To spread or not to spread?

[fhb22266]

I read, with interest, Grey's post on the 'Trading the DOW for profit' suggesting that Spread Betting firms should all be outlawed due to their 'manipulation' of the prices and excessive spreads particularly on the cash indices. I am very new to trading and have been finding it difficult to make profits on the daily DOW because of the spread. In fact a few times I set my stop at what I thought was a reasonable margin only to find that my position was closed even though the real price was still a few points away. Now I only bet using the 'market prices' not the SB firms but that costs an extra couple of points too.

So my question is, are there any people out there who use SB firms for real trading? Should I really be looking at direct access and what is that likely to cost to get into? I don't have much in the way of spare funds to play with so SB firms suit my level of investment. What's the main differences between SB firms and direct access?

 

[Racer]

I trade the dow with spreadbetters but very rarely do daily dow.. you need direct access for that or you will be wiped out very fast!

See this thread
http://www.trade2win.com/boards/showthread.php?t=10827&highlight=racer

 

[danfreek]

The main difference between SB and direct access is that the SB firms allow you to 'bet' on futuer movements in price. You do not buy or sell short anything, you simply make a deal with the SB company. This is why they (often wrongly) get blamed for manipulating the price. With direct access all the broker does for you is allow you access to the markets on which the actual contracts, shares or whatever are traded, therefore you get the actual price of the contract at the actual spread, and you pay commission to be able to do this.

Which would be best for you depends on your capitalisation and what type of trading you are involved in. If you day trade, then maybe direct access would be better as the spreads from SB companies are often too large for the day trader, if you are swing or long term trading, then the difference is minimal. I use SB companies because the commission is in the spread so it's easier to calculate.

As for your stop getting hit when you didn't think it should have, you can always complain to the company, or take it as a lesson and remember in the future that it can happen. Always remember to add the spread to the price on the chart. The lowest price offered by the SB company will always be at least the lowest price minus half of the spread, so although the price my not have touced your stop level, the SB quote may have. You have to plan for this in advance. Sorry to point this out if you had, but from you post it doesn't look like you did.

 

[1lotwonder]

if it doesnt work for you then dont do it. period. dont listen to others opinion, as their opinion does not count. no ones opinion counts in the market. not even your own. these boards are full of dishonest people who hide behing the facelessness that cyberspace affords. not every one, but a lot of them.



furthermore, if you trade from a crook, you must trade using the prices that crook gives you. this is because you are trading the crooks market, not the real market. you must be able to chart the crooks quotes. can you do this? no of course not.

i only come here occasionally to get a grasp of what 'the crowd' is doing. amusement really.

i only post this in the hope that i save someone from the evils of the crooks and the deep unhappiness that the markets can bring.

it always amazes me when i read these threads how some of them call it a 'game', and refer to their trades as a 'play'. the market is a very serious place indeed and is run and operated by people who have financial power beyond the imaginations of most. they can and do do as they please. personally i think that most here treat trading as a hobby - a bit of fun. that is fine. i just look forward to taking their play game money. it all adds up. who knows, maybe their game/fun attitude is just a defence mechanism to stop them facing what they dare not face.

if you are trading for the fun of it, good luck to you, but i guarantee your money will buy more amusement at the cinema or at cheltenham race track. if you are serious then the best of luck to you.

 

[Racer]

you must be able to chart the crooks quotes. can you do this? no of course not.

If you look at that other thread you will see a chart I made of the quotes and how they move them compared to the actual Dow, okay this isn't a real time charting program but it gives the idea of how they do the prices. Yes I know about other factors etc etc, but a lot of people go on the actual Dow so that is what I did

 

[FetteredChinos]

dont trade the daily dow with SB's.

as you say, the spread is killing you. so dont persist.

better to swing trade, and hold for a few days. then the spread is a smaller % of "profits"

 

[Racer]

better to swing trade, and hold for a few days. then the spread is a smaller % of "profits"

Yes that is what I do .. and often longer than a few days.. have got several hundred points at times doing that

 

[fhb22266]

Well I'm now starting to accept that it'll take quite a few points before I get into a profit situation. I reckon I'm looking for a minimum 30 point move in order to take a modest profit which is a lot of hard work.

So what sort of capital is needed to open an account with a DA firm?

