Spread Trading

Spread trading

Hi,
I may be able to offer an alternative that I have found invaluable.
I only trade the daily Dj or S&P. So by the end of the day I am out of the market (no spread on the close). I certainly learnt the hard way during the bursting of the dot com bubble.
Best of luck
 
Pat494,
Hi, I am interested in spread trading but have only seen it on commodities. What are you executing on the Dow/S&P , if you don't mind disclosing.
 
I just do simple daily long (up ) or short (down ) bets on the Dow Jones or S&P 500 indexes. The spread betters automatically close the bet at the end of the day if one is still in the market. I have been caught on a bet on a future going the wrong way. The temptation is to wait for it to come back to break-even or profit or even worse to increase one's stake. Sometimes it does come back but it may not and then one is in big trouble as the loss gets bigger and bigger. I like the safety and enjoy the bet.
 
Have only just read this thread and was interested with some of the comparisons with horse racing and casino's.

Firstly, at the end of the day, the often quoted 90%+ of those who fail at spread betting/ trading don't fail because the spread betting company rip them off generally, they fail because 90+% of traders using any trading instrument, be it stocks, futures, fx etc fail full stop. The fact that SB companies make money out of this makes little difference. Sure, they have wider spreads than some other methods around but stop running etc goes on in every type of trading. It may be harder to make money out of SB's than equivalent instruments with lower spreads but if the 90+% failure rate applies to traders generally as commonly suggested, then the fault has to lie with the individual themselves?

Experienced traders who start off spreadbetting and make a go of it often seem to progress to other methods of trading which can improve profitability due to lower spreads, faster execution, better service etc. But, if you blow your sb account, chances are you will blow "real" trading account.

In my opinion, trading is a form of gambling. I prefer to call it speculation. The differential for me is that when you place a bet on a horse or on a roulette wheel, the odds are stacked against you so in the long run, the bookie or casino will win. This is gambling.

In trading, you have to find a method. One which gives you an edge so that over a large number of trades, you come out on top.
In order to consistently trade using an edge, you have to define rules. You have to set the rules of your own game. You then have to stick to them.

The great thing about trading imo is that you can create your own unique "game". You pick your own trading instrument from an arsenal of 100's or 1000's of possibilities. You then work to create your own set of unique rules that no one else knows as well as you. If you stick to those rules and continue to tweek them to make sure they keep working, you are playing a game against thousands of others and only you know the exact rules!
Over a large number of trades, as long as your rules are sound and you have a genuine edge you will win more than you lose at your own game.

In other words, if you can do this, you put yourself in the position of the casino or the racing bookie, rather than the mug punter who has the odds stacked against him and will most probably lose his shirt after maybe having a few lucky wins ie the gambler. These people exist in racing, casino's and trading (ie the 90+%).

Thats the theory, the practice is of course much harder. How do you know if you have an edge in the first place? If you think you have one, how do you know it will continue working? If you hit a losing streak, is it a losing streak or has it stopped working? Are you psycholigically able to continue trading through a losing streak?

These are all issues that affect anyone attempting trading, whether SB's, stocks, indices fx or anything else imo.

Basically what I am saying is that whether a consistently winning trader or a consistently losing trader, the responsibility lies with the individual rather than the trading instrument. After all, if you took a winning trader who trades stock index futures for example, they could probably devise a method to profitably spreadbet too?
 
compagnito,

I dont know of any hard stats but I remember a general comment that markets tend to go down much faster than they rise (about 3 times faster). So if you can catch the move then, in theory, you can make money 3 times faster for an equivalent move down that was previously up.


Paul
 
Hi,
The downfall of many a spread punter is the whipsaw. Again the daily Dow Jones puts the punter in the driving seat. One does not need to have a stop loss on a daily bet. OK one can take a bit of a fall occasionally but one avoids being closed out on a whipsawing market. It is amazing how often this seems to happen. Not that I am accusing the SB firms of anything underhand. All the books I have read insist on a stop loss. They are right for a futures contract like Jun Dow Jones, but unnecessary for the daily bet.
That just leaves the problem of how much and when to place your bets.
good trading
 
Don't you set a stop loss in case the worst happens?

Not sure what the worst possible might be, most likely in a buy situation.

You all probably heard the Monaco Grand Pris spread bet anecdote, there is no overtaking more or less, race a foregone conclusion, matey bets £360,000 to win £3000 in effect on the sb & loses, cos the leading seven all break down.
 
Pat494 said:
Hi,
The downfall of many a spread punter is the whipsaw. Again the daily Dow Jones puts the punter in the driving seat. One does not need to have a stop loss on a daily bet. OK one can take a bit of a fall occasionally but one avoids being closed out on a whipsawing market. It is amazing how often this seems to happen. Not that I am accusing the SB firms of anything underhand. All the books I have read insist on a stop loss. They are right for a futures contract like Jun Dow Jones, but unnecessary for the daily bet.
That just leaves the problem of how much and when to place your bets.
good trading

So what do you do if you see your "bet" reverse and tank against you?
 
hi compagnito,
loved your first sentence about "hores racing"(thread 95639) Made my day.
I hope to have the ability to offset the losses by bigger profits.
 
You seem to like typos on here, whatever turns you on.

But I'd be a bit concerned on your day trades, eg Saudi Arabia suddenly announces an oil embargo, Dow plunges 2000 points, you are on an up bet?

Maybe it couldn't happen so quickly?
 
Pat494

If no stoploss on daily bet, what happened when 9/11 occured and similar happenings.

Are you locked in to a rapidly falling market with difficulty in getting out. I appreciate that without a guaranteed stoploss there will still be a big loss.

Regards

bracke
 
Hi,
Apologies for my levity.
I will have a 50% chance of being in a short bet or an ultra quick dash to the computer if I am long.
 
Thanks Gist

It's been brewing for a while. Finally got round to putting my thoughts in black and white (or at least black and grey)! ;)
 
I'm going to put my two penn'orth in here.
I spread bet on a regular basis. Any losses I have taken have always been a result of my own greed or timidity, sometimes downright stupidity.
I have done better with futures than dailys and gold has been very kind to me. (In fact not yet made a bad move on gold, even took a quick look this AM and decided to stay away, fortunately)
I take a 2-3 day view but will happily take a 30 tick profit if it presents.
The other day, just for the hell of it I went long on £/$ June and immediately short on the daily £/$. Put limits in.
The daily gave me 20ticks within 1 hour and I let the future run.
A few hours later the future gave me 11 ticks.
I shall not be doing this in the near future because although I took a view it was not backed up by a system. I just looked at the action and drew an imaginary line, albeit with an idea of what was going on in the world.
Last year my little trading pot soared for three months and then went into gentle decline. So I left well alone for a while.
This year I am making profits, aided by slippage on my limit orders which on one occasion gave me a 35 tick bonus (lol).
I shall be seeking professional advice, as they say. Both from a Guru and from a shrink.
All this verbiage is to a) encourage those who want to get their feet wet. b) to demonstrate that slippage can work both ways.c) To show that whilst I can be an opinionated ass I also suffer self doubt.
 
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