What SB FIRMS do not want you to know.

eyyup

Newbie
9 0
Lee Shepherd - Have read your updated blog and the tone is certainly different from the first time I had contact with one of your posts. In fact, it sounds as though a more mature mind has written the new comment in your blog, as opposed to the comments written in this thread. (If you read through this thread in chronological order you'll see what I mean). Practice what you have just preached and the effects will become evident.

I am not really concerned if I make friends or enemies of certain people. But I don't like bully boy tactics being used on anyone whose opinion may differ from another. Again, if you read back the thread, I think you're intelligent enough to see why I considered you fair game for a pop at. After all, it is clear to see who actually had the attitude. (past tense) It wasn't me going on about fisticuffs and trying to look all good and gungho at the expense of others.

Even after some of your snipes, TomTom is still waving the olive branch. Look at the above post. If you were as big as you thought, you would have the humility to pick it up and move on, without the aggro.

Your trading ability is not in question. Indeed, how you go about certain things is commendable. Just don't let things go to your head. More to the point, don't put others down, when all they wish to do is air their views and opinions.

Good luck with your future trades.

ADL - The last thing I need is endearment. Read through the full thread and see why I got involved. Oh.......enjoy the popcorn.
 
Last edited:

Lee Shepherd

Senior member
2,164 573
WTF,

What eva dude,

Blah blah blah, go to my head whateva, mate, I've been doing this for so long it couldn't posibly go to my head, although the money goes to my wallet:p

I aired my opinion to which you decided to take it personally and snipe back with a very poor shot at my trading....lol

If I act childish, that's my perogative, if I'm sometimes rude (to which I am) that again is up to me, I dont hide behind my keyboard and it wouldn't take a private detective to know where I live. You dont have to reply, none of the remarks where directed at you, it was of course you that decided to take it personally and attack me with some bad trades I done to which you pulled out the bag, again, I dont delete these or hide from the fact, they are there to learn from, not snipe at and take the p1ss.

Every trader losses money mate, get over it and more importantly, get a life and stop wasting your time speaking to a loser like me.:LOL:

Happy trading.
 

ibex666

Member
88 8
appology?

My appology was certainly NOT directed at you eyyup. It was made as i was annoyed at letting myself get wrapped up too easily in your garbage! and yes you are not endearing yourself to the community ONE bit!!!!!!!
 
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potshot

Active member
117 2
Its all a game and sb's change the rulers as they go, its adapting to changes what matters. If anybody isnt happy with a sb move to another one. 10 years ago to open an account with cmc £5000 was needed, then £1000 and now £200. sb's are running out of clients and offering money back on losses, they promation running out soon, which is not true. The best I had was with 2waymarkets, posted it on here got accused of pushing the offer because I worked for them. I received the offer from trade2win by email, any posted on here for others to benefit, I was given £250 for opening the account, depositing £500 and doing 8 trades in 8 weeks, the £200 was mine and if I lost £250 in 8 weeks I would be refunded. Needless to say I got a free £200. I could lose £450 and risk nothing, and people on here didn't take it up.

For them to give money away money and refund loses was never heard of until recently, the reason they have skint so many people they are running out of cannon fodder now. What this means to means to me, as time goes by they will have treat everybody more fairly. I am with ODL clicked on a price and it cam back 4 points higher, phoned them up and they refunded the 4 points, today something was wrong the platform, clicked to sell and nothing, clicked 3 or 4 times and nothing, phoned 2 hours later and they refunded half my lose, phoned straight away they would of put me in at the price I was trying to get but couldn't. I have accounts with nearly every sb firm and they are the first without a argument to refund me money.

If I haven't been happy with a sb I change, no point in moaning. I have opened a account with future bets but I haven't used them yet but hoping of good they are good with no games, spiking prices to take out stops and the rest what sb's get upto. If you want to trade tax free and cheaply there is no choice but to use a sb. See how much commission you will spend, and stamp duty with a broker.

Anyway thats my bla bla.
 

loui10

Junior member
39 0
Dear Potshot,

ODL runs different desks i.e. CFDs, SB, Futures & Options etc. They all compete under the ODL unbrella to gain your business. The SB side may have been fair to resolve your problems and it is good to hear. However, if they were not able to resolve it, i'm certain you won't get any help from the compliance department.

Since my on-going problems with ODL a chunk of there complaince departmant have left including the manager, which is very interesting.

Best of luck.
 

potshot

Active member
117 2
loiu10

Out of interest what problems have you had with ODL, they are not perfect but none of them are. I don't like the way they suspend of shut a market for a minute or two, close the dow and S&P for the auction to finish. IG you have to ask them to roll over you trades, but they won't let you trade 16.20 to 16.40 on a rolled over bet.

At the end of the day their main interest is themselves, I am sure the day will come when they are all fully regulated to stop sharp practice of one kind or another. But for now they are the only one's we have to deal with if we don't want to stamp duty, commission and capital gains tax.
 

Kap

Junior member
33 1
Read This before doing another trade.

What the spread betting companies don't want you to know...
Spread Betting in itself isn't evil and can be lucrative if used properly but you also have to be keep in mind that the spread betting industry is still in its infancy with new providers still entering the field. The following article tries to discuss all the bad experiences that have been reported over the past years.