 

[Racer]

Don't forget direct access.. pay CGT!
Spreadbet.. none

 

[1lotwonder]

Don't forget direct access.. pay CGT!
Spreadbet.. none

seeing as the stats suggest 90% of retail folk fail, i dont think this is an issue.

anyway, personally i would rather make a profit and pay tax than lose my money to a crook 'tax free'

 

[Racer]

Yes 1lotwonder, I agree with that as you can also offset losses.
It suits my method of trading to use spreadbetters for the Dow/Nasdaq etc.. I like to run bets for weeks /months. I can bet for 'free' as in I don't have to put up any money to do it. Direct access would mean having money in my account to place the trade, okay if I was doing lots of trades per day/week but I don't. I do bigger trades over longer periods.

 

[the blades]

[/QUOTE]

i only come here occasionally to get a grasp of what 'the crowd' is doing. amusement really.

[/QUOTE]


And in doing so, are you the only member that has had more posts deleted for abusiveness than are actually still posted on the site?

90% of spread betters fail, but 90% of city fund managers fail to compete with the index they benchmark.

Through SB, some of us small fry regularly out pace the city folk AND pay no tax on our gain. So back to the original question - it's horses for courses. If the tax on your gain is greater than the price you pay for the deal then use SB, where the prices are firmly linked to the market in longer term trades. This will become more of a questionable issue the shorter your time-frame.

All the best,
UTB

 

[wisestguy]

I'm don't think it's 90% but the majority will lose.

you can win against the SBs , but it's :

1) skill

2) some adjustments for their shanannigans.

that said , you can also benefit from them .

 

[rossored]

Well I'm now starting to accept that it'll take quite a few points before I get into a profit situation. I reckon I'm looking for a minimum 30 point move in order to take a modest profit which is a lot of hard work.

So what sort of capital is needed to open an account with a DA firm?

With someone like Interactive Brokers you can open an account and trade YM (Dow future) with as little as £1450 - but a bigger sum of money would be better. The fees are $4.12 per complete trade (open and close it) and each tick is worth $5. So, once the market has moved in your favour, you can close the trade for 1point profit if needs be, and bag a whopping $0.88. Better than SB.

Other futures brokers (Tradestation, for example) have a higher account minimum ($5k USD I think), slightly lower intraday margin ($1k?) and slightly higher r/t fees ($2.50 a side instead of $2.06).

As 1lotwonder said - personally, I'd rather pay taxes on some profit than no taxes on no profit - but SB does suit some people - I'm just not one of them.

 

[bluetipex]

It seems there are as many FOR SB firms as there are against. Horses for courses.

I use Deal4free spread betting software on an intraday basis for the Dow. They have recently reduced their spread on this instrument to 4 points. I don't have very high targets - a mere 15 points; this is the trading plan that i have formulated which seems to be working at the moment. Yesterday I sold at 10830 and held the trade for about 20 minutes and got out at 10815. Then turned my screen off and got on with my full time job. Of course, if I had held to the end of the day then I would have been far, far better off as we closed at 10745. I will only do 1 or 2 trades a day, to gain 15-30 points.

My strategy, however, is to HAVE A LITTLE PROFIT each day. As soon as I start getting greedy then that's when I start to lose. This seems to work for me, but I can understand those that think my plan is absolute pants., and that they have a far better one. I wish these people the absolute best of luck, and that one day I too may come across a better strategy.

The minimum margin with D4F is £1000. This will allow you to trade at £10 a point on the DOW. Therefore my target is a mere £150-£300 profit a day. However, I don't trade every day.
I strictly only trade the first and last 2 hours of the day, (although I sometimes miss some excellent moves). If I make money at the end of a day, then I say to myself that I have a little more, and I have moved forward. I disregard the extra 60 points that I could have made...

I also use ESignal charting sofware which costs me $115 per month. I suppose I should also include my subscription to my ADSL line at home to BT at £26.49 per month. I leave the office at 6.00pm and drive home as quickly as I can, to arrive around 7.00pm, then turn on my laptop and see if there any trades to make before 9.00pm. What a sad life I know...

I hope you can find a plan that works for you, and it may well NOT be a SB firm. I know that the 4 point spread I pay is more than the 1 point spread + Commission that I would pay with DA, and I may well one day investigate Twowayfutures.com whose commission is a mere $6.24 per round trip I believe.

