I Need Some Help and Advice Setting Up & Progressing......

[vchohan]

Hi Guys,

I'm Vikash, been spreadbetting for just over a year now with very little capital. I have an account with IG Index and am looking at progressing to actually buying and selling the actual shares.

I am currently reading 'trading in the zone' and follow inthemoneystocks.com to learn. I still have over 70% of my initial deposit from spreadtrading which I think is reasonable as my account is still alive as I have kept and stuck to my rules.

I only get to trade a couple of days a week at most or once a week. I trade the SPDR Trust Series 1 which follows the S&P500 and follow some stocks within it. The reason I want to move onto actually trading the stocks and the ETF is that when I spreadbet the SPDR Trust Series 1 I am already 9points down. That's the difference between the buy and sell.

A friend in states recommended ScottTrade which only charge $7 a trade but I can not join as I don't live in states. I'm sure there are others out there that maybe better but I need UK ones. I've looked at TD Waterhouse who charge £9.95.

I was also looking at CFDs which I don't think suit me as you can lose a hell of a lot, is too high risk for me and don't have the capital to lose. What other charges are there besides the initial commision of putting on a trade and what better places are there?

I have more questions but can't think of them but I need to be pointed in the right direction. Thanks for the help in advance.

Vikash

 

[GladiatorX]

InteractiveBrokers.co.uk
- Trade US ETF's, such as the SPY with no currency exposure
- Post bid/asks, direct market (Trade actual exchange obviously)

Any other questions ? I think thats all you asked ?

Obviously to trade SPY - You'll need genuine capital; Not leveraged. Although IB gives you the option to use margin, use that at your discretion but i recommend starting without it.

On a further note; to day trade US stocks, there are rules set by the SEC whereby if you open trades and close them on the same day 4 times within 5 trade days you are considered a pattern day trader.

To be a pattern day trader, you need an account balance of $25,000 or more. This is for your safety according to the SEC.

I'm not sure whether the SPY applies to this rule, but i would assume it does, as its pretty much a stock; traded on the stock exchange... In a stock format.

To day trade US stocks then; You need $25,000 capital if your planning on doing 4 + trades per week.

Currency exposure is something to think about; InteractiveB avoid this problem all together. Finally, make sure you understand the infrastructure of a real market before you start placing market orders @ 1.30pm

 

[vchohan]

Thanks for the help. I kind of understand what you're saying. I don't have $25000 lol. I didn't know about the rules set by SEC. What are my other options? I mean being 9points down as I click buy is expensive to me. I usually can make about 3 to 4 trades in a day on the same stock.

Do you think I should just trade the stocks within the SP500 then? As I don't have that much capital. I have about £250 right now raising £100 every month into the account.

Is spreadbetting still my best option?

 

[GladiatorX]

The stocks in the S&P 500 have the same SEC Rules... Tbh, personally i'm totally against bucket shops and them placing pretend bid/asks ... So personally i'd never trade on a 9point down start ... I like gaining the spread as much as possible...

Another option would be futures, which don't have the same rules... You'd need a minium of $500 for one contract for no overnight hold in the S&P 500 (e-mini) and this gives you control over $50,000 worth of S&P 500 ...
However i recommend more than $500 for trading futures....
ONe idea would be to trade corn futures, less aggressive and volatile and therefore you wouldn't need as much money; lower margins etc...

Just tell me exactly what you want and i'll think up the best option.

 

[vchohan]

Well I learn from inthemoneystocks.com who trade the SPDR Trust Series 1 and some other american stocks. I would like to trade the SPDR Trust Series 1 as I have got to know the stock and can trade it. I also trade UK stocks and have just started looking at the FTSE100. I don't want to be 9points down when I start trading it's silly and not good for my psychology. I us IG index's advanced charts which I think is good so who ever I trade with I need a charting system that remembers all my trend lines I put in every time I load it up. When I looked at buying actually stocks I found pretty much no difference in buy and sell prices. Just the commision. I also don't know how I'm charged when buying and selling stocks. I've only ever spreadbetted.

Hope that helps you to help me...

 

[GladiatorX]

In an exchange market; you can gain the spread.

Your spreadbetting charges you 9 points spread... In the markets its possible to gain that spread through placing a bid,
For example
Bid: 100
Ask: 101

A trade occurs when a bid/ask crosses over.
For example;
You place a limit to buy @ 100
Someone comes in and sells @ market (therefore at the bid) and you've gained the spread.

The spread is smaller in DMA too.

The spreadbetting broker gets his commision through the spread... A DMA broker executes the trade for you and therefore you pay them a commision (Very small in InteractiveBrokers)...
The problem is; the spreadbetting broker has a complict of interest with you.

