Best Thread Spreadbetting, the myths and what is the reality?

[montmorencyt2w]

Moving away slightly from what is perhaps the main thrust of this thread, which is whether the SB firms are trustworthy or not.


Instead I would like to concentrate on what we as SB traders would like to see, as the firms compete for our business.

1.We have talked endlessly about tighter spreads, and of course that is a good thing that can only be encouraged.

2. Cheaper overnight rolling fees. I know not everyone holds overnight, but for anyone wanting to swing or position trade, this is important, and it can start eating away into your profits, especially over a weekend.

3. Metatrader 4. SLM have made an excellent start. Let's see the others compete.

4. The ability to "hedge", i.e. holding contemporaneous positions in the opposite direction. There are several situations when you might want to do this. It doesn't have to be anything to do with "hedging" in the obvious sense.

You might be holding a long-running long position in a bull market, but might also want to trade the counter-trend intraday. You could do this in another account, but why not be able to do it in the same account?

I have seen one SB firm advertise this option ... was it World Spreads?
Looked interesting.


- What else is there?

Do we want a more "DMA-like" approach, like FXCM and Prospreads....?

Of course we want fast execution and no slippage.

Oh yes, I like the LCG/CS approach to margins, where you essentially pay up-front for the margin which is good for that position whatever happens to price. So long as you do not move your stop, your margin should stay the same, unless the firm decides to change margin requirements in the middle of your position, which theoretically can happen, but isn't that common. With this system, your stop will be hit before you get a margin call, which to me is a much more transparent thing ... you have direct and transparent control over your stop. It is much less transparent when it comes to margin, in my experience. I don't mind being stopped out. I don't like being margin called when my stop is nowhere near being hit, as has happened on occasions with firms that do not work like LCG/CS, etc

 

[kimo'sabby]

Spreadbetting, indicative prices (make of that what you will), bookmakers that may well see a certain type of player as a liability.

Tax free, instant position/trade.

All in all,.....sh!t. Only jokin', i think they offer good value if used in a sensible way.(whatever sensible should mean to the individual)

Oooh, these fence panels have rough edges.

 

[Jack Hughes]

Agree about the margin thing. SBs that stop you out because they close and re-open bets at the end of each day are annoying.

Apart from that, my chief beef is the way charts are only 'indicative', ie. are meaningless, even though they're supposed to be built from quoted prices.... 'Sorry, sir, despite what the chart says the market definitely reached exactly your stop level...'

Oh, and what about how they consistently don't reply to e-mails, then when you ring up to ask why they say they're normally very quick to answer.

 

[montmorencyt2w]

Agree about the margin thing. SBs that stop you out because they close and re-open bets at the end of each day are annoying.

Apart from that, my chief beef is the way charts are only 'indicative', ie. are meaningless, even though they're supposed to be built from quoted prices.... 'Sorry, sir, despite what the chart says the market definitely reached exactly your stop level...'

Oh, and what about how they consistently don't reply to e-mails, then when you ring up to ask why they say they're normally very quick to answer.

Good point about the close and re-open; I hate that.

Not had too many problems with emails, I have to say.

 

[kalott]

The next step in development is to create the opportunity to automate some of the trade, who can follow the market around the clock?

I dont mean scalping

Maybe 15 min and higher?

Metatrader is a good program but has its limitation for example number of papers
and what happens in the near future when the new metatrader 5 take over?

 

[igindex_wagepayer]

Spreadbetting - the myth is you can get rich, the reality is that you won't but the SB company will. The only way to play this game is to rip your brain out and become a vegetable so that you don't apply any intelligence whatsoever to your trades, even then the SB company will find your stop loss point and never find your limit, that is their golden rule, as long as you keep getting wiped out they will keep going. Apparently only 10% of spreadbetters make money and the 90% who lose are paying for that 10%'s profits, the 10% who win are winning by pure luck - mistiming their deals, going in the wrong direction etc so as I said, turn your brain off and you may strike it lucky, otherwise say goodbye to your money and feel the pain of having to get a real job to make up for your losses, oh and also the shattered dream that you can get rich by trading, enjoy spreadbetting.. losers.

 

[scose-no-doubt]

Spreadbetting - the myth is you can get rich, the reality is that you won't but the SB company will. The only way to play this game is to rip your brain out and become a vegetable so that you don't apply any intelligence whatsoever to your trades, even then the SB company will find your stop loss point and never find your limit, that is their golden rule, as long as you keep getting wiped out they will keep going. Apparently only 10% of spreadbetters make money and the 90% who lose are paying for that 10%'s profits, the 10% who win are winning by pure luck - mistiming their deals, going in the wrong direction etc so as I said, turn your brain off and you may strike it lucky, otherwise say goodbye to your money and feel the pain of having to get a real job to make up for your losses, oh and also the shattered dream that you can get rich by trading, enjoy spreadbetting.. losers.