Gambling or Trading?
The thing that I can never get my head around - one thing that just about everyone agrees on -: 85% of traders lose money! Even 85% of fund managers, with vast resources, fail to beat the index. And the spread betting companies benefit from this


;
1) They could lay off the bets. This is expensive for them and assumes they can lay off the bet. My guess is that they don't generally do this other than to make sure all bets as a whole are within risk tolerances. Some spread betting firms have Then come along the 10%-15% who make consistent and substantial gains - a rare breed (we all agree?). If you run a spread betting company and face this situation with a large number of small losers and a small number of very big consistent winners you would face a dilemma on how to deal with the 'suckers'however publicly stated that they net off the trades internally and either carry the risk or hedge only the net exposure. Obviously, it's a lot cheaper/easier for them to hedge just the net risk than hedging every single position.
2) They could side with you. I call this 'front running' or 'matching the trades' and happens in 'real' markets too; after all, you've got the stats to back up that their system is profitable, rather than an advertising sales pitch.
3) Normal trade size restrictions limit the spread betters exposure to very successful traders/strategies thus preventing a trader ever to make a 'large' amount of money. However, the press story about "The Plumber" of around a year ago implied that he was running a spread bet of £ several thousand per point.
4) Checking the profitability of instrument lines. If there are unprofitable instruments (meaning customers are finding real edges against the house) they would stop trading that instrument or adjust their pricing model (especially where there is no off setting market) .
5) Review a customer's profitability over time and place restrictions on successful traders. Whilst there has been some evidence of this it doesn't seem to be widespread otherwise the Internet boards would be full of traders complaining although there's plenty of anecdotal evidence.
High Gearing/Leverage = High Risk
No doubt leverage is a great thing if you know what you are doing - but it is perilous if you don't have a clue. Few people care to admit to themselves that they don't know what they are doing.
To fully understand this we need to examine past history because events and circumstances have a tendency of repeating themselves in time. The evolution of spread betting is very similar to the evolution of the 'Bucket Shops' on America's East Coast in the late 1800's. I suggest that everybody has a read about Jessie L Livermore and his experiences with the 'Bucket Shops' in the late 1800's/ early 1900's. Direct comparisons can be made between the modern day spreadbetting Companies and the Bucket Shops. It's a similar pattern of evolution which is simply taking place 100 years later. It is another example of a cycle repeating itself.
In essence these shops would hedge very little if anything. They knew that their 'products' offered such huge leverage. The net result was that the punters had the odds stacked massively against them - a small move in the market against the punter would often result in the loss of his / her entire pot. That's why GOOD MONEY MANAGEMENT and CAPITAL PRESERVATION are so important!! For one if you lose your capital your can't spread bet any more or can only bet very small amounts. And second if you lose 50% of your account, you've got to make 100% just to get back to even.
Do Spread Betting firms really hedge?
A recent article on Investors Chronicle mentioned how one very active spread better started encountering trading restrictions and later.
As a better-than-average trader, he did not fit into the normal mould of a loser, and yet he still liked to bet small - between £1 and £10 a point. After placing a £2-a-point position with one leading company just after markets open every morning - and winning most of the time, at market opening times - he suddenly found that the spread-betting company no longer quoted Nikkei prices for the first five or 10 minutes of the trading session.
This account clearly presented a problem for the company concerned. Too small to hedge (as the Nikkei contract is bigger than £1 a point), the account was showing a consistent ability to win. The spread-betting company simply used its power to decide what prices to quote, and when, and then ceased to make a market during the time period concerned. Another firm stopped him trading via the internet after a large monthly gain. This highlights a fundamental problem with spread betting.
Cases like the one mentioned above are not uncommon. Some of the spreadbetting companies do not hedge all of their positions. This means that your win is their loss. It could well be that the case highlighted above is based on someone who was trading a 'grey market' (for those people who don't understand the term, a 'grey market', it is a market which is made entirely by the spread betting company. This could be an index which is quoted 'out of hours' for example). Therefore it is possible that the customer's position simply could not be hedged. This means that they assume the full risk. Therefore if someone is very good at calling a particular market then it becomes financially sensible for the quoting company to move the goal posts slightly until the customer's advantage is lost. The experienced dealer knows that there are several ways of 'moving the goal posts'. Refusing orders or delaying executions are just simple examples of a company gaining an unfair advantage over a customer. The problem for the customer is explaining that situation to the regulatory authority in a manner which they will understand.
There are also a number of other points:
The companies which offer very tight spreads would find it more or less impossible to make any money if they hedged positions. Quite often the companies quote is the same as the underlying market. It is also possible that they may not be able to hedge quickly enough. Some traders for example are experts at reading L2 in certain stocks. Quite often they will spot a cascading price and dive in so quickly that quite often it is not possible for the company to take a similar position in the time available. By that I mean that in the time it takes for the punter to open his bet the position is already showing a breakeven or a profit. This is where the problem lies when a spreadbetting company takes on an experienced market participant who trades in such a manner. He or she may be an expert in only a few markets which they watch for many hours a day and also monitor with expensive software. The spread betting company however makes thousands of different prices and can not therefore be an expert in them all. The net result is that, in some cases, the company finds it necessary to manually process certain customer's orders in certain markets. This manual process adds time to execution which gives them time to inspect the order. For example, if an 'OBL has been found' rumour broke then it would be 'sensible' for a certain company to slow down its order flow in many of its markets purely because the market would suddenly make a very easy long. I hope that you get the picture. The bottom line is that split second timing can, in certain cases, make the difference between a successful trade and a losing one. The spreadbetting companies are very aware of that.
