97% Spread Betters lose their money!

DD - I don't know that even if the SBs did report on the actual mortality rate of their punters it would turn new ones away.

Most punters think they can beat the system and be in the winning minority.

In a way, advertising the true figures might encourage even more into the game to take advantage of the cannon-fodder set to which they do not belong.
 
The reason that so many people lose and so many fail to win is the timescale. The smaller time scale you work on the smaller the distribution of gains and losses. They clump together and the standard deviation of those returns narrow. If you take out transactional costs then that wipes out a lot of the bell curve to the right and all you are left with are the outer lying edges of the bell curve the >95% (2 stdevs) that is why you end up with this figure of 90/10 or whatever the mood is when it is quoted. Simple.
 
bang on the nail Zigglewigler!...."understanding the mkt/instrument's behaviour characteristics".....too many $$$ sign's in front of the eyes, not enough prep work/study/money management nounce....blind leading the blind....straight into the welcoming arms of the 3%!!!!!!...... :devilish:
 
In answer to the two threads it is possible to make money from spreadbetting, I do, however you need to set yourself some rules mine are, never risk more than 3% of capital per trade, look at the bigger picture (you might find it easier to trade over a few days rather than daytrade) know where you want to get in and out of a trade.

Some points when looking for a spreadbetter dont just go for the one with the lowest spreads speed of execution and accurately following the market price are also inportant its a well know fact that spreads are moved to either side of the market price especially in times of high volatility. get a live price and compare

Try setting up a practice account at first all the big SB'S have them, and use stop losses in practice, it is easy to win paper trading whilst forgetting that the market initially went against you and you would have been stopped out
 
I agree Scrip.

Daytraders are a case in point.They tend to look at the tightest of time frames and ignore the longer move within the day.

The morning move for Nasdaq traders is where the first profits are.A $1 move in a Nasdaq stock is enough to give any daytrader a living.The morning move can give that and much more.
 
Brilliant points, Zigglewiggler...................instead of understanding the concept of trading and it's instruments........a lot of ppl approach spreadbetting or trading with a gambler's mentality hence the unending search for the 'Holy Grail'...............Smart individuals like VS and co take advantage of this type of mentality to rip off ppl with seminars and books based on outrageous claims of sudden riches.
 
I would like to suggest that trading directly to the market (I’m talking US stocks / futures) via a direct access platform is as near to ‘zero sum game’ as you are going to get. When people enter the world of spreadbetting they fail to correctly calculate the mathematical increase in risk which is bought about by trading in parallel markets. These risks are numerous but include obvious ones like increases in spread and delays in getting orders processed and the not so obvious ones like the drastic increase in the likelihood of long term failure caused by continually trading your account using a big leverage. Any one who trades their account in a manner where by several losses back to back would cause an enforced reduction in bet size will almost certainly lose in the longer run.

Based on the above people then fail to correctly calculate how much they would really need as a deposit / pot in order to trade on a fulltime basis.
I would suggest that your style of trading is directly influenced by your ‘need’ to make money. If you have only a small ‘pot’ then your need to make money maybe higher than someone who has a larger ‘pot’. Because of this increased ‘need’ you may feel pressured into making trades that you aren’t quite comfortable with. This situation becomes exaggerated when trading on margin as losses will consume a much larger percentage of your working capital.
I wonder, therefore, based on the points that I have made, how many professionals use the spreadbetters ? Could it be that few professionals use these services as they realise the risks involved. Since one of the main attractions of the spreadbet companies is the ability to trade using a big leverage I could suggest that someone who already has a large account wouldn’t need this service simply because they don’t need that kind of leverage.
A professional may also find that he or she is also deemed ‘professional’ by the Inland Revenue and therefore their tax situation is such that winnings are not ‘tax free’. You will, by now, be noticing that several of the key ‘advantages’ which the spreadbet companies advertise are not advantages to professionals. I might therefore like to suggest that the 97% figure is skewed simply because people who win consistently over an extended period of time simply don’t use the services of a spreadbetting agent to any great degree because it simply doesn’t offer them any kind of real advantage and does in fact represent disadvantage based on increased spreads and company sharp practices which are to the detriment of the customer.

Steve.
 
If you actually think about it 97% is such an outrageously large number that one wonders where it came from. Certainly the SB companies would never reveal winning and losing numbers for the mere fact that the number must, by the law of averages, be greater than 50% and that would be a bad enuf advert. If you add in the spread which nowadays almost compares in many cases with dealing through a broker and paying commision fees etc the odds must come down to around 40% winners.
Then adding in the fact that most traders no matter what tool they use run their loses and cut their profits will increase the percentage of losers again probably to around the 80-90% range.

