Spreadbet bias - true or false

I have to say I'm very surprised that d4f are saying you can only trade a certain number of times a day. Especially if the head trader can't explain why/how this system of restricting trades operates. He is, after all, the person who sets the policy.

Oh well. :(

Is there anyone else who had been told they can't trade or can only trade a certain number of times a day? And has anyone else tried to get an explanation?

I do agree with the others who say that using SBs for scalping puts you at a disadvantage. And trading multiple times a day with a spreadbetter is probably more expensive than a normal broker. EDIT - just to modify this statement. It isn't the number of times you trade, it is the size of the bet you do. Larger bets are equivalent to larger commissions.
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There are two ways to get around the supposed restriction on the number of times per day you trade. Firstly, change your strategy (I know, easier said than done), and secondly, open accounts with various SB companies and distribute your business amongst them all. Divide and conquer!
mmillar- you have lost me now. Scalping, where it is allowed to carry on is a very good way to make profits. There are usually several times each day where you can take 3 or 4 points on any reasonably active FTSE stock, which at £10 - £20 per point makes a good wage. When you add dealing costs and stamp duty to a conventional trade it would need a huge margin at the SB company to become that expensive - not to mention the amount of capital required !
catsdad100 - i completely agree with you that scalping is a good way of making money. Not trying to pass judgement. Each to his own. :) I also edited my last statement - it isn't the number of times you trade that affects commissions, it is the size of the bet.

There are other ways to trade, apart from spreadbetting, without the disadvantages you have suggested. For instance, CFDs, futures, USFs (probably also options and others, but don't know enough about them). All of these you can trade on margin and without paying stamp duty. You can trade all these at the market prices with only about £10 commission per trade (in fact you can trade for only $2.40 with IB). If you're trading at £20 per point with a spread of 6 points then your commission is effectively £40-50 per trade. Obviously it all depends on the spread of the stocks you are trading. If you have spreads of 1 point or so then it isn't going to make a big difference. Also if you enter a stock with a 6 point spread you are immediately down by 6 points. If it slips by a few points you are all of a sudden way out of the market which just makes it harder to make short term money.

Just my opinion. Obviously it's up to you how you trade and who you trade with. :) Although I swing trade rather than scalp I have looked at all this stuff before and decided to spreadbet rather than use other methods.

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mmillar - I only try to scalp on stocks with a spread of under one point - the risk to potential reward ratio is far too high with a greater spread when you are only looking for a gain of three or four points. CFD's, USF's etc are all very well but I do enjoy the Level2 and Realtime Charting instant action type trading. Each to their own as you say. My real gripe is simply that without any warning, and allowing me to waste my time reloading all their software as that was the original explanation for the delays, they simply move the goalposts and are unable to tell me what they consider a reasonable level of daily trades, or if and when normality may ever return to me. I am often trading while talking to a friend who is at times replicating my trades - he gets the instant price and I miss it, despite entering ahead of him. He has donated a large sum to them by poor trading, whereas I have done the opposite. How does it look to you ??
It would be interesting to see how many people are actually successfully making a living on spreadbetting alone. It seems that as soon as you develop a strategy good enough to do this, the SB companies do everything in their power to make it impossible or even get rid of you.

I've heard people say it's a 'good starting point ', but I would disagree. Learning to trade is difficult enough without having the extra problems of bias etc which don't really reflect what 'real' trading is about and can cloud the view of someone starting out. You spend the majority of your time and energy trying to beat the bookie and when you do they cut you loose!

Wouldn't it be better to learn and develop a strategy using something like a dummy level 2 account? I've never used it but from what I've seen and heard it would seem like a logical move. If a trade goes wrong, it's because there is a direct flaw in your method not because there is a bent bookie on the other side.

I don't want to start the whole level 2 vs sb thing again..just my thoughts....
catsdad100 - i completely agree with you. i think it is appalling that d4f are moving the goalposts on you, especially if they (and especially the head trader) can't explain why. I honestly can't get my head around why they would do this.

Tray_Dar - I have made substantial sums from spreadbetting (tens of thousands) and I never had a problem with d4f. I have also lost substantial sums but that was down to my poor trading.

The thing is you have chucked in this comment (as people keep doing) about 'bias' and 'beat(ing) the bookie' without any evidence. That is the key to this thread that I, and I think others, are trying to find out. The only evidence I have seen is from catsdad100 who has been told very specifically by d4f that he shouldn't trade with them. Otherwise I haven't seen anything except speculation.

I, and others, have compared d4f's prices to the futures and they are exactly the same, tick for tick. Where is this bias you are talking about? NickW who started this thread asked for documented cases of bias, but no-one has replied. Others have claimed that they are 'marked' purely because, it seems, they got a requote.

I know this thread and my posts in particular are getting peoples backs up - and I'm sorry, I'm not doing it on purpose - but give us some evidence.
I appreciate that you have a different view point otherwise this board would just become a 'slag the sb companies off' forum.

