Learning about spreads

[demag]

As some of you may remember I started out absolutely green a few months back, asked some basic (stupid?) questions and got some honest answers.

Thanks for being patient.

I decided to do some paper trading to get the feel of things and not knowing where to go, opened a virtual account with Betonmarkets. I made a few fixed odds bets and now agree with Zelda, yes it is a bit of a game isn't it.

So I opened a virtual account with their sister site Xodds because there is the opportunity of spread betting on there. Up spreads and Down spreads they call it.

I started looking at charts and made a few Forex trades, but quite often opened into a negative position and couldn't understand why. I thought I was getting my bets mixed up and going long when I should have been short. On a strong trend it wasn't so obvious, but in a quiet market I always opened on a negative position. I thought something wasn't quite right, so I opened two trades, one up, one down on the same currency and they both opened into a negative position! I was losing (virtual) money on both trades. Then it clicked, Xodds appear to move the opening position on a spread quite a few points in their favour from the position on the chart.

Is this normal trading procedure, or is it their way of getting a bit of profit in a slow market?

Sorry to have rambled!

Thanks,

demag.

 

[demag]

Sorry, my mistake, it was Zenda who informed me about fixed odds not Zelda as posted.

Nice picture btw!

 

[rossored]

Demag, from your description, this is exactly how spreads work.

For example, if the FTSE is trading at 4400pts, the spread companies will offer a spread at, say, 4396-4404 : so if you go long on this, the market will have to trade ABOVE 4404 for you to be in profit. Hence, if you open at £5/point, then you'll be 4 points (or £20) down as soon as the bet opens. If the market then moves in your favour, the deficit will reduce until (hopefully) you get in profit.

Also, some SB companies do tend to have wildly fluctuating spreads at times - there's really no telling when this happens, unless you're used to the company you're dealing with, and know when they try to run people's stops and where/why this happens - this knowledge will only take time...and money, unfortunately. Unfortunately, placing a bet with an SB company generally allows them to see exactly where your stop is (assuming you use one???), and as you agree when you sign up with them that you are playing thier market, they can pretty much do with it as they choose....that includes running stops to liquidate open positions before moving the market in thier favour, and leaving you high and dry.

Still, dont feel too bad. This sort of thing happens in the "real" market too.

Hope this helps,

RR


Edit : Eeeeek - 666 posts! He is coming, he is coming!!! blah blah blah

 

[Beach Runner]

demag,

Sorry to interupt this thread but:

He has come! May, er, <i>someone</i> protect us! The Number of the Beast is among us. And he is the colour of blood...

Oh... he lives in Cambridge? That's all right then.

 

[demag]

Thanks Rosso,

I haven't done too badly even though I was confused (my wife says she is living with a confused person).

I originally dropped to $9500 from a start of $10000. By cutting my losses quickly and letting the winners run, (sound advice) I have pulled it back to a smidge over 10 grand now. I have used stops and have also not used them on some trades. On a couple of steady winners (USD/Yen) I let the trades run for a week but kept a close eye on the markets and came out on top.

I am trying to get my head round breakouts now, but it's coming, it's coming.

Aaaagh! Who said that?!!!

I will say one thing, this really is addictive! I can't get away from the pc! I don't know if I'll feel the same when I'm using my own money though.

 

[rossored]

So you have been paper trading, right? If so, thats a good idea but it doesnt give you the same feel for a trade as the real thing sadly. Good luck for the real thing.

Yes, trading is totally addictive :cheesy:

 

[demag]

Yes, I thought I'd do that till about June/July and if I broke even or better then I'd dip my toe in and use my own cash.

I have about £1000 which I can afford to lose, which I could probably stretch to £2000 if needed.

demag.

 

[LittleWhiteBull]

Demag

I am in a similar 'green' position, very early days and trying out the demo on D4F site, but I am having trouble with the software operating on my PC, do you have the link for Xodds so I can try them - then I'll know better if it's my PC or the software. PC is 20gig hard drive & 256 mb Ram, it misbehaves only with D4F software.

I sat & watched the spreads changing on 2 of the Instruments I was following, for several hours each day last week and it is interesting to see how the bid leaps up just before the 'breakout' starts to appear, they are one step ahead every time!

 

[demag]

Hi LittleWhiteBull,

try http://www.xodds.com
Click "open account" at top of page and "open virtual account" and follow the destructions.

It's all fairly basic (ideal for me!) but the spreads only appear to work on Forex. And yes they also appear to play games at times.

At the hint of some movement when trying to get a position don't be surprised to get a message saying the underlying market is moving too fast and the opening price will be recalculated, (many times).

But give it a go it's ok for learning on.

ATB,

demag.