is no waiting in line for your order to be processed as with equities. Deals are immediate meaning you can pop in and out when you like without the agonising wait to see if your order clears or not.

- That said, it seems more difficult to day trade SB accounts (I'm using IG) so I have switched to longer time frames using a 15 or 5 minute chart looking for longer term trends. This has been a bit of a difficult switch.

- Shorting. My Japanese equities account had no such capability. It was also very difficult to trade different markets. SB accounts have a lot more diversity and range both of equities, indices, commodities etc.

- In the first few weeks I hemoaeraged money on my SB account. I was a keen follower of order flow in equities which is absent in the SB. Charting/indicator skill becomes a lot more important. I started out trading similar amounts of risk immediately in the SB account. This was a big mistake and I should have learnt from past experience and started small as I learnt the new system.

- I still can't get my head round out of hours markets and their relationship to actual markets. I've been stopped out on many occasions or totally gone the wrong way. Now I'm closing positions prior to market close.

Still early days, still learning. Overall, I see greater potential in SB than I did in the straight equity markets, chiefly through the variety of opportunities, the smaller amount of capital required upfront. On days where it has been good, it has been exceptionally good; bad days can really get you if you're not careful though.

 

[F_Barrone]

Thanks for all the replies.

I signed up to a couple of different Spread Betting companies, but since opening the accounts I subsequently read bad reviews of two of them and closed those accounts. As Windsurfing Stew points out, it seems that some of them are less than reputable!

The main problem is that how can you trust the institutions that are taking your orders when they dont hedge most of there smaller trades ( less than £10/pip). Ive seen some convincing arguments about these firms skewing their prices and spiking out stops on "out of hours trading".

Nne_Knows, this is my biggest problem... working up the courage to trust the SB company - I mean, after all, if I am making good trades then they are losing money on me right?

Anyway, at the moment I am just signed up to IGindex, but I'm really just still paper trading for the moment...

Any of you have experience with both IG and FXCM? Pros/Cons for either?

Thanks again folks.

FB

 

[jansher21]

As per my earlier post, the broker really won't make that much difference to how much cash you lose.

Find a good trader to work with, an accurate signal provider with a long track record. Then you will keep out of trouble while you are learning.

Thanks for all the replies.

I signed up to a couple of different Spread Betting companies, but since opening the accounts I subsequently read bad reviews of two of them and closed those accounts. As Windsurfing Stew points out, it seems that some of them are less than reputable!

Nne_Knows, this is my biggest problem... working up the courage to trust the SB company - I mean, after all, if I am making good trades then they are losing money on me right?

Anyway, at the moment I am just signed up to IGindex, but I'm really just still paper trading for the moment...

Any of you have experience with both IG and FXCM? Pros/Cons for either?

Thanks again folks.

FB

 

[windsurfing_stew]

Hi,

I've tried IG Index for spread betting. They are ok. After trying out IG Index, CMC, GFT, CityIndex and Tradefair I found GFT clearly the best by most measures.

If anyone is intersted in setting up a spread betting account be sure to check the Clean Financial site which reviews various CFD and Spread Betting providers. They often have some good deals - like £100 credit for opening an account etc.

For a Spread Betting comparison:
Spread Betting Companies | Spread Betting Comparison ¦ Compare Spread Betting Companies

For deals:
Spread Betting Offers | Free Spread Bets ¦ Financial Trading Offers

Cheers,

windsurfing_stew