Spread Betting

[DAVIEGRANT]

Hello everyone at T2W,

I am presently writing a book on the world of Financial spread Betting. I would very much welcome comments and input on the following.

1) Which Firms you use and how you rate them.
2) What sort of Markets you Trade and why.
3) The type of trading stlye you use, day, position, swing etc.
4) Your degree of success or not.
5) General moans or praise.


The world of spread betting in the financial markets is increasing massively and a whole new type of trader is evolving. We want to find out more about these traders and what they trade in some detail. We feel that spread betting is an area of trading which is becoming more serious and finding out who are best firms etc is important.

many thanks for any comments

DavieGrant

 

[JonnyT]

Serious traders do not spreadbet

 

[DAVIEGRANT]

JonnyT

I thought the same, but I have found that this is not true. It does however depend on your definition of serious?

 

[Naz]

Daviegrant

Good luck in writing your book.I'm realy going to enjoy reading this thread if, as i hope, it causes a great debate on the pro's and cons of spread betting.

But please guys.How about some constructive suggestions on why it works or dosnt work.Lets try and help each other rather than get into any negative arguments that dont offer any substance.

I'm not a spread better as i dont enjoy a third party quoting me a price and having to accept it.I would rather work my order on a Nasdaq level 2 screen.As i only trade US stocks i find their US stock quotes impossible for a short term trader.For instance i looked premarket the other day at Microsofts quote and it was about $1 wide from a sb firm.Where as i could trade it on island in the US for about 10c spread and have the oppertunity to save the spread by attempting to buy on the bid.Having bought it on the bid i could have offered it out on the ask sold it and made the 10c profit.On a 1000 shares that would have been a quick $100 profit before the market even opened.

To buy/Short MSFT with the sb companies quote i would have had a job making a profit because MSFT only moves about $2 a day.So PRE MARKET their quote was half the daily range.Crazy! Why offer pre market prices with such large spreads?

However there may be point in trading the indices with them and i would like to hear from anyone who does this and makes it work.What are the pro's and cons?

 

[madasafish]

I trade indices

both futures and spread betting.

Disadvantages of spread betting: the spreads and bias.

Advantage tax free and what you see is what you get. No extra costs and tax free profits.
Also opening an account and using one is very easy. A futures account is not easy and requires £££s deposits. And the contract size is big while with sbs you can start small.. 1p with Finspreads for example.

You cannot scalp easily with spreads due to the bias or spreads but for longer moves (hopefully bigger?) and with stops they are ideal. Leave and forget, close in hours.

I use Fins and City Index.. the latter has on-line stops (v good) and continuous real time quotes unlike others who either requote or give you a 5 second window and that's it. A continuous real time quote allows you to buy/sell when you want.

 

[ChartMan]

MAD, what are City Index fees like?...on INDU for example...
NAZ...nothing would give me greater pleasure than to be able to trade the DOW on L2.... Using SB's we have to sufer not only the 6 point spread ( twice) but also the bias- which can be anything from 0 to 20 in extreme cases. Having said that, ther are a number of us( not me, particularly) that are quite good at anticipating the spread reversals and can adn do get good results. This requires a superb grasp of TA and in particular , the nuances of the DOW. Longer term moves, that some of us advocate, tend to erase the effects of the spread and bias, looking at taking 100-150 point rallies. Even so, there is the slice that goes to the SB co. If you could point me, and the others, in the direction of DOW direct access trading, we'd be rich very quick. Of that I am sure.
The other point has already been made. There are those people, that maybe have limited funds, and can open a Fins account for £100 and get going. A 10 p stake on a longer term rally can return you 10% in a very short time ( couple of hours). Getting it wrong at that level of exposure IS, without doubt, dangerous and very damaging. I know a stake of 1p is just so rediculous, it's laughable, BUT, for ervery 100 point rally, or group of trades, that's still 1% up. Do that every day, and it's a tidy little earner. You have to take the viewpoint that experience is being gained, and look at it from the % returns, or points gained. The natural progression over time is that one increases one's stake....and one day it may be £10 a point that you are playing with. Sounds too easy and silly? well. You could go and get a futures account open with £25K and literally lose your shirt.... In as much as every one has their trading style that they are happy with and make a profit with, so there are those that are happy with using Fins to trade. One can't knock it, it's grossly short sighted. It's also TAX FREE and what you get , you keep. Im sure that those that see the light, by whatever means, and progress to L2 Nasdaq trading, may well wonder how on earth they dealt with the likes of Fins......Some may try L2 and decide it's far too hecktick to manage.
We in the US room do ok spreadbetting. I suspect that we would all do better if there were an alternate platform and who knows, in the fullness of time, one may appear. In the meantime, we curse and swear and get on with it, taking the hits and enjoying the big ones. If spreadbetting was such a bad deal, no one in the US room would use them.... I look at it this way. A 6 point spread in 9K/10K is thin. Far far better than the four points offered for COMPX.
I concede too, that there are superb opportunities trading US stocks, with far greater volatility and trading ranges. This is not for me, I'm afraid. But it is the grail for people like yourself and "Spike". It really is each "each to their own"....
A balanced viepoint.......