I think it was the Chairman of IGIndex who a couple of years ago admitted that they didn't lay bets off because it was just too expensive to do. He made a public statement to this effect (a friend of Gerald Ratner perhaps?). Effectively they take a view of the market each day and adjust their quotes accordingly in order to minimise damage and maximise profit. That is a summary of what I believe he said.
Execution delays
A number of the books written about Livermore mention how the bucket shops acted to protect their interests when he started to make money from them. Is it any different today? Widening of the spreads and delays in order execution are tricks which were played by the bucket shops 120 years ago. If we are honest then we know that, in this computer driven world which we now live, it is possible to execute customer's orders electronically in a fraction of a second. Ask yourself why many of these companies still route certain orders or customers through a manual dealing procedure? These companies are fully aware that an introduction of a delay gives them a chance to observe movements within the market which were subsequent to the order being placed - of course they can then use these 'subsequent movements' to determine the financial viability of the submitted order.
My own personal view is that the different companies will note your trading style and that can determine what kind of service you receive. If you scalp trade effectively (scalpers attempt to 'scalp' i.e. extract profits from small price movements using large position sizes) then you will often upset the spreadbetting companies, I know companies will argue this but that is my experience and therefore my view. More than a year ago I had a dispute IG Index which is evidence of that. IG are happy to send out advertising literature stating that 'prices are always live and tradable' and that 'the price you see is the price you get' - this is in order to attract customers to their platform. However, as you become a better trader and win money in very short time-frames you may start to get treated differently. In my case it reached a point where orders were taking almost a minute to get processed and orders were being refused based on price movements within that time. This clearly isn't the service that they clearly advertise and nor is it what the terms and conditions say will happen to your order once it is received. Thereby, swing trading and position trading strategies are better suitable for spread betting than scalping strategies.
The bet was for £80 per point. I've bet at that size many times and its never been a problem. I would however mention that the time it takes to process my bets had increased from about 3 seconds to 40 odd seconds. It seems to me like they started to monitor exactly what I was doing by manually checking each bet. However the dealer has admitted that he only decided that his price on Dow needed reviewing after my instructions to close were known to him. As he is at liberty to swing his market based on his order book then it is clear that a conflict of interests exists if they are allowed to have 'seconds thoughts" once they have priced and advertised their market prices. Obviously in this case the dealer rejected the order based on what he decided his market was after he had re-priced it, however the T&C act to protect customers from this type of situation by clear stating that the reasons for rejections based on incorrect prices should be based on prices AT THE TIME THE ORDER IS SUBMITTED. In my case the price I submitted was correct at the time I submitted it and only became incorrect with the passing of time (almost 1 minute) but IG ignored this fact because it suited them to do so.
Execution delays allow spread betting companies to see if the market is moving in a manner favourable to them or the customer, if the move favours them they simply accept the order, if it favours the punter they refuse the order on the grounds that "the price is no longer valid". This type of sharp practice does go on (we are referring to scalp trading here) and it does conflict directly with the service that companies actually advertise. There is only one reason in the world of spreadbetting why companies would advertise "the price you see is the price you get" and that is to suggest to customers that their service is in some way superior because of the ability to grab prices quickly. The fact is that when push comes to shove they claim that they have no obligation to standby anything they advertise, be it the type of service (ie WYSIWYG) or the prices. There are laws which are supposed to protect consumers from this type of rogue practice and the FSA has recently increased its vigilance and monitoring of financial promotions.
The fact is that computers can match and process deals far quicker than the human intervention that many of the spreadbetting companies use. Computers are also much cheaper, don't demand a salary and don't take lunch breaks. Staff are paid to process orders because it is financially viable for them to do so. Experienced customers will always be able to take advantage of certain market conditions if they are allowed to do so. By this I mean that fast execution does, under certain circumstances, benefit the customer which is of course to the detriment of the company offering the market.
This is where the delay in execution is particularly useful to the spreadbetting company. While your order is waiting to be executed the dealer effectively has the gift of hindsight in deciding whether to allow your order to pass at the originally quoted level. In effect this advantage, over a period of time, has the effect of making the spread slightly larger than is quoted. The obvious result is an increase in the cost of trading which is a cost shouldered purely by the customer.
And that's why phone dealing can turn convenient here - if you deal on the Internet and you start getting delays on the screen price, if they don't like it , it gives them time to change it whereas on the phone, the dealers can't do that unless they want to risk lying barefaced over a tape recorder.
Re-Quotes
If the quoted prices are honoured by the spread betting company which is usual in normal markets, all is well but trouble starts when the market has moved away from the quoted price and the dealer decides to reject your trade, and 're-quotes' you a new price.
This happens regularly with CMC and there is no point in pretending that it does not. Sadly it seems that the more successful the trader is, the more it happens (shares and indices). Traders can only talk about their own experiences and with CMC it is not a case of seeking to place the blame elsewhere. IG Index on the other hand do not carry out such practices (in my experience) but their spreads/charges are much higher.
One could say that execution delays shouldn't do much harm if your strategy is right and your finger quick. However for example, with CMC at times even with fastest finger your attempted trade will only be accepted if it is going against you. Actual experience not once, twice, thrice but several times:-
Once the mouse is clicked the order screen is frozen, no more trades can be placed, may eventually go through only if price as moved against me, Otherwise a re-quote.
Mouse clicked, order screen stays yellow, theoretically giving me a option to cancel the order as well as an option for CMC to refuse the trade. If the price moves against me try to cancel -no luck trade accepted. Otherwise the screen stays yellow till the inevitable re-quote.