In any event, good luck with your trading.

 

[fhb22266]

This is exactly the sort of strategy that I'm hoping to develop. I work from home so online trading is the sort of opportunity that I've been looking for, but my trading skills are somewhat lacking at the moment although every day I seem to get slightly better. I'm just reducing my losses at the moment which doesn't sound good but hopefully in the not too distant future I will start to make small profits.

I can see the benefit that others have talked about using SB firms for a longer term view and putting on a trade that looks for greater movement over several days (or weeks) to take a larger profit, which also it reduces the spread costs due to only needing one bet instead of lots of bets. I'm considering short term futures on the Dow for this reason although Finspreads have a bigger margin requirement for futures, but it does mean I've got to be able to spot the longer term trend which I might have difficulty with.

Deal4Free sounds like they offer better spread than Finspreads I may move over to them, what is their trading platform like, Finspreads seems very slooow on my ISDN connection (we don't yet have broadband)?

Thanks for the info.

 

[Racer]

Deal4Free sounds like they offer better spread than Finspreads I may move over to them, what is their trading platform like, Finspreads seems very slooow on my ISDN connection (we don't yet have broadband)?

Before you think of using them, be warned, read very carefully the threads on here and on other bbs too about them.
Cheapness is not all it seems!

 

[fhb22266]

rossored...

Thanks for that info too.

Interactive Brokers sounds like a good option for me over SB firms. I sent them an e-mail Monday asking for information but they haven't got back to me yet. I assume that you can put on larger trades (>$5 per tick) if you have the margin. Is that correct?

 

[bluetipex]

This is exactly the sort of strategy that I'm hoping to develop. I work from home so online trading is the sort of opportunity that I've been looking for, but my trading skills are somewhat lacking at the moment although every day I seem to get slightly better. I'm just reducing my losses at the moment which doesn't sound good but hopefully in the not too distant future I will start to make small profits.

I can see the benefit that others have talked about using SB firms for a longer term view and putting on a trade that looks for greater movement over several days (or weeks) to take a larger profit, which also it reduces the spread costs due to only needing one bet instead of lots of bets. I'm considering short term futures on the Dow for this reason although Finspreads have a bigger margin requirement for futures, but it does mean I've got to be able to spot the longer term trend which I might have difficulty with.

Deal4Free sounds like they offer better spread than Finspreads I may move over to them, what is their trading platform like, Finspreads seems very slooow on my ISDN connection (we don't yet have broadband)?

Thanks for the info.

You will definitely need a broadband connection. I find the D4F trading platform (Marketmaker) excellent. No complaints whatsoever.

My attitude to SB companies or brokers is fairly relaxed: all businesses are there to make profits. I don't really care how much profit the SB firm makes on my trades (within reason) AS LONG AS I make the money that I desire, and the service provided meets with my requirements. If the firm is either too greedy or the service is lacking then I will change. 4 point spread on the DOW is very reasonable I think.

The spread on trades held overnight is much larger of course, typically 10 points. However, this never applies to me.

Good luck.

 

[rossored]

rossored...

Thanks for that info too.

Interactive Brokers sounds like a good option for me over SB firms. I sent them an e-mail Monday asking for information but they haven't got back to me yet. I assume that you can put on larger trades (>$5 per tick) if you have the margin. Is that correct?

IB are a bit poor on responding to emails...

There's no limitation your $per tick apart from your capital and the liquidity - unless you're trading loads of contracts, there won't be a problem there regarding fills anyway.

To give you an example of how relatively easy it is to trade compared to SB:

Today, YM opened at 10716 (see attached). Traded south, north, then bounced off s/t resistance at 10732, traded back to 10711, I bought at 10714 with a stop just below recent support. Market trades up, sold off at 10724, as it looked a bit weak. So $45 net profit. Market trades back to 10710. Bought again, stop just under support...market goes back up, sold off again 10725, another $40 profit. Sold at 10721, closed back at 10713 on a bounce - another $35 net profit.

So, three winning trades, 27 points profit, $135 gross, whilst trading in a 22-point range. Could anyone have done this with SB? I think not.

OK, I should have held my short here as it was trading up on low volume, and so it traded south through 10710 (heavy volume comes in) just now to 10675 - ah well, they can't all be big winners.