Spread betting vs Trading

[Ross Spur]

Yes, but wouldn't a consistently successful trader be flagged and removed from the pool and then the SB hedges them individually. Thus increasing the SB profit on the pool and the successful traders positions. Or is this where the successful trader get's 'problems' to encourage them to leave to another SB firm.

Regrading roulette, the only edge I can see is to influence the machine, which the customer can't do. So maybe your cousin is on a streak.

If a SB really does have a consistently successful trader, with a proven record over at least a year or so, I think they might hedge and shadow him/her, but why would the house gamble when 99% of the time they can just hedge as appropriate and rake in the profit from looosers?

 

[The Leopard]

Yes, it's betting against a bookmaker and that's why it's tax free. Those SB companies who claim to give you DMA with your "bets" going through to the market are either slightly economical with the truth or they have discovered a loophole in current legislation which will likely be slammed shut in their faces before long.

Like I say Jon, you might be right, but if an FSA regulated business is making claims like this on their website and they're not true, they're going to get into trouble pretty quickly:

The bet is still placed between you, client and us, FP Markets, however our platform directly mirrors the underlying market and all bets placed will be automatically hedged in the underlying market.

Unlike most traditional Spread Betting providers, all orders are automatically hedged.

 

[ZEN archer]

If it's a genuine thing it could be an ideal way to spread bet - ordinary SB companies rely on clients losing in order to make profit.

 

[Ross Spur]

If it's a genuine thing it could be an ideal way to spread bet - ordinary SB companies rely on clients losing in order to make profit.

Don't think so, because if all bets are hedged automatically in the real market then they have to be the same size, or a multiple of, the underlying contract, so one of the main advantages of SB has gone. Also, there's at least one reason why the absence of internal hedging will make the spread (effectively commission) wider. Apart from the zero tax possibility, overall, it's therefore the worst of both worlds, IMO.

 

[barjon]

Like I say Jon, you might be right, but if an FSA regulated business is making claims like this on their website and they're not true, they're going to get into trouble pretty quickly:

The bet is still placed between you, client and us, FP Markets, however our platform directly mirrors the underlying market and all bets placed will be automatically hedged in the underlying market.

Unlike most traditional Spread Betting providers, all orders are automatically hedged.

ok, I'll knock out the economical with the truth bit, although the crucial word in your quote is "mirrors". Hedging is just "laying off" in bookmaker terms but I'm not sure that automatic hedging of single bets would be easy unless the minimum bet size was commensurate with market contract size.

 

[Mike Kshemaraja]

Just open an account with Oanda, MB Trading, Hirose UK or Pepperstone, they are decent forex brokers that you can deal with and learn to trade with very small amount of money.

If you learn and your capital gets to a level that you feel a bit nervous dealing with them, well that is a nice problem to deal with, isn't it? Then you can always deal with brokers like IB or else.....

 

[mike.]

This is what i am trying to understand Mike, why would you open an account with the above forex brokers and trade currency with a leveraged account when you could spread bet the same instrument with something like a 1 or 2 pip spread, I know Leopard touched on the subject before that the SB companies can manipulate prices, but surely not to an extent where it is blatantly obvious cheating ? Surely there must be regulations in place.

 

[ZEN archer]

Don't think so, because if all bets are hedged automatically in the real market then they have to be the same size, or a multiple of, the underlying contract, so one of the main advantages of SB has gone. Also, there's at least one reason why the absence of internal hedging will make the spread (effectively commission) wider. Apart from the zero tax possibility, overall, it's therefore the worst of both worlds, IMO.

If I had a choice between two of them, I would always choose SB company with wider spreads and less flexible trade size if they are indifferent to my performance.

What chance to you stand to use the main advantages if a SB company applies the latest software/technology available to make you lose? Even if you are among the 5% and are successful after all the tricks played by them, they can always close your account.

Check what happened to a winning client - http://www.trade2win.com/boards/fix...46-ig-index-custom-betting-8.html#post1787494

PS I said if it's bona fide. Maybe they are just trying to exploit current dissatisfaction with SB companies' practices?

 

[The Leopard]

ok, I'll knock out the economical with the truth bit, although the crucial word in your quote is "mirrors". Hedging is just "laying off" in bookmaker terms but I'm not sure that automatic hedging of single bets would be easy unless the minimum bet size was commensurate with market contract size.