Trade accepted, subsequently cancelled -reason bad price. Only the opening trade cancelled, closing trade stays valid. Had to have a 10 mins discussion before no profit/loss situation was restored- only on one occasion.
CMC, as market makers, told me that they will not accept an order for 1000 Abbey National (FTSE 100 CO) as there were no buyers. Placed limit order, price reached the limit order - no fill. When queried got a similar response, however, all of a sudden got filled, and guess what within seconds the price moved in the right direction by several pence. Forget the details, but it was about 10 to 15 pence.
Finally, the above tactics were experienced with 80, 25, 5 and even 1 Dow contract.
None of the above is made up or is sour grapes actual practical experience.
Skewed Spreads
One practice (which, again, is thankfully less common now than it was a few years ago) is to skew the spread in the direction of the market move. In other words, if the market is trending rapidly down, most people are selling, so, although the spread may be the same, the prices quoted will be that much lower than in the real market, as most people would be selling into a down move. As soon as the market looks like it's going to recover, the skew is switched around the other way. This can shave several points off a client's profit. However, it can backfire in that not only does it upset customers by appearing unfair, but those able to take the opposite trade fast enough can squeeze some extra profit out of the trade.
Barred
Yes! Its not unheard of that accounts be closed for 'winning too much'- the account is not usually closed straightaway but the behaviour of the broker can become (in rare cases) less than pleasant if the bets placed are costing the spread-betting company large sums of money; this could happen if the instrument the client is trading on cannot be easily hedged by the spread betting provider. I refer this as closing accounts with grace hehe and I suppose having your account closed is really a compliment. However, we don't support firms that close down winning accounts so for this reason we will not hesitate to shame such behaviour.
Timeouts
Even worse than a re-quote is a 'timeout'. Some online systems have an hourglass icon, which spins away for what seems like an eon (from a few seconds to a minute or more). By the time you realise that nothing is going to happen, and you call the dealer hotline, it's up to the dealer whether you get the price you were originally quoted. Some companies put a high premium on customer satisfaction, and will give you your original quoted price, while others just quote the market at the time.
So how to get the insight without the pain?
So where do you get the insight on the various providers without going to the expense of opening an account with all the different spread-betting companies? Most providers offer a demo account to try their dealing platform although this doesn't guarantee that your executions will be dealt in the same way as with a real money account. But remember demo trading can only do so much, it is when real money is on the line where the markets bring out every emotional defect you have. Risk small capital so you can stay in the game long enough to learn and demo trade using market orders, go for the longer trades and do not scalp. The shorter your timeframe the more you'll compete with professionals and anyhow you're end up irking the spread betting dealers if you are successful as its difficult for a spread betting company to offset your exposure for very short trading timeframes. And you could always visit sites like this one and check our regular reviews about the different providers. If you ask me which spread betting to recommend I would say that most are pretty good but you should look for brokers that quote the tightest spreads combined with good software which is reliable, especially when the markets get volatile. Personally I've been using Capital Spreads for over a year now and am still a happy camper
OK, finally the good news - things have improved!
The penetration of the Spread Betting companies is most probably reaching maturity. It is unlikely that there is a completely new batch of clients ready to tap into, so in the first decade of the 21st century the financial spread betting companies are likely to concentrate on innovation of products and services.
Most of the so called 'incidents' mentioned above are a thing of the past. Things have vastly improved over the last few years. Competition has lowered spreads significantly and the quality of service is improving all the time. For example, 'rolling' bets have been introduced at many spread-betting companies recently. They have the same low spreads as the 'daily' bet (which is an intra-day bet that has to be closed by the end of that day's session), but can be rolled over to the next day with a small charge being made for the rollover. This bridges the gap between a daily bet (that expires at the end of that day), and the larger spread paid for a bet that expires several weeks or months hence.
Companies that have, in the past, resorted to certain sharp practices appear to be doing it rarely now, as it clearly isn't in their interests to upset their customers, and effectively chase them away to firms which treat their customers more equitably. All the big spread betting and cfd firms these days are increasingly seeing professional traders register and deposit substantial six-figure sums because they're finally making the move away from other trading methods towards better regulation, smaller spreads and NO TAX. Also, where can you speculate in almost any financial, commodity or currency market worldwide, within the one account!? If I wake up one morning feeling bullish on the Pound or bearish on gold and I can take immediate action. But with a traditional stockbroker or even a futures trader this is often difficult because they won't be set-up for that kind of business. In effect you may find yourself having to open accounts with different brokers to trade different products.
To be honest Direct Market Access attracted me at first, all excited about leaving orders on the underlying, then I suddenly realized I was paying through the nose for it and that you are being squeezed into placing larger trades. I have always stuck to spread betting because nowadays the spreads are so tight and the all round packages are generally very good and improving all the time. In a nutshell, the tax free element and leverage outweigh all other factors for me. Sure one day I will have to answer the sole income question, though I have some ideas as to how I could work around this. The path that a successful trader takes is one of continual evolution and I would re-evaluate this situation if something really nasty happened. For now I'm making steady and consistent if modest gains which although far from the millions of pounds which some top traders claim to have made are still a welcome supplement to my income
a spreadbetters lament
They slipped me again, I couldn’t get out
it went the wrong way, the news was leaked out
the broker is bent, the prices are wrong
they took all my rentGambling or Trading?
The thing that I can never get my head around - one thing that just about everyone agrees on -: 85% of traders lose money! Even 85% of fund managers, with vast resources, fail to beat the index. And the spread betting companies benefit from this