If you follow a link posted earlier in the thread you will note that Riz posted about a time when his account was suspended and the only response he got was "we think trading is not good for you". Then you have catsdad100 comments above. I also know that Tom Houggard of CityIndex had his account suspended by Fins under similar circumstances. You've probably not experienced this as despite your substantial profits you've also made substantial losses. Had there been only a few losses then the story may well be different.

The few times that I've compared live futures prices with sb quotes I HAVE seen a difference but admittedly I have not done enough research to present this as evidence. However, bias or no bias is not really the issue. The issue is why is it that when someone starts making substantial profits the sb company decides to screw them, whether it's limiting trades or suspending accounts?

The fact that they do this proves that they are not hedging all the bets, which means you are betting against them. Why would you choose this kind of environment to trade in when you have much better alternatives?
I may be completely wrong, but I think in my situation the following is happening : I tend to ignore the general trend on the day to some extent and look for the spike up or down to grab. Say the sb co. has decided that GSK is going down for this part of the day, they will hedge every down bet. If I come in after a spike down to take it up, they probably think I am an idiot on a day like this, so let it happen, without hedging, on the basis that I will lose to them fairly quickly. Of course, two minutes later it has bounced back up 4 or 5 points and I am out again, either giving them no time to hedge it, or if they were not going to anyhow, I have taken 4 or 5 times £20 straight out of their coffers. If they simply connected an auto buy of shares to hedge on EVERY trade, whether they considered it wise or not, they would not have this situation, although it would no doubt reduce their profits. With my type of trading they are simply betting against me, and become grumpy if they lose. I can understand their side and in their position I think I would tend to ensure that every time somebody doing my style of trading comes on, they hedge it automatically. Then we both make a little. I should also make it clear that I do not take large amounts from them, at best each day is a couple of hundred pounds. It would thus be folly for anybody reading this to imagine it is a situation only reserved for very profitable traders. It is now at the level where I cannot place even £1 on anything without it being directed to a dealer !! Would I do the same if I were the SB co. ? - in fairness I probably would, as after all their job is to maximise profit for the business. While the situation may not suit me one bit, I would be hypocritical not to see their view. If anybody knows an alternative method where good returns can come from little capital I would love to know it, as I think I am now swimming against a nasty tide.
SB Closing Accounts

I have read somewhere, and I cannot remember where but I think it was on Fillyaboots, that one guy had his account closed by a SB company for arbitrage trading. This would indicate that in certain circumstances you are betting against the SB company because if this was not the case then why would they close his account ?
I swore I would not reply to a post ref SB again but there ya go I am going to.

SB companies win when we lose especially if they do not cover your trades like Fins.

SB companies do victimise big winners. I have traded along Rizz and a number of others who have traded SB for some time now and I have heard and been a victim of everything from delayed quotes to suspended accounts. If you keep your trades to £10 a point and below you should evade their radar as soon as you trade £20 + a point you show up. Please dont ask how but I have seen it time and time again.

SB companies do not like scalpers.

I have posted this before but milk it for what you can but plan a replacement strategy for the medium to long term unless you are happy to go head to head with them all the time.

Anyway - things wouldnt have got like this if Rizz refrained from placing his £400 a point trades - lol
lol Splurge :)

Just for the record I dont trade that big, not even close to that...

mmillar, traders posting their experiences here, they dont have to provide evidence to you, in fact I dont think they should due to the simple fact that they are still trading with those firms and they must know from experience how bad it can get when they turn nasty on them... another thing is that you yourself didnt base your views on any evidence not even when you accussed them with paranoia, being losers, etc... you say I observed it there were no bias, they say we observed it there were bias, both acceptable, everyone posting their experience, but if you are going to do the 'give us some evidence' thing, I suggest you start with yourself...

Blimey - remind me not to start anymore threads - talk about ask a simple question!

There are two topics going on here - one about price biasing and the other about unfair treatment. Could someone else start another thread about the second because I was only interested in getting to the bottom of the first issue?!

When mmillar mentioned evidence I believe it was just a simple case of wanting to get to the bottom of the biasing question. Do the SB Co's apply a bias or not, because the very thought of it affects the way we trade. If someone thinks they had a stop unfairly zapped then post the details and someone with a live feed could check it. Thats the evidence he's talking about - nothing sinister.

As of today I've had an IB feed alongside my D4F SB charts. What I can see is that they both mostly tick together, i.e. if one ticks up so does the other at the same time - but not necessarily by the same amount. It appears to me that the differences we are seeing may be due to rounding errors.

Now this is not a perfect test because I can only see ticks on the e-minis - whereas I am told by D4F that their S&P future is based on the full SP not the ES. I can see that the D4F future with its 0.7 spread stays roughly 0.25 either side of the ES - but the ES are in 2 decimal places whereas D4F is 1dp hence you get rounding errors. E.g. 915.00 bid on ES would be 914.8 bid on D4F S&P future - and 915.25 bid becomes 915 bid.

When it comes to the D4F cash price this is based on the future price +/- fair value - it is bound to be more volatile than the real SPX index for that reason.

