returns with spreadbetting

[davidh1819]

Hi everyone

i have been thinking about this for a while now. alot of books i have read about trading
have said that trading and attempting to get an anual return of over 30% or so a year is to risky

however all those books were talking about purchasing acual shares. does that still appy for spreadbetting?

for example if the FTSE100 was 5000 some one spreadbetting £1 per point has the same exposure as a trader with £5000 worth of real FTSE shares. thanks to the leverage of spreadbetting

so here is my theory

share trader has £100,000 and makes £20,000 one year

spreadbettor has £10,000 in a spreadbetting account and opens the same positions as the share trader above and gives himself the same market exposure as the share holder and also makes £20,000 that year

so the share trader has made a 20% anual return and the spreadbettor a 200% anual retun

the only catch here is that the £10,000 spreadbetting account would not be able to cope with as much drawdown as the £100,000 trading account

but goes to show that 3 figure returns in terms of percentage are very possible in spreadbetting

any one wish to add to this?

 

[LiamH]

I'm sure 3 figure returns are possible and probably quite achievable when spreadbetting but leverage is scary when it works against you, drawdown and it's psychological impact are not to be underestimated.

Something I've realised after years of dreaming about what I could make... There's no point in thinking about what you could gain, no point at all. Simply sort yourself out with a strategy and MM that you can handle then trade for a year and see what you've made. If it's 3 figures then good for you sir and if not well then it'll just take that bit longer to get yourself on the rich list.

 

[Pi3141]

If that share falls 10% in value then your account is wiped isnt it? (Or is my maths wrong - sorry)

In any case, its like Liam said above, leverage is a double edged sword. It will amplify your gains as well as your losses. First and foremost think about protecting your capital rather than dream about what your gains will be. I remember - when I first started trading - dreaming about how I could afford to buy a brand new Mini Cooper S after just 3 months if I traded at £100 a point... ..I'd like to say the mini is now sitting in the garage.. but there is no mini.. :'(

 

[KinsaleForex]

It all depends on the spreads of the currency/stock/whatever that you're trading and how you manage your account. I've been working on a strategy the past few months and am going to begin trading (again!) in January with a Finspreads Spreadbetting account.

I'll be trading FX and that's it. My maximum loss per trade will be 3% of my account and i'll look to make 3% gain as well. If you start your account with £10k then for your very first trade your max loss will be £300. It takes over 200 trades, sticking religiously to this "3% rule" to wipe your account. On the other hand, if you make 200 successful trades you're up at over £3.5mil. So three figure returns are very possible with spread betting.

Obviously the next step is getting a strategy you're comfortable with and addressing any psychological issues you may have with a loss or even a win. And finally; executing all of it.

 

[LiamH]

I'll be trading FX and that's it. My maximum loss per trade will be 3% of my account and i'll look to make 3% gain as well. If you start your account with £10k then for your very first trade your max loss will be £300. It takes over 200 trades, sticking religiously to this "3% rule" to wipe your account. On the other hand, if you make 200 successful trades you're up at over £3.5mil. So three figure returns are very possible with spread betting.

I'm pretty sure you'll be broke long before you hit 200 losing trades at 3% risk.

 

[davidh1819]

If that share falls 10% in value then your account is wiped isnt it? (Or is my maths wrong - sorry)

In any case, its like Liam said above, leverage is a double edged sword. It will amplify your gains as well as your losses. First and foremost think about protecting your capital rather than dream about what your gains will be. I remember - when I first started trading - dreaming about how I could afford to buy a brand new Mini Cooper S after just 3 months if I traded at £100 a point... ..I'd like to say the mini is now sitting in the garage.. but there is no mini.. :'(

i did mention the catch above that the spreadbetting account could not cope with as much drawdown at the trading account. however if your a good trader the double edged sword could be a very good tool indeed

 

[Splitlink]

First get to the point that you have to worry about that desirable possibility, then, if that is your problem, go to a broker. I have not got there because I do withdraw profits and spend. I'll never get rich!

One thing is for sure. If you do arrive at that point, you have an edge!

 

[KinsaleForex]

I'm pretty sure you'll be broke long before you hit 200 losing trades at 3% risk.

Of course, i was merely making a point!

 

[nunrgguy]

3% win for 3% risk is suicide more so emotionally than financially. Up down up down up down up down. 3% risk on 1 trade is pretty reckless. Risking 0.5 to 1% you can make excellent returns if you learn how to run and manage positions. Don't go the overleveraged route, will lead to ruin imo but of course it depends on what suites you personally.

 

[SanMiguel]

I'm pretty sure you'll be broke long before you hit 200 losing trades at 3% risk.

3%'s not that bad but you need to know or have an idea of your worst losing run. 2% is a bit more comfortable emotionally but then you should really try for 1:2 or 1:3 on every trade to make it worthwhile.
Also, if you lose 10% of your account and reduce your size then you will have to make back an effective amount of more than 10% just to break even.

