You are NOT trading.

bluetipex

Active member
174 22
Wasp,

It is clear that you are a well respected member of the T2W community, who has undoubtedly contributed far more than many. However, it seems to me that your original post is full of subjectivity and personal prejudice. Yes, people have asked you for your opinion - but:



strikes me as unabashed arrogance. Anyone who is not prepared to consider that their opinion of fact could be misguided - heaven forbid, wrong - should bear in mind that humility is probably the best tool of learning there is.

Furthermore, there are a few comments in particular you have made that I find difficult to accept in the context you have set them.

Specifically:



Besides arbitrage, you will find that every "trade" is infact the acceptance of a payout, for a specified risk, determined by the value of an asset under certain conditions. Be it buying /ES8M, or AAPL, or a $10pp Spreadbet on EUR/USD - My payout is largely determined by the value of said asset at the time T I close the position. You go on to say that:



Well I might be an options geek, and I might be in the market for buying and selling volatility in the wholesale OTC market. This is just as much an asset as a spread bet, but you don't consider me a trader??? :eek:

Moving on...



Call up the dealing desk of Killik & Co. or Brewin Dolphin, and ask for the price of BP shares. They will quote you a Bid and an Offer, which may well be different to the best Bid/Offer currently available in the market. But because I am dealing with a counterparty who is making a profit from the difference between the Bid and the Ask, I am not considered a trader??? Would you consider the counterparty, the MM in BP at Killik a trader??? :eek:

Next;



I've already covered the speculation aspect of this sentence, so I will focus on the first part "own the underlying stock". You are right, a spread better does not recieve the packet of rights associated with an ordinary share. However, what about CFD's? Increasingly these are being used to gain an influence over the management of a company; so much so that the FSA have launched investigations into abuse of these instruments, with disclosure of an interest > 3% in any listed company through a CFD likely to emerge in the future. But as CFD's dont mean you own the underlying stock, you cant be a trader??? :LOL: These things were invented by the City!

You then move on to describe your definition of trading:



and



Do you not understand the concept of risk? Traders trade RISK, nevermind the wrapper it comes in. I can receive risk by buying or selling an asset with the intention of completing the reverse transaction in the future for a profit, and I can receive risk by entering into an agreement where the payout is determined by the underlying assets' price at some time in the future. Potaeto, Potarto.

__________________________________________________________________________

In this first part of your post, these are the only serious arguments - most of the rest is just "filler", and pretty contentious at that (e.g. "Trade is the voluntary exchange of goods, services, or both." - absolutely. I pay my SB firm a commission, in the form of a spread, for the provision of RISK).

You then go on to list the - in your opinion - pro's and con's of spread-betting. Of all the "cons", only 2) and 6) aren't misleading.



And this is perhaps the only valuable point you make. Yes it is true that, in dealing with an SB firm, you are accepting a payout determined by the value of an instrument at time T, where the SB firm itself provides the value of said instrument. Conflict of interest? Of course! Does this mean I can't trade it? Bullsh!t.


There is a difference between buying a payout in acceptance for risk from an exchange, and buying a payout in accpetance for risk from a counterparty. But to say that one is trading and the other isn't is just plain ignorant. Each have their benefits - through an exchange I eliminate the conflict of interest (to the best degree possible), and through an SB firm I can tailor the size of the payout to suit my own particular propensity for risk. These are significant differences, but they share exactly the same principals of RISK and PAYOUT. Trading, or betting, is about finding opportunities, whereby one considers the PAYOUT and the RISK to be mis-matched, and acting to profit.

As an aside, some members do seem to exhibit a genuine "class divide" attitude here on T2W - there are those who trade mostly via exchanges (or ECN's), and those who trade via spreadbetting. In general, it seems that a few of the "exchange traders" consider themselves to be better traders than "SpreadBetters" - perhaps because of the bigger cash requirements (a point you elude to in your post), and I won't disagree that there are different skill sets for each. However the reality is that we are all just different shades of grey; there are good traders, bad traders, full-time traders, part-time traders, prop traders, hobbyists and teenagers (Spanish89 is my fav :cheesy:). Instead of arguing about who is the most "trader-like", we could all just lay our d!cks out on the table and see who's got the biggest (I will sell the risk that you have the biggest ;) - friendly banter :D).

