How do Spread betting firms make money?

[leovirgo]

I've come across many threads complaining against spread betting firms. I myself have had some nasty experience such as "waiting for confirmation", "telephone orders only", "unavailable".... through... "manual" controlling of my orders.. occasional spikes ... to ... unreasonable "rolling over charges" where they charged(robbed) for difference in yesterday's closing price and today's opening price for GBPUSD something like 3 pips (at midnight)... a long list.

Seriously though I respect that being a SB firm is a legit biz and they must have proper ways to make money. And they must have proper hedging strategies.

Anybody knows how they make money? ...apart from usual suspects..

 

[N Rothschild]

have a search there is alot of threads about this

 

[BJ21]

How do Spread betting firms make money?

By taking yours !!!!

 

[ffsear]

by taking positions, just like the rest of us.!

 

[TomTom]

Lets think about it ....
If 95% of traders become unsucsessful this results in 95% becomming loosers.
On this basis the SB firm takes on the postion its self.
Due to the nature of there business they can squire prices and take charges for over night postions manipulating the bid / offer to its benifit these firms have a liecence to print money.

Dont get me wrong they do have there use's however I recomend not to use a SB firm if your trading as a prime income because this method of doing business is very expensive.

 

[bakoo]

I find it funny how spreadbetting is really a 50/50 bet, there are only two ways to bid, so why do so many bid the wrong direction?

Anyone every wrote down where they think the share will go and then bid the opposite?

I always feel sure the FTSE will go up, and when i feel like that it does down, and visa versa, may try doing the opposite to what i feel.

But would be nice to know why so many go the wrong direction.

 

[theoracle]

I find it funny how spreadbetting is really a 50/50 bet, there are only two ways to bid, so why do so many bid the wrong direction?

They probably do only slightly worse than 50/50 to begin with, it's what you do after the trade has been opened that dictates whether you win or lose overall.

I reckon averaging losers and snatching winners is the main reason why most lose in the end. That behaviour has certainly been responsible for all of my big losses.

I now try and do the opposite of what I would like to do. It's hard but it usually works. (Bit of a mishap last week with Barclays but I need to get it wrong every now and then just to keep me on the straight and narrow!)

 

[slik]

I don't think they take positions as such- I imaginethey hedge their positions out in the 'real' market- they just quote wider and take the instant edge.

 

[arabianights]

Same way any other market maker makes money. Take on as much risk as you're happy with and hedge the rest. Easy!