I would suspect that these two reasons account for a fair number of suspicions about SB biasing. What I'd like to know is if you take away these false signals, do they really unfairly zap stops? For that to be answered - we need to see the price data and thats the evidence mmillar is talking about.

Personally I can't see why they'd bother trying to predict the market when the market is going to wrong foot the majority of the punters anyway - why would one of their traders do any better at predicting the market sufficiently well to decide that now is the time to apply a bias? My understanding is that their traders are really just execution clerks - it's not as though the head trader and his team from Goldman's are going to join a spreadbet firm. You also have to ask yourself how many traders do they have versus how many indexes are they trading - do they even have the time?

Seems to me that they have such a good cash cow in place, 80% of traders go bust in the first year anyway - why risk falling out with the FSA and joe public over a tiny bit extra here and there?

Ok - my flame suits on - lock & load !
What makes it even harder with Fins is that you now cannot hit the refresh button and get regular updates. So, you can't see what their prices are doing. Getting a refreshed price and immediately hitting the Trade button brings up a different price. One wonders why their "charts" don't work..... I'll tell you. It would give the game away that's why. I used to play Fins off against D4F's charts and scalped perfectly ....If Fins put up charts of S&P and DOW, they'd get taken to the cleaners. You just simply work off their charts instead of real ones. That was one big bonus with D4F's crappy charts- you could see exactly where their support and resistance points were- with or without bias.
On that point, surely we are all agreed that without question, the SB's bias their quotes in the direction of the move..... and as frequently stated by as much as 20 points in the case of the dow.
Anyway, all this debate is very healthy. I hope it helps all the newbies out there get an understanding of what happens in the real world. The rest of us are old enough and wise enough to make our own choices. Some have little choice, some have none. Those whose pockets are deep enough may be able to burn the candle from both ends, thus having their cake and being able to eat it.......
What annoys me is that all this has been covered in great depth on a previous thread.
Any new people to this site might wanna try searching the old posts.

Put up the lycos free real time chart of the cash Dow alongside the cmc chart and watch the 'bias' at work. When the market is going to move, cmc jerk the price before the 'real' price moves. (As all the sb's. It's what they do.) If they kept the price either side of the real price they would get hammered.

Take the trade and it cuts your profit if it reverses, if it carries on you miss a good portion of the move. you lose out a bit either way.

The bias we talk of is not a constant thing, most times it straddles the real price quite well. Your own eyes will give you all the proof you need.

Quite a few traders have held positions with comfortable stops over longer periods of time. When their trade has been closed because of the stop being hit and the charts show that the price went nowhere near the stop. The dealers explanation of 'market volatility' is a bit hard to swallow; even allowing for their wild spikes.


Of course you could always watch the future chart against the cash.
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There's nothing wrong with fresh debate - new people bring new opinions.

What I get annoyed with is people not listening.

The lycos chart is spx and is the cash index.

The D4F cash price is based on the SP Future +/- fair value. It is a realtime mechanical approximation. They are not the same thing!

Because it is based on the future you can be certain that the SB cash price will regularly over shoot the real spx index you see on lycos.

Ca-ching - do I hear a penny drop?
That's funny, I've been talking about the Dow charts. Not the S&P

Lycos do more than one.

What was that about people not listening.
Sorry to continue the debate but:


"On that point, surely we are all agreed that without question, the SB's bias their quotes in the direction of the move..... and as frequently stated by as much as 20 points in the case of the dow."

No we are not all agreed! NickW, MMillar and myself have all seen how CMC's quotes for the S&P and the Dow exactly straddle the futures prices. The only difference is the increase in spread.


Yes I agree that the CMC daily dow or S&P 'appears' to be biased against the cash index. This is where the problem is, the CMC daily price is actually based on the nearest futures contract +/- a premium. They have to do this as the only way to trade the cash index is to trade all the underlying shares that make it up. There is no equivalent futures market for the daily bets.

The cash index and the futures price will never be exactly the same as they are in effect two completely different markets. They are kept very close because of Program Trading. The banks will buy/sell the underlying shares in the index against the index futures when there is a tradable difference in the two. Continuous arbitrage keeps two different markets trading very closely together. There is no law that says that the future has to trade at exactly the same level as the underlying cash index, they are only kept together due to market forces.

Equally the SB companies are under no obligation to keep their quotes exactly the same as the market they represent. However, if there were big differences (or bias) then a) Traders would arbitrage it and more importantly b) they would not be able to hedge their bets in the underlying market effectively if they needed to.

As traders we need to trade our chosen market. You wouldn't trade the March S&P ES contract by watching a chart of the cash S&P500 index, you would watch a chart of the March S&P ES futures contract. They are different markets. So why trade the daily dow on CMC by watching the underlying cash index, they are very closely related but they are different markets.
Options post is spot on. I have been stopped out using Deal4Free when the Dow futures and Cash index didn't go with 20 points of my stop.

Rather ironically I once averted being stoped out when the actual went 12 points past my stop. That ended up a 150pt trade!

Just watch the market, especially when it is trending strongly and I assure you, you will see the bias. 20 points is not uncommon in my experience. In quite periods I agree it is more or less a straddle of the underlying.