;
1) They could lay off the bets. This is expensive for them and assumes they can lay off the bet. My guess is that they don't generally do this other than to make sure all bets as a whole are within risk tolerances. Some spread betting firms have Then come along the 10%-15% who make consistent and substantial gains - a rare breed (we all agree?). If you run a spread betting company and face this situation with a large number of small losers and a small number of very big consistent winners you would face a dilemma on how to deal with the 'suckers'however publicly stated that they net off the trades internally and either carry the risk or hedge only the net exposure. Obviously, it's a lot cheaper/easier for them to hedge just the net risk than hedging every single position.
2) They could side with you. I call this 'front running' or 'matching the trades' and happens in 'real' markets too; after all, you've got the stats to back up that their system is profitable, rather than an advertising sales pitch.
3) Normal trade size restrictions limit the spread betters exposure to very successful traders/strategies thus preventing a trader ever to make a 'large' amount of money. However, the press story about "The Plumber" of around a year ago implied that he was running a spread bet of £ several thousand per point.
4) Checking the profitability of instrument lines. If there are unprofitable instruments (meaning customers are finding real edges against the house) they would stop trading that instrument or adjust their pricing model (especially where there is no off setting market) .
5) Review a customer's profitability over time and place restrictions on successful traders. Whilst there has been some evidence of this it doesn't seem to be widespread otherwise the Internet boards would be full of traders complaining although there's plenty of anecdotal evidence of Deal4Free doing this...
High Gearing/Leverage = High Risk
No doubt leverage is a great thing if you know what you are doing - but it is perilous if you don't have a clue. Few people care to admit to themselves that they don't know what they are doing.
To fully understand this we need to examine past history because events and circumstances have a tendency of repeating themselves in time. The evolution of spread betting is very similar to the evolution of the 'Bucket Shops' on America's East Coast in the late 1800's. I suggest that everybody has a read about Jessie L Livermore and his experiences with the 'Bucket Shops' in the late 1800's/ early 1900's. Direct comparisons can be made between the modern day spreadbetting Companies and the Bucket Shops. It's a similar pattern of evolution which is simply taking place 100 years later. It is another example of a cycle repeating itself.
In essence these shops would hedge very little if anything. They knew that their 'products' offered such huge leverage. The net result was that the punters had the odds stacked massively against them - a small move in the market against the punter would often result in the loss of his / her entire pot. That's why GOOD MONEY MANAGEMENT and CAPITAL PRESERVATION are so important!! For one if you lose your capital your can't spread bet any more or can only bet very small amounts. And second if you lose 50% of your account, you've got to make 100% just to get back to even.
Do Spread Betting firms really hedge?
A recent article on Investors Chronicle mentioned how one very active spread better started encountering trading restrictions and later.
As a better-than-average trader, he did not fit into the normal mould of a loser, and yet he still liked to bet small - between £1 and £10 a point. After placing a £2-a-point position with one leading company just after markets open every morning - and winning most of the time, at market opening times - he suddenly found that the spread-betting company no longer quoted Nikkei prices for the first five or 10 minutes of the trading session.
This account clearly presented a problem for the company concerned. Too small to hedge (as the Nikkei contract is bigger than £1 a point), the account was showing a consistent ability to win. The spread-betting company simply used its power to decide what prices to quote, and when, and then ceased to make a market during the time period concerned. Another firm stopped him trading via the internet after a large monthly gain. This highlights a fundamental problem with spread betting.
Cases like the one mentioned above are not uncommon. Some of the spreadbetting companies do not hedge all of their positions. This means that your win is their loss. It could well be that the case highlighted above is based on someone who was trading a 'grey market' (for those people who don't understand the term, a 'grey market', it is a market which is made entirely by the spread betting company. This could be an index which is quoted 'out of hours' for example). Therefore it is possible that the customer's position simply could not be hedged. This means that they assume the full risk. Therefore if someone is very good at calling a particular market then it becomes financially sensible for the quoting company to move the goal posts slightly until the customer's advantage is lost. The experienced dealer knows that there are several ways of 'moving the goal posts'. Refusing orders or delaying executions are just simple examples of a company gaining an unfair advantage over a customer. The problem for the customer is explaining that situation to the regulatory authority in a manner which they will understand.
There are also a number of other points:
The companies which offer very tight spreads would find it more or less impossible to make any money if they hedged positions. Quite often the companies quote is the same as the underlying market. It is also possible that they may not be able to hedge quickly enough. Some traders for example are experts at reading L2 in certain stocks. Quite often they will spot a cascading price and dive in so quickly that quite often it is not possible for the company to take a similar position in the time available. By that I mean that in the time it takes for the punter to open his bet the position is already showing a breakeven or a profit. This is where the problem lies when a spreadbetting company takes on an experienced market participant who trades in such a manner. He or she may be an expert in only a few markets which they watch for many hours a day and also monitor with expensive software. The spread betting company however makes thousands of different prices and can not therefore be an expert in them all. The net result is that, in some cases, the company finds it necessary to manually process certain customer's orders in certain markets. This manual process adds time to execution which gives them time to inspect the order. For example, if an 'OBL has been found' rumour broke then it would be 'sensible' for a certain company to slow down its order flow in many of its markets purely because the market would suddenly make a very easy long. I hope that you get the picture. The bottom line is that split second timing can, in certain cases, make the difference between a successful trade and a losing one. The spreadbetting companies are very aware of that.
I think it was the Chairman of IGIndex who a couple of years ago admitted that they didn't lay bets off because it was just too expensive to do. He made a public statement to this effect (a friend of Gerald Ratner perhaps?). Effectively they take a view of the market each day and adjust their quotes accordingly in order to minimise damage and maximise profit. That is a summary of what I believe he said.
Execution delays
A number of the books written about Livermore mention how the bucket shops acted to protect their interests when he started to make money from them. Is it any different today? Widening of the spreads and delays in order execution are tricks which were played by the bucket shops 120 years ago. If we are honest then we know that, in this computer driven world which we now live, it is possible to execute customer's orders electronically in a fraction of a second. Ask yourself why many of these companies still route certain orders or customers through a manual dealing procedure? These companies are fully aware that an introduction of a delay gives them a chance to observe movements within the market which were subsequent to the order being placed - of course they can then use these 'subsequent movements' to determine the financial viability of the submitted order.
My own personal view is that the different companies will note your trading style and that can determine what kind of service you receive. If you scalp trade effectively (scalpers attempt to 'scalp' i.e. extract profits from small price movements using large position sizes) then you will often upset the spreadbetting companies, I know companies will argue this but that is my experience and therefore my view. More than a year ago I had a dispute IG Index which is evidence of that. IG are happy to send out advertising literature stating that 'prices are always live and tradable' and that 'the price you see is the price you get' - this is in order to attract customers to their platform. However, as you become a better trader and win money in very short time-frames you may start to get treated differently. In my case it reached a point where orders were taking almost a minute to get processed and orders were being refused based on price movements within that time. This clearly isn't the service that they clearly advertise and nor is it what the terms and conditions say will happen to your order once it is received. Thereby, swing trading and position trading strategies are better suitable for spread betting than scalping strategies.
The bet was for £80 per point. I've bet at that size many times and its never been a problem. I would however mention that the time it takes to process my bets had increased from about 3 seconds to 40 odd seconds. It seems to me like they started to monitor exactly what I was doing by manually checking each bet. However the dealer has admitted that he only decided that his price on Dow needed reviewing after my instructions to close were known to him. As he is at liberty to swing his market based on his order book then it is clear that a conflict of interests exists if they are allowed to have 'seconds thoughts" once they have priced and advertised their market prices. Obviously in this case the dealer rejected the order based on what he decided his market was after he had re-priced it, however the T&C act to protect customers from this type of situation by clear stating that the reasons for rejections based on incorrect prices should be based on prices AT THE TIME THE ORDER IS SUBMITTED. In my case the price I submitted was correct at the time I submitted it and only became incorrect with the passing of time (almost 1 minute) but IG ignored this fact because it suited them to do so.