Rothschild?

 

[Ross Spur]

Spreadbetting - the myth is you can get rich, the reality is that you won't but the SB company will. The only way to play this game is to rip your brain out and become a vegetable so that you don't apply any intelligence whatsoever to your trades, even then the SB company will find your stop loss point and never find your limit, that is their golden rule, as long as you keep getting wiped out they will keep going. Apparently only 10% of spreadbetters make money and the 90% who lose are paying for that 10%'s profits, the 10% who win are winning by pure luck - mistiming their deals, going in the wrong direction etc so as I said, turn your brain off and you may strike it lucky, otherwise say goodbye to your money and feel the pain of having to get a real job to make up for your losses, oh and also the shattered dream that you can get rich by trading, enjoy spreadbetting.. losers.

Talk about paranoia.

 

[igindex_wagepayer]

Talk about paranoia.

LOL, A healthy paranoia I hope.. just answering the threads title, trying to make people aware of the reality, if you know any different please enlighten everyone! SB companies are making millions, IG Index is expanding all the time, where do they get that money from? I'm not saying you can't make money out of SB, just that it will be purely random/luck. They do want you to win - once you have played successfully for a while you will get lured into higher bets and that is when they start getting ready for pay day..

 

[kalott]

If one punter go long and another punter go short the same amount at the same time (like in a normal market)

How can the SB market maker make any money besides the spread

 

[gle101]

The problem with SB is that they get all the newbies. Lack of basic trading skills and poor money management lead to frustration, which in turn is directed towards the SB. Sure, there are some security issues with trading SB, but overall there isn't much different compared to trading the real market.

 

[gle101]

LOL, A healthy paranoia I hope.. just answering the threads title, trying to make people aware of the reality, if you know any different please enlighten everyone! SB companies are making millions, IG Index is expanding all the time, where do they get that money from? I'm not saying you can't make money out of SB, just that it will be purely random/luck. They do want you to win - once you have played successfully for a while you will get lured into higher bets and that is when they start getting ready for pay day..

Total paranoia I would say.

 

[Ross Spur]

LOL, A healthy paranoia I hope.. just answering the threads title, trying to make people aware of the reality, if you know any different please enlighten everyone! SB companies are making millions, IG Index is expanding all the time, where do they get that money from? I'm not saying you can't make money out of SB, just that it will be purely random/luck. They do want you to win - once you have played successfully for a while you will get lured into higher bets and that is when they start getting ready for pay day..

It's not that I don't think SBs make huge amounts of profit, just that they don't need to do it by hunting stops or otherwise moving the goalposts. It also doesn't make much sense to say you can only win by luck or by being a brain-dead vegetable (or I'd be rich).

 

[lancenicolase]

The problem with SB is that they get all the newbies. Lack of basic trading skills and poor money management lead to frustration, which in turn is directed towards the SB. Sure, there are some security issues with trading SB, but overall there isn't much different compared to trading the real market.

Absolutely spot on, spread betting is widely used by novices who'd like to gamble on the stock market, please note I used word 'gamble' on purpose. On the other hand there're some traders who actually do trade and make a living out of it.
Trading with spread betting company or any other broker requires knowledge, education and lots and lots of work. Unfortunately, many come and just think they know better, then lose and blame the broker.

Sometimes it does happen when you get exited at your stop lose and market move in the right direction straight after it, there're lots of discussions about it. At first I also believed that spread betting companies could do it (as I burnt myself a few times) but then I have about 5 spread betting accounts with different brokers and all the brokers (even though they use different platforms) show the same graphs. I don't think that all the companies manipulated the graphs just for me with my £40 loss (or so) with £1 bet on FTSE100. it would be cool if they did .

Overall, as long as you use a reputable and FSA regulated broker you'll be fine as long as you learn, learn and learn more.

Look, Lehman Brothers, Bear Sterns, Baring, etc went bust and they arguably had the best traders.

 

[gle101]

Absolutely spot on, spread betting is widely used by novices who'd like to gamble on the stock market, please note I used word 'gamble' on purpose. On the other hand there're some traders who actually do trade and make a living out of it.
Trading with spread betting company or any other broker requires knowledge, education and lots and lots of work. Unfortunately, many come and just think they know better, then lose and blame the broker.

Sometimes it does happen when you get exited at your stop lose and market move in the right direction straight after it, there're lots of discussions about it. At first I also believed that spread betting companies could do it (as I burnt myself a few times) but then I have about 5 spread betting accounts with different brokers and all the brokers (even though they use different platforms) show the same graphs. I don't think that all the companies manipulated the graphs just for me with my £40 loss (or so) with £1 bet on FTSE100. it would be cool if they did .

Overall, as long as you use a reputable and FSA regulated broker you'll be fine as long as you learn, learn and learn more.