That's it, you have to trade standard contracts, just like a normal futures broker (otherwise it would be nonsense). I have spoken to them and they have said that your order is effectively just routed through them.

I agree that it is wise to be highly sceptical about anything in this industry, but I am willing to give this a try. Apart from the fact that they make unequivocal statements, it is easy to see where they make their money - noticeably higher commissions and a levy on losing (loosing) accounts for the betting duty.

It depends of course - a high frequency scalper is going to be hit hard by the increased commissions ($7.50 per RT standard as opposed to $4.50), but with me the benefits should outweigh this as I make relatively few trades, around 15 or so a month.

I don't want to sound like a cheerleader and your caution is the only sensible approach, but if it is what it purports to be then I think it is an interesting proposition.

 

[tar]

Spread betting is over-the-counter or off-exchange trading for retail traders . In professionals world OTC trading is important and huge but it is done with big banks and financial institutions .

http://en.wikipedia.org/wiki/Over-the-counter_(finance)

 

[flbroker]

This is what i am trying to understand Mike, why would you open an account with the above forex brokers and trade currency with a leveraged account when you could spread bet the same instrument with something like a 1 or 2 pip spread, I know Leopard touched on the subject before that the SB companies can manipulate prices, but surely not to an extent where it is blatantly obvious cheating ? Surely there must be regulations in place.

I hope you're kidding. That's like buying car parts in Walmart.

 

[Mike Kshemaraja]

This is what i am trying to understand Mike, why would you open an account with the above forex brokers and trade currency with a leveraged account when you could spread bet the same instrument with something like a 1 or 2 pip spread, I know Leopard touched on the subject before that the SB companies can manipulate prices, but surely not to an extent where it is blatantly obvious cheating ? Surely there must be regulations in place.

Spreads on eurusd, about:
Hirose 0.7
Oanda 1 to 1.2
mbT 0.8 to 1
Pepperstone 1.3 -1.6

Those brokers are all regulated and are not based in the middle of nowwhere, all account are segregated.

Open demos with all of them and spend time comparing prices, they all share the same prices, the difference lays in few pipettes.

Executions are also important, the speed and how much do they have improved in slippage, so you need to test how you get filled compared to the price at the moment you pressed the button in any market condition.

They all use mt4 platform (not the best imho) apart from Hirose and Oanda also have their own (which is better).

When you open an account with them, trade and you see something unusual, you need to keep them on their toes and eventually report it to the appropriate body.
It is all part of the job.

Of course you need to know when is best to trade based on your way to trade, if you scalp for 10 pips and an important news is coming out, the spread will widen and your chances will narrow down.

I am not trying to promote them, what I am trying to say is that they have their pro and contro. Hope it helps.

 

[new_trader]

Hi folks, can you give me your personal opinions on the following,

What are the advantages and disadvantages of Trading over spreadbetting, I know its illeagal to spreadbet in the USA so the question is mainly directed to European members.

Its something im interested in and have been demo trading for a few months now, reading books and attending various webinars to gain some knowledge.

tried demo trading forex on etoro and dont particularly like it, perhaps its the platform.

I do enjoy the thrill of scalping and daytrading on the spreadbet platforms though.

All your comment's are welcome and appreciated.

The major difference between DMA and spread betting platforms is market transparency. Opinions about the importance of transparency vary from one trader to the next, for me it is unequivocally the most important feature. I have both a DMA account and a spread betting account because there are pros and cons for both. But without any question, I use and depend entirely on the DMA account for pricing and market analysis.

The spread betting account is used purely for entering occasional trades (mostly for longer term) or if I am testing a modification to my methodology. The advantage of the S/B account is I can trade as little as £10/point and I can scale out at £1/point on the SPX500. I also use the S/B as a reserve hedge in case I lose connection with the DMA broker and can’t close a trade. This is especially important on a Friday where I don’t want to hold a position over a weekend, especially not a long position. Another advantage of S/B is I can use a guaranteed stop which I would use if I felt there was a good reason to enter and hold a position over a weekend.

My advice would be to open both a DMA account and spread betting account so you can experience the difference for yourself. That is the only way you can make a fully informed decision about which one is best for you.