 

[ihickling]

Just my opinion but trading intraday using spreadbetting is more difficult to profit from than futures.

But for learning without losing serious money whilst confidence is gained and losses and wins taken, it is a very good "nursery".

Most people who participate do not seem to realise that the index "cash" bets are based on the near month futures price anyway and complaints about skewed prices are generaly caused by not understanding that the futures often turn before the cash at key levels as some of the most accomplished traders in the world in the DOW pit are dictating the direction.

On UK stocks companies like D4F offer the same prices as the market bid/offer spread (subject to a 1 point minimum on most stocks). This makes trading UK stocks the best value for trading on a risk reward basis although only a few move more than a handfull of points. Some move over a range of 50-100 points per day regularly. Good practice for trading off a level2 screen albeit on UK stocks.

For US stocks I agree with Naz that there are much better ways to trade.

It is my own opinion and some would disagree, but it is pointless trying to scalp points on the FTSE with a spreadbet company as its range rarely exceeds 40 points witha 4 point spread either way your potential max gain is reduced to somewhere near 20 points and if wrong you will lose minimum os 10 20 points straight away.

For swing trades they can be great places to practice trading with real money, when you have lost you have to pay up, or give up.

The dow seems to be everyones favourite trading instrument and it is possible to make money, if you can consistently make money spreadbetting on the DOW then you must be good and would no doubt be evn more profitable trading futures.

You will not make money consistently unless you have developed a good "system", mechanical or discretionary (usualy this requires a large element of unconscious competence and "rules"), It is a different game but the caveats to success are the same, whatever method you use to trade.

Spreadbetting accounts are easy to set up and a much cheaper place to learn than most. It seems that most people who are honest with themselves admit that they have learnt to lose before they can consistently win.

I am not certain but it seems to me that a lot of the people who complain about skewed prices etc may be seeking to avoid accepting responsibilty for their own actions. In the actual market, shares or futures, slippage is a reality.

 

[ChartMan]

Isn't it just great to get back to 100% honest, critical and worthwhile appraisals. Great posts IH.

 

[JonnyT]

My original comment was made on the basis that probably 90%+ of people who trade for a living on indices do so using futures and not spreadbets. There are several reasons why, not least that you can trade on a spread of 2 with occaisional slippage instead of 4+ with bias.

There is an argument that Spread Betting is Tax free but this has yet to be tested through the courts where someone is effectively a professional trader. I understand that the IR have conjouled individuals to cough up tax under the threat of court action. Such a defence would be very very costly against the full weight of Government.

Others have covered the point that if you can tick trade using SBs then you could trade futures far more profitabily, almost certainly so much so that the Tax saving (from SBs) would be totally negated taking compounding into account.

When I finally do pack in the day job I will be using a futures account and not an SB one.