Look, Lehman Brothers, Bear Sterns, Baring, etc went bust and they arguably had the best traders.

Yes correct, in Sweden a well known investment bank went bankrupt the other week. The main reason for this was very poor money management, way too high risk taking on their trading positions.

 

[JDTRADER]

So Black Swan your not a total plank then.

Great Thread

"I have not failed. I've just found 10,000 ways that won't work."
- Thomas Alva Edison (1847-1931)

 

[charliechan]

If one punter go long and another punter go short the same amount at the same time (like in a normal market)

How can the SB market maker make any money besides the spread

not quite.

this is how it works:

1st, an algorithm is generating your quote. this is based on your current position. if you are short, the algo will quote 1-2 ticks higher than if you were long. therefore, you're getting fleeced there.

this is common sense if you think about it. as your broker is also your counter party, it's clearly in his interest to quote you to his advantage not yours. i'm sure you'd do the same if you could.

2nd, that algorithm knows where you put your stop that you believe is sound practise after the free 'education' they gave you. when the real market approaches your stop, your quotes will get skewed towards your stop.

3rd, look at a sb business model. where does it get it's income from? they dont charge commission, and they most certainly dont hedge each customers position. how could they hedge a 10p per point position (i guess thats a typical trader of a newbie whos been bleeding to death over the last 4 months) in a market that trades $10 per point?
They get their income from 2 places: interest on customer deposits, and also from the eventual loss of customer funds. it can be no other way. every one knows the average customer lasts approx 6 months. similar to the average life of a t2w member! when you've cleaned those customers out, you put another flashy ad in the FT suggesting potential dreams and financial freedom to another bunch of mugs.

4th there are plenty of stories about legendary traders from futures, stocks etc. ive never once heard about a successful sbread better who did it for longer than a few years.

face it. spread betting is for people who are too eager to get into the markets and get some action. thus they get taken to the cleaners and rightly so. they would be much better off by staying out of the market and keep learning/paper trading until they have the money for a proper account with a good broker to trade in a listed and regulated market like stocks or futures, but not fx, which is the same as spread betting in that you are trading against the same counterparty.

good trading is about managing probabilities. spread betting is not good trading in general as the probabilities are stacked against you even more so than in a regulated market place.

 

[Black Swan]

but not fx, which is the same as spread betting in that you are trading against the same counterparty.

Could you explain what you mean by this bit...? TIA...

 

[Ross Spur]

Also explain the bit about quotes being based on your current position if you don't have one?

 

[wallstreetwarrior87]

not quite.

this is how it works:

1st, an algorithm is generating your quote. this is based on your current position. if you are short, the algo will quote 1-2 ticks higher than if you were long. therefore, you're getting fleeced there.

this is common sense if you think about it. as your broker is also your counter party, it's clearly in his interest to quote you to his advantage not yours. i'm sure you'd do the same if you could.

2nd, that algorithm knows where you put your stop that you believe is sound practise after the free 'education' they gave you. when the real market approaches your stop, your quotes will get skewed towards your stop.

3rd, look at a sb business model. where does it get it's income from? they dont charge commission, and they most certainly dont hedge each customers position. how could they hedge a 10p per point position (i guess thats a typical trader of a newbie whos been bleeding to death over the last 4 months) in a market that trades $10 per point?
They get their income from 2 places: interest on customer deposits, and also from the eventual loss of customer funds. it can be no other way. every one knows the average customer lasts approx 6 months. similar to the average life of a t2w member! when you've cleaned those customers out, you put another flashy ad in the FT suggesting potential dreams and financial freedom to another bunch of mugs.

4th there are plenty of stories about legendary traders from futures, stocks etc. ive never once heard about a successful sbread better who did it for longer than a few years.

face it. spread betting is for people who are too eager to get into the markets and get some action. thus they get taken to the cleaners and rightly so. they would be much better off by staying out of the market and keep learning/paper trading until they have the money for a proper account with a good broker to trade in a listed and regulated market like stocks or futures, but not fx, which is the same as spread betting in that you are trading against the same counterparty.

good trading is about managing probabilities. spread betting is not good trading in general as the probabilities are stacked against you even more so than in a regulated market place.

I dont think all your points are entirely accurate.

1. Its not hard to check your prices against the real market. Most SB companies offer 2 point spreads based on the YM for instance. All you have to do is check their prices against the data on CME or esignal and you wont find much difference. If you want to prove a point; why dont you put up a chart of a SB instrument against the actual underlying market?

2. If your successful, your broker is your best friend not the enemy. Dont get brokers confused with bucket shops.

3. If you know what you are doing, you can utilise SB to your advantage, all tax free to boot. But you must know what you are doing, and you must stay under the radar.

I agree totally that for inexperienced traders, whom play by the book, its not the best arena to be participating in. But I guess that goes for anything in life.

At the end of the day SB companies offer a genuine product that is regulated, and they are a business too.