 

[mike.]

My advice would be to open both a DMA account and spread betting account so you can experience the difference for yourself. That is the only way you can make a fully informed decision about which one is best for you.

Can you suggest a UK broker with a DMA demo i could check out.

Also ive been demo spread betting with tradefair, I like the simplicity of their platform, Little things I find helpful, like when setting a S/L, it gives you the price you may loose or take profit in gbp when setting it, rather than having to work it out.

quick question, Is there any way when using the "time to trade" charts ( that traidfair use ) that will calculate pip's from top to the bottom of a trend ? opposed to physically working them out, Ive seen this done on some other charts.

 

[new_trader]

Can you suggest a UK broker with a DMA demo i could check out.

I only know one broker, OPEN E CRY, I signed up with them back in 2005 and have used them ever since. They offer a FREE 14 day trial.

Futures Trading Platform, Futures Trading Demo, Electronic Trading System - OEC™

Also ive been demo spread betting with tradefair, I like the simplicity of their platform, Little things I find helpful, like when setting a S/L, it gives you the price you may loose or take profit in gbp when setting it, rather than having to work it out.

quick question, Is there any way when using the "time to trade" charts ( that traidfair use ) that will calculate pip's from top to the bottom of a trend ? opposed to physically working them out, Ive seen this done on some other charts.

I use igindex and although I've tried others, like CMC, I have stuck with igindex. I don't use any features other than the very basic order entry tickets and charts.

 

[alphadude]

my 0.2 cents on this topic: Spreadbetting is:

- Good: if you want to have fun with little effort; and small capital
- BAD: if you want to make money from the markets

spreadbetters are middleman between you and the brokers/exchanges.

It's suffice to have a broker as a middleman; why add another one.

 

[mike.]

Just been looking into DMA SB, fp markets, like Leopard suggested is very interesting, will have to have a few tutorials to be able to understand the platform, all looks a bit complicated to a noob, Think i will have to serve my time in the bucket shops to gain experience before i move on to DMA. It appears to be more of a traders environment.

 

[kimo'sabby]

Purely for the reason of trading properly, a person must surely chose DMA, a real futures auction. That said, DMA is certainly no level playing field, at least not as some would suggest. DMA has it's own pros and cons, some of which i find are quite similar to spreadbetting.

The DMA emphasis is based upon transparency and order flow, but these factors alone will not make a person successful. Two people trading the ES contract based upon the exact same information and data will, or can, produce entirely different results.

As for spreadbetting, i think the pros and cons have been documented and debated enough. Personally, i've never had any problems (other than my own personal trading problems) with the spreadbetting firms i've used in the past.

 

[SimonK]

Whether you trade SB or DMA depends partly on your timeframe.

I know spreadbetting swing traders who are doing very very well, because 1 pip slippage here or there doesnt really matter. On the other hand, I know scalpers who got frustrated with poor execution and slippage, and hence trade DMA.

I also know scalpers who put up with the odd trick from SB brokers because they could still make money, despite that.

The main thing is to have a statistical edge and one that works with your chosen broker's quirks.

 

[capitalspreads]

i realise that i might be considered a biased observer but the fact is that, percentage winning wise, there is virtually no difference between SB and DMA for the average sized client (up to say £200 a pip in the eur/usd or equivalent in other markets)

for the big traders i have to assume that DMA is more suitable simply because the vast majority of SB companies do not really want this level of risk on the kind of margins that they charge.

with capital spreads a trader can operate at over 150/1 on markets like the FTSE (although i wouldn't recommend it!) but require far more than this to trade in the FTSE futures. Most brokers for retail style clients will require around 15/1 in LIFFE contracts.

it must also be remembered that the average stake size in the FTSE for Capital Spreads clients is around 3 to 4 pounds a point (with a huge number just having a punt at £1).... the minimum on the Futures is £10. ten times bigger than our smallest permissible trade size . In spot FX if you were trading in the equivalent size of our £1-£5 a point you would be paying pretty hefty comms charges.

but we have quite a few clients who watch the liquidity on DMA platforms and then make the trade with the SB provider becus they know they will get the trade. If you are going against thin liquidity on DMA there is a good chance that someone else will get the offer/bid before u do.

but horses for courses.... there is room for all requirements.

simon