Execution delays allow spread betting companies to see if the market is moving in a manner favourable to them or the customer, if the move favours them they simply accept the order, if it favours the punter they refuse the order on the grounds that "the price is no longer valid". This type of sharp practice does go on (we are referring to scalp trading here) and it does conflict directly with the service that companies actually advertise. There is only one reason in the world of spreadbetting why companies would advertise "the price you see is the price you get" and that is to suggest to customers that their service is in some way superior because of the ability to grab prices quickly. The fact is that when push comes to shove they claim that they have no obligation to standby anything they advertise, be it the type of service (ie WYSIWYG) or the prices. There are laws which are supposed to protect consumers from this type of rogue practice and the FSA has recently increased its vigilance and monitoring of financial promotions.
The fact is that computers can match and process deals far quicker than the human intervention that many of the spreadbetting companies use. Computers are also much cheaper, don't demand a salary and don't take lunch breaks. Staff are paid to process orders because it is financially viable for them to do so. Experienced customers will always be able to take advantage of certain market conditions if they are allowed to do so. By this I mean that fast execution does, under certain circumstances, benefit the customer which is of course to the detriment of the company offering the market.
This is where the delay in execution is particularly useful to the spreadbetting company. While your order is waiting to be executed the dealer effectively has the gift of hindsight in deciding whether to allow your order to pass at the originally quoted level. In effect this advantage, over a period of time, has the effect of making the spread slightly larger than is quoted. The obvious result is an increase in the cost of trading which is a cost shouldered purely by the customer.
And that's why phone dealing can turn convenient here - if you deal on the Internet and you start getting delays on the screen price, if they don't like it , it gives them time to change it whereas on the phone, the dealers can't do that unless they want to risk lying barefaced over a tape recorder.
Re-Quotes
If the quoted prices are honoured by the spread betting company which is usual in normal markets, all is well but trouble starts when the market has moved away from the quoted price and the dealer decides to reject your trade, and 're-quotes' you a new price.
This happens regularly with CMC and there is no point in pretending that it does not. Sadly it seems that the more successful the trader is, the more it happens (shares and indices). Traders can only talk about their own experiences and with CMC it is not a case of seeking to place the blame elsewhere. IG Index on the other hand do not carry out such practices (in my experience) but their spreads/charges are much higher.
One could say that execution delays shouldn't do much harm if your strategy is right and your finger quick. However for example, with CMC at times even with fastest finger your attempted trade will only be accepted if it is going against you. Actual experience not once, twice, thrice but several times:-
Once the mouse is clicked the order screen is frozen, no more trades can be placed, may eventually go through only if price as moved against me, Otherwise a re-quote.
Mouse clicked, order screen stays yellow, theoretically giving me a option to cancel the order as well as an option for CMC to refuse the trade. If the price moves against me try to cancel -no luck trade accepted. Otherwise the screen stays yellow till the inevitable re-quote.
Trade accepted, subsequently cancelled -reason bad price. Only the opening trade cancelled, closing trade stays valid. Had to have a 10 mins discussion before no profit/loss situation was restored- only on one occasion.
CMC, as market makers, told me that they will not accept an order for 1000 Abbey National (FTSE 100 CO) as there were no buyers. Placed limit order, price reached the limit order - no fill. When queried got a similar response, however, all of a sudden got filled, and guess what within seconds the price moved in the right direction by several pence. Forget the details, but it was about 10 to 15 pence.
Finally, the above tactics were experienced with 80, 25, 5 and even 1 Dow contract.
None of the above is made up or is sour grapes actual practical experience.
Skewed Spreads
One practice (which, again, is thankfully less common now than it was a few years ago) is to skew the spread in the direction of the market move. In other words, if the market is trending rapidly down, most people are selling, so, although the spread may be the same, the prices quoted will be that much lower than in the real market, as most people would be selling into a down move. As soon as the market looks like it's going to recover, the skew is switched around the other way. This can shave several points off a client's profit. However, it can backfire in that not only does it upset customers by appearing unfair, but those able to take the opposite trade fast enough can squeeze some extra profit out of the trade.
Barred
Yes! Its not unheard of that accounts be closed for 'winning too much'- the account is not usually closed straightaway but the behaviour of the broker can become (in rare cases) less than pleasant if the bets placed are costing the spread-betting company large sums of money; this could happen if the instrument the client is trading on cannot be easily hedged by the spread betting provider. I refer this as closing accounts with grace hehe and I suppose having your account closed is really a compliment. However, we don't support firms that close down winning accounts so for this reason we will not hesitate to shame such behaviour.
Timeouts
Even worse than a re-quote is a 'timeout'. Some online systems have an hourglass icon, which spins away for what seems like an eon (from a few seconds to a minute or more). By the time you realise that nothing is going to happen, and you call the dealer hotline, it's up to the dealer whether you get the price you were originally quoted. Some companies put a high premium on customer satisfaction, and will give you your original quoted price, while others just quote the market at the time.
So how to get the insight without the pain?
So where do you get the insight on the various providers without going to the expense of opening an account with all the different spread-betting companies? Most providers offer a demo account to try their dealing platform although this doesn't guarantee that your executions will be dealt in the same way as with a real money account. But remember demo trading can only do so much, it is when real money is on the line where the markets bring out every emotional defect you have. Risk small capital so you can stay in the game long enough to learn and demo trade using market orders, go for the longer trades and do not scalp. The shorter your timeframe the more you'll compete with professionals and anyhow you're end up irking the spread betting dealers if you are successful as its difficult for a spread betting company to offset your exposure for very short trading timeframes. And you could always visit sites like this one and check our regular reviews about the different providers. If you ask me which spread betting to recommend I would say that most are pretty good but you should look for brokers that quote the tightest spreads combined with good software which is reliable, especially when the markets get volatile.
The penetration of the Spread Betting companies is most probably reaching maturity. It is unlikely that there is a completely new batch of clients ready to tap into, so in the first decade of the 21st century the financial spread betting companies are likely to concentrate on innovation of products and services.
Most of the so called 'incidents' mentioned above are a thing of the past. Things have not improoved over the last few years. Competition has lowered spreads significantly and the quality of service is deteriating all the time. For example, 'rolling' bets have been introduced at many spread-betting companies recently. They have the same low spreads as the 'daily' bet (which is an intra-day bet that has to be closed by the end of that day's session), but can be rolled over to the next day with a small charge being made for the rollover. This bridges the gap between a daily bet (that expires at the end of that day), and the larger spread paid for a bet that expires several weeks or months hence.
Companies that have, in the past, resorted to certain sharp practices. All the big spread betting and cfd firms these days are increasingly seeing professional traders register and deposit substantial six-figure sums because they're finally making the move away from other trading methods towards better regulation, smaller spreads and NO TAX. Also, where can you speculate in almost any financial, commodity or currency market worldwide, within the one account!? If I wake up one morning feeling bullish on the Pound or bearish on gold and I can take immediate action. But with a traditional stockbroker or even a futures trader this is often difficult because they won't be set-up for that kind of business. In effect you may find yourself having to open accounts with different brokers to trade different products.
To be honest Direct Market Access attracted me at first, all excited about leaving orders on the underlying, then I suddenly realized I was paying through the nose for it and that you are being squeezed into placing larger trades. I have always stuck to spread betting because nowadays the spreads are so tight and the all round packages are generally very good and improving all the time. In a nutshell, the tax free element and leverage outweigh all other factors for me. Sure one day I will have to answer the sole income question, though I have some ideas as to how I could work around this. The path that a successful trader takes is one of continual evolution and I would re-evaluate this situation if something really nasty happened. For now I'm making steady and consistent if modest gains which although far from the millions of pounds which some top traders claim to have made are still a welcome supplement to my income
a spreadbetters lament