This is my opinion, and if anyone can convince me that I am wrong I will change it.
Excellent post.
 

fernanj

Junior member
32 3
It does not make a shread of a difference if one was trading or spreadbetting - call it what you like, the principals applied by a individual trader or spreadbetter would not change as his TA, Fundamentals and psychology will dictate the finale outcome. Trading requires big Bucks whereas SBs one can start with small amounts and if one can not make money or profit with a small account then in my opinion it would be damn right stupid and silly to start trading with big bucks.
It is a myth that you must start with a big account to make it big! Absolute RUBBISH!!
Yes - by all means attempt 'Trading' only if you can consistently make money in 'Spreadbetting' with very small amounts, arm yourself with the required experience and mind set first before you even think of going for the big kill!
 

nine

Senior member
2,038 506
The spreads and price distortions in spreadbetting may well distort your behaviours. This may not be a problem with longer term trading but if you trade intraday it's a bad thing.

If you are planning to trade futures or shares you would be better of paper trading to test your strategy and then lightly trading once confident in your strategy and your ability to execute it in real time.
 
  • Like
Reactions: black bear

charliechan

Experienced member
1,008 119
I understand your first point but if the trading plan is to go for larger moves in which the, say 2 point, spread makes up say 10% then where's the harm? If I made a 20 point profit I'd have to give a lot of that back in tax wouldn't I? I agree it's a harder platform for scalping or small moves but then a beginner will get burnt trying to scalp using DMA too.
I'm intrigued as to why there is such a level of vitriol aimed at people who use SB companies. How does it affect people who use DMA? It's a bit like a Mac users not understanding how anyone could use a PC...oh, I get it now :)

H.

eh? so based on your theory, youre quite happy to give up 10% on every trade? this is the harm. so if you made 10 trades in a period, you would be giving up ~90% of the margin. ok so some will win and this may give a small net profit overall, but no one serious would willingly give up 10% of net, especially given the leverage given with the confidence of a good broker/clearer.

its because some fail to see how 'small' % (added edge) quickly accumulate into large figures that make the difference as to whether your activity will be subject to tax or not in the first place!
 

mp6140

Established member
742 74
MP -- having read this, IM CONFUSED !

here in the states we have two (retail) methods of trading -- using a broker, who is paid through the spread, the same (apparently) as your spread betters but with NO commission past the spread (we also get the rollover interest payments or debits) and we have ECN's such as Interactive Brokers, EFX and MB (few others popping up daily also )

no matter how one wants to trade, they can probably start as low as a few hundred US dollars.

What then is the "difference" between a spread better and whatever youse guys refer to as "DMA" trading, which you claim is so much more expensive ?

really just curious

mp
 

bluetipex

Active member
174 22
here in the states we have two (retail) methods of trading -- using a broker, who is paid through the spread, the same (apparently) as your spread betters but with NO commission past the spread (we also get the rollover interest payments or debits) and we have ECN's such as Interactive Brokers, EFX and MB (few others popping up daily also )

no matter how one wants to trade, they can probably start as low as a few hundred US dollars.

What then is the "difference" between a spread better and whatever youse guys refer to as "DMA" trading, which you claim is so much more expensive ?

really just curious

mp
Wasp has described the differences in his opening post, but in essence:

1. In the UK the gains derived from Spreadbetting are free of income tax.
2. It is generally held that Spreadbetting companies are dodgy, unreliable, give poor customer service and want you to lose.
3. When you enter a transaction with a SB company the counterparty is the SB itself, who sets its own price which may or may not reflect the "real" market price. When you transact in DMA you are vying with other traders directly. The DMA has no interest in whether you win or lose.
4. The margin requirements for DMA are significantly higher than for SB.