 

[LiamH]

3%'s not that bad but you need to know or have an idea of your worst losing run. 2% is a bit more comfortable emotionally but then you should really try for 1:2 or 1:3 on every trade to make it worthwhile.
Also, if you lose 10% of your account and reduce your size then you will have to make back an effective amount of more than 10% just to break even.

Agreed, I wasn't saying 3% is too much. In fact, 3% is my max risk per trade.. I took issue with it being stated that risking 3% you will have to lose 200 trades before you're broke which is b0llocks obviously lol more like 50 trades.

 

[LiamH]

Of course, i was merely making a point!

No, you said that by sticking to 3% risk per trade you would need to lose 200 trades to blow the account. This isn't the case, it's more like 50 although I can't be bothered working out the exact figure.

 

[KinsaleForex]

3% win for 3% risk is suicide more so emotionally than financially. Up down up down up down up down. 3% risk on 1 trade is pretty reckless. Risking 0.5 to 1% you can make excellent returns if you learn how to run and manage positions. Don't go the overleveraged route, will lead to ruin imo but of course it depends on what suites you personally.

Suicide in your opinion maybe, but for me it seems to be working so far.

Of all the threads i've read, risking 0.5% is the lowest i've read about. It's what suits the person like you say. This is my third time around so my emotions are very much in check at this stage.

 

[kalott]

10 000 - 90% = 1000

1000 x 90% = 1900

1000 x ? = 10 000?

 

[KinsaleForex]

No, you said that by sticking to 3% risk per trade you would need to lose 200 trades to blow the account. This isn't the case, it's more like 50 although I can't be bothered working out the exact figure.

Do the maths, you'll find its actually over 300 trades to go from 5,000 to 0. (i stopped counting when i got to 0.77c) Losing 3% a time. Obviously it gets to figures that aren't trade able, for example i think Finspreads (the company i use) is 50p bet per pip minimum. But the fact of the matter is 50 losing trades @ 3% from 5,000 takes you to 1,090.32 which is still a trade able account. Though if you lose 50 trades in a row you're doing something wrong.

5,000 / 100 * 3 = 150. 5000-150 = 4850
4850 / 100 * 3 = 145.5. 4850-145.5 = 4704.5
etc.

 

[brettus]

It all depends on the spreads of the currency/stock/whatever that you're trading and how you manage your account. I've been working on a strategy the past few months and am going to begin trading (again!) in January with a Finspreads Spreadbetting account.

I'll be trading FX and that's it. My maximum loss per trade will be 3% of my account and i'll look to make 3% gain as well. If you start your account with £10k then for your very first trade your max loss will be £300. It takes over 200 trades, sticking religiously to this "3% rule" to wipe your account. On the other hand, if you make 200 successful trades you're up at over £3.5mil. So three figure returns are very possible with spread betting.

Obviously the next step is getting a strategy you're comfortable with and addressing any psychological issues you may have with a loss or even a win. And finally; executing all of it.

haha 3% x over 200 = 100%. goodluck!

 

[SanMiguel]

No, you said that by sticking to 3% risk per trade you would need to lose 200 trades to blow the account. This isn't the case, it's more like 50 although I can't be bothered working out the exact figure.

not if you reduce the risk on each trade.
3% of 10k = 300
take a loss = 9700
then you risk 3% of 9700 = take a loss of 291.
but tradin this way you always need to make up more to win it back.
For example, with a 1:1 ratio, losing your 1st trade, but winnning your second, you account will still be down by £9.

Anyway, it's pretty irrelevant compounding like that per trade, better to compound per month or per set milestone or always have a fixed amount.

 

[KinsaleForex]

not if you reduce the risk on each trade.
3% of 10k = 300
take a loss = 9700
then you risk 3% of 9700 = take a loss of 291.
but tradin this way you always need to make up more to win it back.
For example, with a 1:1 ratio, losing your 1st trade, but winnning your second, you account will still be down by £9.

Anyway, it's pretty irrelevant compounding like that per trade, better to compound per month or per set milestone or always have a fixed amount.

You've put that far more eloquently than I attempted, thank you!

 

[LiamH]

not if you reduce the risk on each trade.
3% of 10k = 300
take a loss = 9700
then you risk 3% of 9700 = take a loss of 291.
but tradin this way you always need to make up more to win it back.
For example, with a 1:1 ratio, losing your 1st trade, but winnning your second, you account will still be down by £9.

Anyway, it's pretty irrelevant compounding like that per trade, better to compound per month or per set milestone or always have a fixed amount.

Apologies to Kinsaleforex then... I didn't think you'd get so many out of it compounding down, I still thought it'd only be about 50 although hadn't bothered to do the calculations. My bad.

 

[KinsaleForex]

Apologies to Kinsaleforex then... I didn't think you'd get so many out of it compounding down, I still thought it'd only be about 50 although hadn't bothered to do the calculations. My bad.

No probs! Turns out from 5k to less than 1cent/pence is 432 trades!