with regard to the enter price, probably a stupid a question,please help!

[stucash]

Hi guys I am currently holding a demo account with capital Spreads; and I am just a bit confused about the price that I actually entered the trade.

For example, say stock ABC has a bid price (Sell) of 10.00 and a ask price (buy) of 10.04; I predict that the price is going to fall and therefore I go short; the system is showing that I entered the trade at price level of 10.00; however, the actually price i get is 10.04, so every time I entered a trade, I see myself with a loss; when I was right, I did turn the loss into profit, though.

So the thing is, I thought, if I went short, I entered the trade at the bid price, but actually it was not; I have to wait the price to go down the bid price to make a profit.

How does this actually work? I am currently looking for help on their website as well, just to see if I was too stupid to see their instruction on basic spread betting knowledge.

Thanks for all your help and advices in advance!

 

[Brock Landers]

probably what happens is that you hit the bid (10.00) and that is the price you trade at, but immediatley your position is marked to market - which, in this case, means marked to the price you can exit the trade, namely the ask (10.04).

So your entry price IS 10.00, but your P&L aand margin requirements are calculated from the offer price, which is 10.04. That is why you show an immediate loss, because you are paying away the spread.

 

[Hoggums]

It's the buy/sell spread - and it's how CS make their profits.

You always sell at the lower price (bid) and buy at the higher price (offer).

So if you bought/sold while the market never moved so the mid stays at the same price you would make a loss.

 

[stucash]

It's the buy/sell spread - and it's how CS make their profits.

You always sell at the lower price (bid) and buy at the higher price (offer).

So if you bought/sold while the market never moved so the mid stays at the same price you would make a loss.

Thanks for your explanation! straightforward and make sense!

 

[stucash]

probably what happens is that you hit the bid (10.00) and that is the price you trade at, but immediatley your position is marked to market - which, in this case, means marked to the price you can exit the trade, namely the ask (10.04).

So your entry price IS 10.00, but your P&L aand margin requirements are calculated from the offer price, which is 10.04. That is why you show an immediate loss, because you are paying away the spread.

Thanks for your reply, as you said I was actually paying the cost of opening my position; this is how SB company makes money. Now I understand. I am such a rookie hope you don't mind. :cheesy:

 

[capitalspreads]

stucash

not such a foolish question as it is asked by many clients. Some SB companies revalue your position at the 'mid point' i.e. half the bid/offer spread . we find this a little disengenous as in reality the client should always know his/her exact p/l if they were to exit their positions at that precise moment in time.

I have just such an account with one of our competitors where you have to subtract half the spread on every position (times the stake) in your head before you actually get to your real situation. It can be confusing.

Simon