I haven't personally experienced (2) above, but I cannot say that it doesn't happen to other people. I also watch the live prices for my chosen instruments all day every day, and rarely is there a difference between that and the price quoted by the SB companies. When there is, it lags, allowing me to enter at a better price. However, this is very rare indeed. Last year one of the SB companies I use had a recurring problem where their prices would "freeze". I would spot this, enter my trade, and then when the real price had gone in my favour by 20 or 30 points ring them up and they would reset their feed to the correct price giving me an instant profit. They've fixed this now so it doesn't happen any more.

I have no problem with SB companies. I derive my income solely from trading with them.
 

bluetipex

Active member
174 22
Solution to the argument

This debate will never be resolved because it simply depends upon your personal opinion, however, I think I have a way to make us all one big happy family:

It occured to me recently, when I received my Tax Return form for year ended 5 April 2008 the other day. When I have a form or questionnaire to complete, when I get to the box "Occupation" I often write "FINANCIAL SPECULATOR".

So, let's all agree to call ourselves Financial Speculators, which encompasses all forms of trading, including DMA, Spreadbetting, Options, CFDs, Covered Warrants, Fixed odds etc.

I like the word "speculate" because that's what we're all doing every day. Using our skill and judgement we analyse our chosen financial instrument(s). We enter a position with the expectation that the market goes in our favour in the following minutes, hours, days, weeks or months ahead. (I would suggest holding a position longer than, say, 6 months would be called "investing"). We then close our position taking our profit or loss.

Surely we can all agree on this at least, to regard ourselves as Financial Speculators?
 

the blades

Experienced member
1,336 275
Spread-Betting is Non-Professional and DA is Professional. Those who know, know why, and those who don't, argue.

The End.
Arrogance to the end, as ever. How is your keeper, He Who Shall Not Be Named, these days?

UTB
 
Last edited by a moderator:
  • Like
Reactions: LION63

the blades

Experienced member
1,336 275
I don't understand why there is any debate about this. In some circumstances spreadbetting is more cost efficient. In others (probably most) DA is the best choice. One isn't superior, they both have their place.

I use both. I'm happy to be classed as a gambler rather than a trader. What's in a name? I want to challenge the grey metter and make money, nothing more.

UTB
 

Splitlink

Legendary member
10,850 1,231
Spread-Betting is Non-Professional and DA is Professional. Those who know, know why, and those who don't, argue.

The End.
Ok, I delete that. Might as well be polite.

I must say that you are a condescending person.

Professionalism is method in doing things in an efficient manner , no matter what it is.

Are you telling us that you know, for a fact, that spreadbetting firms are not used in a professional manner? There are all sorts of reasons why a professional body might use their services with respect to various legal matters which concern only themselves.

At the same time, DA brokers are often used in an extremely non-professional way by all sorts of punters.

What your post insinuates is that that spreadbetters are beyond the pale and that it is wiser to open an account with a broker.

My answer to that is---Only if you know, absolutely, what you are doing. If you don't, stay with the spreadbetting procedure. You may swear, sometimes, at the filling procedures but most of the punters persuaded into trying their luck (luck is non-professional) with a broker, will lose their money quicker.

Split
 
Last edited:

dcraig1

Experienced member
1,604 243
One other factor not mentioned so far on this thread is that if you want to trade small cap stocks, the spread from a bookie will be a killer (if you can manage to place a bet at all). You will be limited in your choice of equities.
 

Splitlink

Legendary member
10,850 1,231
One other factor not mentioned so far on this thread is that if you want to trade small cap stocks, the spread from a bookie will be a killer (if you can manage to place a bet at all). You will be limited in your choice of equities.
That is so. My trading is limited to Footsie shares, where I can see the shares, and their spreads, quickly. I haven't the time or patience to go any farther. It depends on volume, probably, you can get reasonable spreads within the top 350.
 