well done for gettting that all down, and yes I smiled when I read about CMC ... my quotes are massively delayed ..and now they requote and "hold" the price ..add 10-15 tics and requote me.. unless it moves against me then I get filled. Criminal, they have even got to the point of logging me out if I reject there requotred prices... I want some guy from the FSA to come and sit here and watch this.I have probably taken Nesbits Royalties from them overall whilst my ex colleague who is in the less fortunate losing category of CMC clients gets filled immediatly. funny that (n)
 

ikhan71

Junior member
10 0
Thank you for all the differant insights. I am new to trading and have taken a very balanced & cautious approach. To be honest the uncertainty and current non regulation of the SB industry has given me valuable insight into this area.

I am not saing that I will never use a SB company, but I think it is better to learn from the DMA platform initially and once I have gained some experience and education, to possibly consider it at a latter date. Possibly when there is much more regulation and accountability.

I would rather not loose a lot of money on an uneven playing field.

Many thanks to all :)
 

gle101

Veteren member
3,717 84
Thank you for all the differant insights. I am new to trading and have taken a very balanced & cautious approach. To be honest the uncertainty and current non regulation of the SB industry has given me valuable insight into this area.

I am not saing that I will never use a SB company, but I think it is better to learn from the DMA platform initially and once I have gained some experience and education, to possibly consider it at a latter date. Possibly when there is much more regulation and accountability.

I would rather not loose a lot of money on an uneven playing field.

Many thanks to all :)
Read up on Money management so you will have a basic understanding of risk and leverage, and how it will affect your trading account under different trading scenarios. If you understand this vital part correctly, you will probably not start with trading DMA.
 

ikhan71

Junior member
10 0
Thanks for the advice - please expand!!!

:idea:
Read up on Money management so you will have a basic understanding of risk and leverage, and how it will affect your trading account under different trading scenarios. If you understand this vital part correctly, you will probably not start with trading DMA.

Thank you for your advice. I have read and underdtood the importance of risk management and planning. However, my issues are with some of the practices I understand SB firms tend to use which seem to work gainst you eg. Not adhering to Sop Losses, delays in setting orders etc.

Can you please advise and tell me why my issues may be incorrect?

Thanks.
 

rwb

Member
70 12
SB profits & tax

Kap quoted -
'Sure one day I will have to answer the sole income question, though I have some ideas as to how I could work around this'.

Kap, You might want to look at this page on IR.
Trade: exceptions & alternatives: betting and gambling: the professional gambler

As long as you're only trading with SB's (ie gambling) your profits are not subject to tax in UK whether you are supplementing your earned income or it is your only income source. From a practical point of view IR would be seriously out of pocket if SB profits were taxable especially when you consider the high %age of people who apparently lose.

hope this helps, don't expect you want the vision of the taxman on your back while your trading!!!!
 

gle101

Veteren member
3,717 84
:idea:

Thank you for your advice. I have read and underdtood the importance of risk management and planning. However, my issues are with some of the practices I understand SB firms tend to use which seem to work gainst you eg. Not adhering to Sop Losses, delays in setting orders etc.