JonnyT

 

[DAVIEGRANT]

JonnyT

interesting what you have said about the IR. I have heard something similar as well. Do you know what sort of Futures accounts are avaible for trading the Dow and with whom?, what the minimum account sizes are etc. It is useful to know from the point of view of where a succesfull spreadbetter could head for once they feel they are ready.

Also a question to everyone. What sort of real-time software or charting platforms do spread betters use so as to tick trade the Dow etc.

all the best
Davie

 

[Hughmac]

I use the charting software provided by CMC which means that i am activating trades based on CMC data.

As mentioned previously their bid/offer is based approx on futures pricing.

Its pointless to use cash prices except as a general guide!

cheers

Hugh

 

[DAVIEGRANT]

Hi Hugh

So if I understand you right, the CMC charting software charts the CMC actual quote. For example if you were looking at the CMC Dow cash chart, it would actually be charting the CMC quote rather than just charting the Wallstreet NYSE Cash Dow for the day?

Thx in advance
Davie

 

[Hughmac]

Davie hi

yes, the charts reflect CMC's quotes. There is much mention of "bias" but this is nonsense. CMC determine a price just like any other bookie and its pointless monitoring the cash situation to determine where to entry/exit a trade. Rather like placing a bet with Ladbrookes based on Corals prices!

I have now put my tin helmet on and "bunkered down" awaiting "incomming" responses from the daytrading community!

cheers

Hugh

 

[ihickling]

Davie - The CMC chart tracks the CMC quote which is based upon the DOW futures, which are in turn related to the actual DOW index.

The index figures are not a tradeable market instrument and the "cash or daily" quotes from most spreadbet companies are based upon the near month futures contract.

Although tracker funds, such as QQQ, exist for some indexes, I am not sure how they are traded perhaps others can add something on this.

 

[ihickling]

Hugh - got your tin hat on ? Just joking.

Most of the traders I know of, work from the index point value, as it relates to the futures price, and use the index values to trade the spreadbet price in the same way as the futures traders trade futures based on the index value.

So there is a relationship between index value and spreadbet price which can be traded.

I believe most of them trade with the companies that base their Daily or Cash price on the near month futures contract (D4F/Finspreads/ING) I may be wrong but I believe thats the case.

Hope that makes sense!

 

[rejji]

I would like to add something to this thread regarding the tax regulations surrounding s/betting. It is true to say that when spread betting it IS CGT tax free. However if you are a full time trader, and this is how you earn your living it is required to be declared and you will need to pay the appropriate tax. It is a very 'grey' area at the moment, but thought I would raise this point as I for one do not want to be paying an unexpected bill!!

I only trade futures as I would prefer to have the tighter spreads on indicies and USFs making more opportunities to make money/break even. If profits are made in excess of my annual allowance then I'll wear the tax bill.

 

[JonnyT]

Agreed if you are a full time trader and married then where possible trade under the wifes name aswell ;o)

You can get away with CGT on shares by using the kids aswell

JonnyT

 

[DAVIEGRANT]

Thanks Hugh and IH,

Does the CMC Chart software have any TA options or is it just the graph etc.

Does anyone use any web based real time futures feeds like Tradesignals.com or Prophet charts etc?

thanks
Davie

 

[Hughmac]

Davie

the charts have a basic number of indicators (mom, ma etc)however if you attempt to use them then the charts frequently stop updating! (at least thats what happens on my systems!)

I dont use any indicators, simply relying on support/res levels and chart patterns which you see repeated on a daily basis

cheers

Hugh

 

[Bankbuster]

Hi Davie,

Many part time spreadbet traders use the free realtime charts provided by finance.lycos.com for trading the more volatile US markets. Certainly numerous traders on the advfn daytraders thread use these charts.

This link shows my typical setup which enables me to monitor 3 charts concurrently with the trade already set up to go in the 4 segment of the window. I've included extra buttons to refresh the charts because they frequently freeze. You may not be able to virew the charts in this link unless you register with lycos for the free service.

http://www.bankbuster.supanet.com/splitscreen.html

regards BB