You should get others opinions; others will disagree with me. What is a fact though is that its better to day trade on an exchange market than through spreadbetting handsdown. However your circumstances may make spreadbetting the best option for you.

 

[vchohan]

I'm looking at interactive brokers. I can't understand what the commisions are and what stamp taxes mean and will I be charged it. Give me examples with the FTSE100 and say Barclays shares. I think if you do this I will start knowing where I want to go and what to use.

 

[GladiatorX]

I'm looking at interactive brokers. I can't understand what the commisions are and what stamp taxes mean and will I be charged it. Give me examples with the FTSE100 and say Barclays shares. I think if you do this I will start knowing where I want to go and what to use.

To trade UK shares, the government employs stamp duty on share purchases because they are greedy and have no idea how useful the stock exchange is to their GDP. This is 0.5% of amount invested and therefore this is why i trade US stocks rather than UK stocks.

 

[vchohan]

Okay now I'm confused at what to trade UK or US Stocks.... How much to interactive brokers charge for US stocks and UK stocks?

 

[GladiatorX]

Okay now I'm confused at what to trade UK or US Stocks.... How much to interactive brokers charge for US stocks and UK stocks?

The governement taxes trades of UK stocks with a 0.5% charge on capital invested. (EVERY TRADE)
This doesn't occur in the US.

InteractiveBrokers charge based on volume amounts;
For US stocks, its 100 cent per 100 shares with a minimum of $1 (Last time i checked)
So 500 shares = $5 (Maybe less)
For UK shares, its £6.99 per trade as far as i know.

I will verify these figures later... Although the facts are probably better, either way, its cheap commisions.

 

[vchohan]

Now I'm beginning to understand.

Example 1 - Barclays
Buy @ 320 meaning £3.20 a contract right?
I buy 20 contracts @ £3.20 = £64 + £6.00 Commission + 0.5% tax (£0.32) = £70.32
I sell 20 contracts @ £4.00 = £80 - £6.00 Commission - 0.5% tax (£0.40) = £73.60
£73.60 - £70.32 = £3.28 Profit
Is that right?

Example 2 - Apple
Buy @ 21000 meaning $210.00 a contract right?
I buy 5 contracts @ $210.00 = $1050.00 + $0.05 Commission = $1050.05
I sell 5 contracts @ $215.00 = $1075.00 + $0.05 Commission = $1074.95
$1074.95 - $1050.05 = $24.90 Profit
Is that right?

Is there a minimum amount of shares I have to buy with US Stocks?
This maybe is a silly question but I just need to clarify, If I buy 1 contract in Apple Inc @ $210.00 I need that value in my account right? So if I were trading and my rules state only use 2% of capital of total investment I would need at least $10500.00 in my account. Is that right?

Are there any other costs to consider in any scenario.

P.S. This is all based on Interactive Brokers.

 

[thos]

I was also looking at CFDs which I don't think suit me as you can lose a hell of a lot, is too high risk for me and don't have the capital to lose.

CFDs don't have to be risky. You don't need to buy 10K lots, you can buy as few shares as you want and just pay the minimum commission (GBP10), and no stamp duty. You buy the number of shares that makes your maximum loss your comfort loss. It is also very easy to adjust stops - much easier than putting them in the market (and some markets e.g. Italy do no have stop orders).

 

[vchohan]

I just don't see the benefit to CFDs over normal trading. Unless you can point it out to me. I'd still need the same capital for CFDs as normal trading.

 

[vchohan]

Another question.
When spreadbetting do all ETFs have large spreads? I'm looking at the ISF - UK Top 100 Tracker which has a spread of 4 points.

With very little capital would you advice to trade stocks rather than ETFs?

 

[thos]

I just don't see the benefit to CFDs over normal trading. Unless you can point it out to me. I'd still need the same capital for CFDs as normal trading.

1. Wide range of markets. I have used the three Euronext, UK, Noway, Sweden and Italy. I could buy US if I sent the form in.

2. Easy processing of stops, even where the markets do not accept stop orders (eg Italy).

3. No stamp duty and fees less than my brokers (I may try IB which is apparently cheaper still).

4. Margin. I do not go over my head, but I work out my comfortable risk and once I am in profit I have no risk so I can buy some other shares without tying up my capital.

5. Ability to short as easily as long.

 

[vchohan]

Okay let's say I had £10000 of capital and I wanted to only use 1% of it so £100. I buy 100 contracts of X @ £1.00. If I lose 10%, I lose £10 right?

Let's put this in the case of CFDs. I buy 100 contract of X @ £1.00. That's deposit of 10% so I have a 1000 contracts. If I lose 10% then I lose the whole £100 rather than the £10 in the previous example.

Maybe you can put in a better example to show me the benefits of CFDs as I'm not able to see it yet.

Vikash

 

[vchohan]

Anyone?