Spreadbet bias - true or false

[madasafish]

It is a PUBLISHED FACT (from IG's accounts) that they make money when clients lose.. and vice versa. They make because they have no bias but HUGE spreads.

Those with narrower spreads have to make their money somewhere apart from the spread..

As Riz says, those with experience know from many years observation that bais versus futures is a fact of life with some companies. Full stop.

Any suggestion otherwise is just flying in the face of real life..(and if you want to do that give up trading shares and take up politics..

 

[delboy trotter]

If the SB's have a large imbalance in their book, then of course they will hedge. They would be mad not to. As for individual trades, I don't think so. Far too inefficient. Much better to wait and gather up all our little pennies into one large pile, then hedge if required. As for Bias, I gave up on Finspreads. Just could not beat their intraday spreads/bias/shenanigans! D4Free much better, their price straddles the futures, most of the time.

db-t

 

[sidinuk]

SB firms are not perfect, we all know that, but I think we have to be fair. D4F track the futures tick for tick, fact, the only difference is the increased spread.

Where D4F fail is the delay in filling market orders, which results in them having to re-quote. This is due to the fact that they only have a limited number of dealers to process those orders. I always use stops to enter and exit and always get filled at the price I want, even if the market is flying.

I have used City Index and IG Index and they are next to useless if you want to actually make money. If the Market starts moving a coincidental technical problem will hit City's on-line dealing system and require you to phone up! Coupled with the extortionate spreads they very much have the edge over you.

 

[bigblue]

In the words of a Liverpudlian anywhere 'Calm down, calm down'

 

[sltsang]

Hi,
Please note, the 20 pts bias people are talking about is on Dow cash, not Futures, though the SB co's still do bias, so lets say CMC is 0.5 spread on S&P fut, it'll bias up or down but without ever going outside.

PS....if a SB co bias the S&P fut 20 pts, please let me know !!!

 

[delboy trotter]

To continue this thread,

For those who have experienced it personally, at what stage do D4F start to re-quote you continuously, as a "marked" client? Is it when you get to a particular level of staking or is it some other criteria?

db-t

 

[sidinuk]

My guess is that what actually happens with D4F is that for small bets of a few pounds a point these get dealt automatically, anything more gets routed through a dealer who has to check the account (or finish his coffee) first before it gets dealt.

I imagine that this apparent "marking" of accounts happens when the trader moves his bet size up a bit as a result of a few good trades, giving him the impression that he has been singled out for special treatment due to his success.

 

[mmillar]

Don't know about the other SB firms but D4F certainly have an 'auto-trader'. They use it for small bets (less than £5-£10). But the size of bets it takes and when it is on or off is changed depending on the time of day and market conditions. When it isn't on you have to wait for a dealer to (finish his coffee and) confirm your trade.

I used to have lots of requotes with D4F because they had a two click dealing system. You would click once to say you wanted to deal at a price, then you would have upto 5 seconds to click again to confirm the trade, but of course the market would move in that 5 seconds so you would be requoted. They changed their system a couple of months ago so that there is now only one click to complete a trade.

 

[delboy trotter]

My own experience so far! Is that I always get filled instantly, but then I am only betting small at the moment. Anyone else with experience of problems with D4F quotes?

db-t

 

[Helenqu]

Hi db-t,

I've only ever bet up to £5 a point on UK stocks ( and £1-2 on indices) and never had a problem with fills, so I suspect the auto trader covers all my trades.

 

[ChartMan]

I would think it's more to do with how much £ profit you are making, not so much the £ per point. I wont say " who knows for sure", they'll post if they see fit.As we all know, the SB's scan the BB's for clues........

 

[stock trader]

There seems to be a lot of uncertainty here surrounding this issue with SB companies bias and their spreads...has any one concerned thought of contacting the Regulators 'FSA' it is the authority that governs and monitors the activities of SB companies. Perhaps we could get them to shed some light on the issue.

regards

ST

 

[NickW]

Out of interest - has anyone actually documented a biased price? Maybe if you've been affected then you could post the details and someone with a real futures account could check the actual tick data. A documented history would be a prerequisite to take things any further.

 

[catsdad100]

I have recently become a "marked client" with D4F. Every single trade I now do, no matter how little per point, goes to a dealer and not through the auto system. This generally costs a point or two at each end of the trade once the requote finally appears. Apparently this happens if you do more scalping type trades in a day than they like. Apparently the computer determines the level, and you remain marked until your level average drops back to acceptable - although they can't/won't tell me what is an acceptable level. I was told that I would have to alter my trading style or consider whether they were the best company for my trading style. Make what you will of this, but I have my own views. Suffice to say that if every time I traded they bought or sold the shares to match, then the more trades I do, the more money they make. Yet for some reason they want me to trade less. Anybody who thinks they are the same as brokers is kidding themselves.

 

[ChartMan]

You're definitely not alone...... Sadly, even if the SB's read these BB's, they won't be changing their act as there are far too many that are happy to play along with them, scraping a bit here and a bit there, for them to feel in any way inclined to offer a "better" service....... Sad but True.