Can you please advise and tell me why my issues may be incorrect?

Thanks.
You are so welcome. If you can't make it trading SB, I guarantee, you will not be able to do the same with DMA. If you are a newbie, do not trade DMA to start with, this is because the stakes are way too high, and without sufficient experience in real trading you will probably burn your account more than once. On the other hand if I were a newbie, I would not go for SB. Instead, I would trade CFDs with the smallest stakes I could find. You will probably lose out the first year, but you can deduct losses from taxes (depends on local taxation rules). Do not give away more money than you need to, in order to get the experience required to end up consistently on the winning side. Regard your initial trading experience as education, and that will take a sizable amount of time and effort. This education will also undoubtedly cost some money in order to reach profitability in the long run.

It is just amazing to read all the negative posts about SB on this board. I guess it is much easier not to take personal responsibility and blame somebody else for unsuccessful trading. There are some problems for sure, and I have been pointing them out on numerous occasion on this forum. These drawbacks, will not, however, be the deciding factor in becoming a successful trader or not. Until the SB industry matures, this is the price you pay, for being able to trade the market with fixed spread and low stakes.
 

simcom

Active member
142 8
It is just amazing to read all the negative posts about SB on this board. I guess it is much easier not to take personal responsibility and blame somebody else for unsuccessful trading.

I agree. I guess it's just like the way in which people lay the blame thick and fast on the high street banks and credit card companies that 'irresponsibly' lent them the money they can't afford to pay back.
 

ikhan71

Junior member
10 0
You are so welcome. If you can't make it trading SB, I guarantee, you will not be able to do the same with DMA. If you are a newbie, do not trade DMA to start with, this is because the stakes are way too high, and without sufficient experience in real trading you will probably burn your account more than once. On the other hand if I were a newbie, I would not go for SB. Instead, I would trade CFDs with the smallest stakes I could find. You will probably lose out the first year, but you can deduct losses from taxes (depends on local taxation rules). Do not give away more money than you need to, in order to get the experience required to end up consistently on the winning side. Regard your initial trading experience as education, and that will take a sizable amount of time and effort. This education will also undoubtedly cost some money in order to reach profitability in the long run.

It is just amazing to read all the negative posts about SB on this board. I guess it is much easier not to take personal responsibility and blame somebody else for unsuccessful trading. There are some problems for sure, and I have been pointing them out on numerous occasion on this forum. These drawbacks, will not, however, be the deciding factor in becoming a successful trader or not. Until the SB industry matures, this is the price you pay, for being able to trade the market with fixed spread and low stakes.

Again thank you guys....words of wisdom are much appreciated. There seems to be a lot of organisations and people more than willing to take your money if you dont take dilligance in your own actions. I have spoken to many differant investors that have lost money. There seem to be a lot of shady organisations out there that seem to promise the World.

However, I have recently been to see the online trading academy in St Albans. They definately seem to be very differant from the others. The course modules are not cheap.... however, when I have researched the company, their instructors, mentors and their background etc. it all seems very positive.

It wasn't the normal setup ie. hotel conference room, hard sales pitch, great discount offers on the day if you signed there and then, unrealistic targets, everyone can do it, 60 to 200 people on the course, no live trading, no practical trading, no information on the instructors or the mentors, very negative feedback etc. etc.

The OTA was completely differant..... met one of the instructors/mentors on the day at their training center / academy as there was a Forex class being taken at the same time in the other class (Sam Sieden - Flew in from US - active and very experienced trader). I checked him and the other guys out when I got home and to my surprise they all have very reputable experience in the trading field, research papers, academia literature, books, proffessional cv.s etc. To be fair after the previous organisations I had met and seen, I am really quite impressed with the set up these guys have.

- max 19 people per class
- live trading at their academy with their money
- the course you pay for can be retaken as many times as you wish
- 1 computer per peson
- 1 weeks initial course
- Grad club that you become part of for life
- Weekly webinars with instructors and experienced traders
- personal mentoring
- no unrealsitic claims and super win win stratedgies
- they stated that it wasnt for everyone and it was only for about 10% of people in the class.
- I liked what they were saying......it takes discipline, hard work, ongoing education and time; in my experience this is the only way to get on in life!
- the quality of the people on the course and the instructors was very good. They came from proffessionl backgrounds in professional trading, corporate law, engineering, IT, banking etc. etc.
- the reveiws of people that had actually done the courses was really positive (independant forums)
- They give a lot of training online for free and the material is very easy to understand and in depth.
- The whole academy and their practices are very transparent
- train NASDAQ graduates (checked on NASDAQ website and this corresponds)
- The academy has bases all over the World and the instructors that are part of the academy are all active and reputable proffesional traders (i googled everyone of them:sleep:).

My partner and I actually met some of the grads from the other course and had a chance to mingle and speak to them. It all seemed very sincere and I came away thinking that this was the right path to take if I was seriously considering this path as a career. I didnt get that same feeling with the other organisations I had met.

I know that theres a lot of people that have been burnt on these courses and to be honest I was very very sceptical. I have previously completed my degree, MSC and worked in Industry in IT and as a managment accountant. I have also been on various training courses throughout my career and ran my own businesses, so I do not beleive I am naive or easily influenced in any way....but however you can not be 100% in anything in life. I have read a lot of books and researched in trading and I would rather spend the money initally on the right type of education rather than loosing a greater amount because I am still not confident that I completely know what I would be doing and what the pitfalls of the industry are. I have heard so many people loosing money initally because they have just gone staright into it without any experiance. I do beleive that I will loose some money over the time but I also think that I would rather go into this with some form of proper training and education and managing my risk properly.

Thank you again guys for your advice. Any thoughts!
 

TomTom

Established member
652 37
Ikhan hi m8, if this is attractive to you then for for it .
What is the total cost for such an expierance ?
The set up sounds impressive ...
 
 
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