The error in accusing the SB companies of bad faith in market practice is that for the main part it is the customers own failings that make them long term losers in the market.

There is one very good rule that all dealers must try to adhere to and that is NEVER believe you are right. More people lose money because they cannot bring themselves to admit defeat on a position than any other reason. There is always the fear that your stop out will signal a refersal and this is what drives the average punter into major losses.

Set your stops / stick to them / do not let a winning position turn into a losing one / never put a stop further away than your profit target.
 
I trade using an SB and I am profitable .

The real problem with losing money with an SB, I believe, is that 97% of people (the losers), don't have sufficient funds to spread bet.

Many people who don't have enough funds (say typically those with less than £2000) are drawn to use SB's rather than direct access because of the lower amounts required to open an account and for margin. They are however penalised by large spreads.

It is these very people who would benefit from using direct access due to the lower spreads, but they can't because they don't have sufficient funds.


I find SB trading can be very profitable......

1) If you are an experienced / professional market player

2) You have at least £50,000 to play with.

If you fit into those categories, you can make serious money. Because you make serious money, the tax advantages of using an SB rather than direct access make sense, which is why, currently I don't use direct access
 
likewise, still run sb account (& always will), tend to utilise mine for more 'positional' plays now though.....there's nowt wrong with spreadbetting as a vehicle for trading, as somebody else highlighted.....used correctly, they're an extremely important part of a traders kit bag!
 
Excessive leverage for your account size is trader's problem, not one created by SB companies. The appeal of options is that high leverage is possible, how you use it is down to you. Account management is your business, you expect the SBs to go 'tut,tut, that's a little unwise, don't you think'?

Spread bets are a derivative of sorts, they are riskier, if you come from a background of share buying, you may be in for a shock. All forms of future's trading have a high rate of attrition. Deal with it.

SB companies have some peculiarities, the spread hops about like a hoover, drawing in money, the same way bookmakers lengthen/shorten odds to balance their overround. This movement is akin to slippage in any other derivative.

Pro sports punters look for value in their market, SB users need to do the same for the own market. Tight spreads if short term, wider is acceptable on longer time frame in market that has larger moves. I don't think alot of daytraders initially grasp the importance of the risk/reward profile of a trade.

And don't think the Time's author grasped it either.

For example, a spread-betting firm might offer a spread of 10,500 to 10,515 on the price of America’s Dow Jones index in June. If you buy at £10 a point and the index is at 10,525 when you close your bet you would make £100. If the spread had been narrower, say 10,503 to 10,512, the firm would have been obliged to hand over £130.
Click to expand...

So you take offer on June Dow at 10515 and close 10525!?! You have a 10 point target with a 15 point spread? Are you nuts???
This would explain why people go bust. This would have to be a failed trade or an ill conceived one that you were lucky to get out off ahead.

Sure this might just be an example to demonstrate the worth of tighter spreads, but it was offered up as an example of success, I don't believe the author sees the inherent weaknees there in.

The easy access to trading afforded by SB can mean, easy in, easy out! Thank heaven for SB companies. Your trading ability won't come so easy. Unless you take responsiblity for your crap trades, you'll be out. I've lost money because of what I did, the SB company didn't lose money for me.

capitalspreads:
The error in accusing the SB companies of bad faith in market practice is that for the main part it is the customers own failings that make them long term losers in the market.
Click to expand...

Spread betting sounds like something you can 'do', 'hey, I'm a financial spread better, don't you know.' Wrong, you can't. It's an instrument. You trade because you are a trader.
 
Hi Deskpro, I do not think you will get an answer to your question as some time back on this site we had a tax scare started for spread betters to worry about
I am sure it was started to upset the spreadbetters by one of the many losers, it did not hold water because of the high amount of losers but it may stop you getting an answer to your genuine question
twiggytwo
 
Ziggle – Whilst I agree that disciplined and controlled trading is very much the traders problem I would have to suggest that some of the companies around don’t exactly help the customer by offering such large margined accounts. It is very easy to get an account where you can obtain a leverage of 20 times your deposit – this is often advertised as an advantage of the services offered.
Correct me if I am wrong, but wasn’t leveraged spread betting originally used by people who were interested in hedging off shares which they physically held in times of downturn ie ‘sell in may and go away’ etc etc. The fact is that spreadbetting has evolved from that situation into a business where people are more likely to have simple ‘naked’ exposure. The problem is that this ‘naked’ exposure is sometimes heavily leveraged and therefore directly threatens a customers capital which is unlike a spreadbet hedged against physically held stock where the customer would , to large degree, be either still net long of the stock or hedged flat. In that situation there is very little risk to the customers capital and all that can happen is that he misses out of profits if the stock continues to rise when he’d hedged for a pullback.

Steve.
 
