Cheated or Naiive?

[liberati]

I had a long bet on British Insurance Holdings on £1/point. I set my stop at 3xATR but also added an extra 11 points as the offline spread was quite large at about 11 points My stop was 30 points below bid price which was well beyond the daily 'noise' of price movement.

This morning on opening the price gapped down about 3 points then climbed up 5 in the first two minutes - nothing major given the share price.

Imagine my disbelief as I was stopped out when the spread widened by 50 points? The ask price increased slightly but the bid price went south. Now the cynic in me want to believe that this is Capital Spreads way of knocking out the stops, but maybe I've simply been naiive.I suspect the truth is they're reflecting the underlying bid/offer spread in the marketplace, but is there a resource I can use to check the historical bid/offer spread BEFORE I make the trade?

Just for the record, as I type, the bid/ask at Capital Spread is currently 1068/1076 and with IG is 1073/1090.

Of interest on the IG platform the price shows a dip of 3 points, whereas on the Capial platform it spikes down!

Your comments, feedback or advice welcome.

 

[pboyles]

I've seen that happen, it's why I gave up spreadbetting a long time ago. Of course there will be plenty of excuses but the bottom line is that this is going to happen to you if you insist on spreadbetting.

 

[PipStar]

You should immediately ask Capital Spreads for a refund. This is most likely an erroneous price that took out your stop.

 

[liberati]

Thanks pboyles and PipStarfor the quick reply.

I simply feel cheated. I don't mind losing money if I simply got it wrong, but when my judgement (in this case) seems sound and the price is trending nicely upwards it's frustrating to be going out on a loss for an event for which the spread betting platforms tell you nothing about.

They explain about market gaps but not abaut bid/offer spreads which can increase in seconds by 500%+ for no apparent reason!

I'll post the Capital Spread response when (if) I get one

You mention (pboyles) you no longer spreadbet, may I ask what you do instead?


Thanks.

 

[pit pony]

You should immediately ask Capital Spreads for a refund. This is most likely an erroneous price that took out your stop.

spreadbetting companies make you a market around the actual market, also they can take stops out as their market got there ( not the actual market though ) this is what they do. The only S/Better out there that i have come across that have DMA and never seem to have a problem on fills is ProSpreads, although they dont do stocks at the moment, i here they will be releasing very soon though.

 

[liberati]

Hi pit pony.

Thanks for your post but excuse my ignorance but what is DMA?

 

[liberati]

sorry just found it...Direct Market Access.

 

[tar]

is it Brit insurance holdings ?

 

[liberati]

Yes I believe on some platforms like IG its called Brit insurance holdings.

Opened down 3, currently up 11 and I'm out on a 30 point loss...seething.

 

[tar]

Naive , sorry mate , things like this happens in stocks like this check the screen shot the spread was 45 points wide at the open , anyway i thought Capitalspreads will get you out if the bid or the offer traded , should check with them about their policy ...

 

[liberati]

Thanks tar. Appreciated.

To be honest this is what I wanted to hear, as the minute you lose faith in the spread betting firms you've nowhere else to go if you're under capitalised for stock purchase etc.

Another lesson learnt!

I suppose on thinly traded stocks it may be wise to trade with stops set way out and trade manually to avoid this situation.

Thanks.

 

[Splitlink]

I had a long bet on British Insurance Holdings on £1/point. I set my stop at 3xATR but also added an extra 11 points as the offline spread was quite large at about 11 points My stop was 30 points below bid price which was well beyond the daily 'noise' of price movement.

This morning on opening the price gapped down about 3 points then climbed up 5 in the first two minutes - nothing major given the share price.

Imagine my disbelief as I was stopped out when the spread widened by 50 points? The ask price increased slightly but the bid price went south. Now the cynic in me want to believe that this is Capital Spreads way of knocking out the stops, but maybe I've simply been naiive.I suspect the truth is they're reflecting the underlying bid/offer spread in the marketplace, but is there a resource I can use to check the historical bid/offer spread BEFORE I make the trade?

Just for the record, as I type, the bid/ask at Capital Spread is currently 1068/1076 and with IG is 1073/1090.