Paul71

Senior member
2,056 412
I don't think having a go at Newtrader will resolve any issues here, and i have to admit, i personally believe DMA to be the professionals choice, but, just because a person uses DMA doesn't automatically give them professional status. I posted earlier on in this thread, the post was meant tongue in cheek to create reaction.

An adept trader could use either SB or DMA and still make a living out of it.



Strategy wise, in terms of order types, automation and programming, DMA is king and always will be.

SB prices? They are only indicative, and although through competitiveness the prices are becomming more accurate and spreads lower, it still leaves a question mark for me personally.


Just my 2 cents worth.
 

Crap Buddist

Senior member
2,458 289
Thought for the day

This echo's an argument (discussion, to those who are sound of mind) between 2 groups in a class studying medicine n stuff.

Tutor says hands up all those who do not believe in herbal medicines. ya know half the class puts hands up n waves em in the air, with the grace that they just dont care, anyhoo the tutor says...

"ahhh, thats good, now, no matter what you believe if you eat this digitalis you will die."


Now which is which between SB & DMA who is the herbal medicine & who the synthetic drug. Who believes in DMA & who SB, maybe if you still cant trade you'll die anyhow :idea:

Bonzer.
 

LION63

Established member
746 33
I do not play golf or squash so I suppose I am not a sportsman but I play football and rugby and that makes me a brute. It comes down to a matter of choice and there are many that spread bet that can run rings round those that trade via direct access.

Many of the posts on these boards about spread betting are from those that have had bad experiences brought on by themselves or those looking for something for nothing (ie. the thread about IG Index stealing £5,500 from an account). Quite a lot of the others are by those that do not have an inkling about how the costs of spread betting really work out.

CFDs and spread betting are generally provided by the same firms and the prices/quotes are exactly the same (phone them and ask). Yet you do not have people making disdainful remarks about those that use CFDs. Spread betting in the main is for UK residents due to the current tax laws and CFDs are for those outside the UK who cannot take advantage of the 'tax free' benefits of spread betting.

Many have say that the prices quoted are not transparant or are skewed in the firms' favour. This is absolute nonsense and if they did this, a good trader with any reasonable degree of sense would make bundles of money taking advantage of these anomalies. Prices are always based on the underlying and a firm adds its spread to derive a quote, what is the problemwith this? If you trade shares you will find that it is cheaper to trade through a spread betting firm as opposed to placing a trade through a stockbroker unless the trade is for more thatn £5,000. That is before you take CGT into consideration.

Day traders are gamblers; swing traders are gamblers; anyone holding a position for less than 18 months or so is a gambler (speculator) regardless of the methods or instruments that are used (these are labels applied in the financial industry and have remained the same for decades). There are Professional Money Managers who constantly lose money despite the fact that they manage billions for their clients, yet they appear on television programmes and get interviewed by newspapers and magazines; command seven figure incomes and live like royalty. Then there is that little spread betting 'punter' that is vilified but turns a profit month after month and provides for his needs and some. Please, give it a break.

The claim that no professional, broker or big hitters use spread betting firms is also a nonsense that has been made by those that live in cocoons. How would you describe the Board of Next Plc that put on a trade worth millions with Cantor Index that there shares would exceed 1600p within a few years (trade placed in 2004 or 2005)? What about Michael Ashton who lost millions recently in one of the banks? Why did the city regulator insist that those that build stakes of 3% or more using CFDs/spread bets have to declare these positions?

These firms are constantly called bucket firms by those who make these negative statements but on what criteria? Are Man Financial who are a member of the FTSE 100 a bucket shop; Cantor Index (part of Cantor Fitzgerald); CMC Markets that are valued well in excess of £500 million or indeed IG Index who also have a fairly large market quote? We will ignore the fact that Barlays, Lloyd TSB and others also have spread betting arms in order to muscle in on the market.