Derivatives are high leverage, that's their appeal. Spread bets were created in the 70's so city traders could hold positions in gold. SB's are not solely and intrinsically a hedging mechanism, that's a good use, but it's real power is in it's leverage potential.

Stevespray, I think what you imply is that SB companies offer easy-open high leverage accounts as a means of subtle deliberate fleecing. That point could be argued either way, but the unpalatable truth about the markets in general, is that the majority are fleeced so that the few may prosper. The fleecing comes about because their is no fiercer competition in the world.

That pool of liquidity has to come from somewhere, if everyone who spread bets was a net winner, there would be no SB companies in business. The SB companies put their disclaimers in small print, the truth about making money in the markets is not something to use in headlines.

I read somewhere that certain firms in US, I think bucket shops was the term, would offer easy access accounts, with minimal deposit, allowing hugely leveraged positions, so enticing victims/punters/ investors/dreamers to go with very tight stops, they'd get run and the bucket shop cleaned up, as long as they had a high turn over of clients they did well. This is not the same situation with SB companies. The bucket shops were a fraudulent operation, I see SB's as being a democratic development. But stupid people do get took!

A lot of complaints seem to come from the daytrading crowd. I don't daytrade anymore. A couple of years ago I was quite happy scalping the Dow for 10 to 30 points even with a sometimes 8 point spread. You could happily do that with the daily ranges and ebb and flow that existed. Along comes Iraq and the Dow puts in regular 60 point daily ranges and flip flop moves. Much harder to scalp profits even with 4 point spread. I moved on to greener pastures. I swing trade 2 to 10 day cycles, looking for 200 to 400 point targets(not Wall Street). I frankly don't care if I don't get the exact price I wanted everytime, so the 5 point spread becomes a little bigger all of a sudden, I don't care, I have a risk/reward profile I'm happy with. A handfull of points less on larger targets is something I accept. If you're going to chase small points with comparitively large spreads, knowing that price execution is not exact, well you're asking for it.

Now this bit of personal history highlights one important thing, ADAPT! You don't have to be loyal to one SB company, nor one type of trading, nor one market. The opportunities are there, take advantage of the benefits afforded by spread betting, be selective, find value, and people, stop bitching.
 
zigglewigler said:
[...] this bit of personal history highlights one important thing, ADAPT! You don't have to be loyal to one SB company, nor one type of trading, nor one market. The opportunities are there, take advantage of the benefits afforded by spread betting, be selective, find value, and people, stop bitching.
Click to expand...

Good post ZW.

One that mirrors another elsewhere this morning on the need to be constantly reviewing not only your strategies and methods, but also your platforms, datafeeds, comfort levels, rrisk:eward expectations and; the sharp end of our business - our brokers.
 
Zigglewigler

Out of interest what are you trading now instead of the Dow. I to am trading the Dow but investigating trying the Forex.
 
Deskpro
Ftse 350 Sectors. I haven't looked in depth at Forex, but I don't think that market would suit my style.
 
Yes, good post ZW. I read with interest your reference to ‘bucket shops’. A few years ago I actually spent quite along time studying the subject of ‘bucket shops’ after reading some comments made by Jessie L Livermore in one of the books which covered his life. Mr Livermore points out several times that an advantage can be gained over the real market by using one of these ‘parallel markets’ if you know how to play it.
The ‘Bucket Shops’ were born in the 1880’s in several larger cities on the US east coast. Most of the larger ones were based in New York and Boston. They were known as ‘Bucket Shops’ because they seldom hedged their customers positions into the market but preferred to simply keep customers excepted orders in buckets behind the counter hence ‘Bucket Shops’. These shops were not illegal but were initially unregulated at first. As time past a certain amount of regulation was introduced and a degree of hedging was introduced. Despite all of this the ‘Bucket Shops’ still targeted what were termed as ‘shoestring traders’. The were named as such because of their methods of trading. Generally a ‘Shoestring’ would gather together a stake and then risk the whole lot on one trade. For example, if a trader came in with $100 he / she would be encouraged to take a larger position (obviously using big leverage) in a stock of his / her choosing. The position would be such that it would only require a tiny movement the wrong way in the market to wipe out the $100. Once the market moved against the trader by the set amount the order was closed and his / her ticket became worthless.
Traders like Jessie Livermore used these ‘Bucket Shops’ on a regular basis until the shops either banned them (because they kept winning) or introduced sharp practices such as delaying order opening / closing and increasing spreads. After a while it got so bad that successful traders were forced to employ runners to place the bets but after a honeymoon period that failed to as faces became known to the shops.
In my opinion there are comparisons that can be made between the bucket shops of the late 1800’s / early 1900’s and today’s spreadbetting companies.

Steve.
 
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