Of interest on the IG platform the price shows a dip of 3 points, whereas on the Capial platform it spikes down!

Your comments, feedback or advice welcome.

Insurance shares and the Japanese crisis? Phew!

I don't know British Insurance but I don't touch any share outside FT100 because of the problem that you had.

If you are new to SB then you were not naive, just learning! That's the way it goes! A share's spread must be as close as possible, that means that there is good buy/sell volume with that share.

I am comfortable with my SB firm but it must be realised that they are bookies and illiquid shares (I don't know whether yours was, or not), especially when left overnight, are very vulnerable.

 

[tar]

Thanks tar. Appreciated.

To be honest this is what I wanted to hear, as the minute you lose faith in the spread betting firms you've nowhere else to go if you're under capitalised for stock purchase etc.

Another lesson learnt!

I suppose on thinly traded stocks it may be wise to trade with stops set way out and trade manually to avoid this situation.

Thanks.

Anything can happen , check this example :

http://www.trade2win.com/boards/first-steps/119860-first-trade-ever-down-over-15-a.html

 

[liberati]

Thanks for all the replies. Thanks to your help I've learnt I need to do an additional check for bid/offer spread volatility before committing to a stock outside FTSE100. Thanks to the contributors I now realise this info is available on sites such as iii.co.uk but only for the current day. Does anyone know if there's a resource for historical?

I belive the way to trade the less liquid best is to have manual stops (maybe use an auto one but say 10 ATR away as a safety net) but how would you define less liquid? Would you use volume or simply use the chart?

Many thanks.

 

[tomorton]

Please note the Caps Spreads tick charts show bid prices, not mid prices. In some ways this is actually more helpful to their customers, as it can illustrate stocks subject to spikes downwards and therefore help with sensible location of stops. Other SB firms' tick charts usually show mid prices and these can hide a lot of action.

Just to add I would not try SB for small caps outside the FTSE350. The biggest 30 of the FTSE100 should be plenty to pick from if you're going to SB stocks, because of dependable liquidity and competitive spreads.

 

[capitalspreads]

liberati

just ring up the dealers and they will sort it out.

Our prices are based on the actual bid/offer in the market. The bid for brit insurance at 08.01 (when we open) was 1046 . Your stop order was therefore activated by the computers.

As you can imagine it was pretty busy first thing and the bid for Brit Ins stayed at 1046 for another minute and a half until 8.02.46 . This meant that your stop was activated.

The reason we open at 08.01 and not 08.00 is that the spreads in the first few seconds can be ridiculous (and therefore unreasonable stops will get hit). Obviously this morning the market makers were a little more wary than usual (especially on an insurance stock) and took more time to come in with a narrow price spread. Your stop though is obviously unreasonable and CS will always reverse such trades if they are made aware of them.

The problem is that we would have been taking over a thousand trades in just a few minutes over the open so my dealers obviously missed this error. It is always worth checking any stop activation against 3rd party information

The reason for the difference in price between us and IG is more difficult. We are definately around the market price (we always are). But I might point out that our spread on the price you quoted was just 8p whereas the IG one is 17! (more than twice our spread). this is the type of advantage that I could do with more people pointing out.

Cheers

Simon

 

[liberati]

Just had a call from George at CS. Position reinstated. Restored my faith in Capital Spreads!

Thanks everyone.

 

[peakoil]

May I just say - Well done Capital Spreads! As someone who isn't a customer of yours ...yet, I must tell you that seeing a situation like this resolved fairly is worth more than seeing a hundred advertisements for your business!

Albeit, for me personally, I'm not jumping to open an account just yet because I would have an issue with your automatic stops as I mostly bet on the most liquid instruments - oil, indexes, & major fx pairs, building a position on a *very* wide basis, so your stops would most likely knock me out before I'm even two thirds of the way to increasing my position! (and before anyone jumps in to say that's crazy, I started just over 10 years ago & still about). However, I can definitely understand why automatic stops would be a great plus for many.

 

[tomorton]

I am happy with Caps' customer service. I have contacted them twice re trades being closed at strange levels - once it was a rogue trade which they had already identified and went on to re-fund within minutes: the other was my own fault for not reading the chart right.