 

[Paul B]

hi
I use to only bet between £5 to £10 a point with D4f had no problem and not doing to bad , so I then increased to £20 no problem. when I started to trade at £40 to £100 a point started to have huge problems with D4F as someone ask do they mark some traders and hedge bet. Yes in my expreince, had spreads moved from 1 point to 10 and waiting to have a trades delt with cost my dear. The longest I waited was a 2 full mins and guess what the price had moved I didnt lose money I was even but they made on the spread. Dont get me wrong I am not complaning about by trades and this is not blame the the other man because I still trade with D4F but onlyt at £1 to £20 ponds a point and have no problem and make money, but you rise above these amounts and you start finding it harder to make money and I have spoken to D4F and got told the software is automated to a point and they can only fill larger order with dealers.

Paul

 

[mmillar]

PaulB - I would consider £100 per point a big bet. You haven't said what you trade but on the FTSE index for instance this is equal to a trade of nearly £400,000. That's a lot of money and you would expect them to want to manage it rather than go through an auto-system.

catsdad100 - It sounds like you spoke to them and they confirmed that they were marking you. Is that right? I think that is the kind of evidence people are looking for rather than the usual speculation. What size bets do you do? And on what instruments. Who did you speak to who told you that you were doing too many trades per day? Brian Griffin is their head trader - I would expect him to know what an 'acceptable level' of trading is.

It's going to sound like I'm making excuses for D4F again but I was at a seminar there last year and one guy had a particular trading style where he placed lots of huge bets every morning with limits and stops. D4F hated him because one trader spent half his day just hedging this one guys bets. I can imagine in that kind of situation they would be happy to get rid of you. Again, I'm honestly not on the side of the spreadbet companies I'm just trying to understand the facts.

 

[sidinuk]

Lets not forget that Financial spreadbet companies are there as a tax fiddle, that is there only purpose. Without the fact that gambling winnings are not taxed they wouldn't exist. You are dealing with a bookmaker not a marketplace and the spreads and slippage are bigger as a consequence.

You effectively pay more to use a spreadbet company but this is offset by the tax advantages. Of course you only gain from the tax advantages if you actually make a profit from trading. SB co's make a big thing out of the tax advantages, but lets face it how many people using them actually make a profit? If you have a tough year and make a loss then thats that, if you were actually trading then that loss could be offset against other income or gains in the year and you could get tax back.

The other point to consider is that if you trade too often then the increased costs with SB will be more than any tax saving you could make. Of course the SB co's know this and that's probably why they try to discourage people from scalping. They know that they are not right for that sort of trading.

Basically SB companies are great for taking longer term views, but very bad for the short term trader. Let's face it the odd point lost on a trade that you hold for 3 months is neither here nor there, over 5 minutes, its your whole profit!

As a trader you need to weigh up the benefits and costs of who you use to trade. If you decide that a SB company is 'ripping you off' then don't use them, there are plenty of other options!

 

[catsdad100]

mmillar - As I am still trading with D4F, I cannot say enough to reveal my identity as, has been pointed out, they also read these boards, and I have no desire to make my own situation even harder. Yes, I did speak to a head trader, which is how I finally found out what was happening. None of my bets were large - usually £20 ppp on FTSE100 stocks. I have accepted that this is now how it is, my main gripe being that having spoken to IG, Cantor, City etc., none of them seem to have a problem with lots of trades. I also feel that we should be told of this policy, rather than find out this way. However, it is my choice to continue, as the spreads elsewhere make the alternatives no more viable - better the devil you know etc. I also feel there is nothing to be gained from phoning and talking to anybody else in D4F, as the policy is such as it is, and winding them up will only be to my own detriment ultimately. Really, all it does is make the job harder, but life would be dull without these little challenges ! The other thing I think you should bear in mind is that gathering evidence is a bit pointless. The simple fact is that if you try to do anything much with it I suspect you will quickly become an ex-client. These companies are there to make max. profit with min. hassle. We have to accept this and if we can make wages on the way through then it's a result. I do not imagine any of them are much different/better/worse than the others. If any particular one stands out above the others please do let me know, although in my experience, despite recent events, I will stay where I am.

 

[NickW]

I think you're right. Scalping isn't the road to riches with SBs, it's fun and good to learn with but thats it, position or 2-3 day swing trading has a better chance. I've read the stuff on web posted by Robbie Burns who I think writes articles for a newspaper and also have read the stuff by Vince Stanzione (?), both of these guys appear to make money by taking on longterm positions.

Scalping with SB's for 2-3pts is hard to do because when you place the trade you're already well out of the money. You can do it but you should really wait for the big momentum setups, which may only happen 1-3 times - true scalping needs a higher frequency trading pattern than this to be succesful. If your trading style is scalping then I guess you've decided to trade fulltime to try and make a living at it, and lets face it you can't make a living scalping 2-3pts only twice a day - and that would count as a fairly good day for me spreadbetting.

To make it harder for you still none of the realtime or helpful newsletters you might subscribe to off the web will match with the prices you see on your screen. SB cash prices, which have better spreads, are based on the future minus fair value and intraday premium variations, so they are going to be all over the place and can't be compared to the real cash index. The SB spreads on the index futures are also about 50% greater still than those on their cash prices. I believe the spread on the real S&P future is only 0.1 so even with the best spread that I've seen of 0.7 no outside help is going to be useful to you for scalping a regular 2pts. Plus most of the outside help is about the e-mini which does not track either the real future or the cash index either.

Also thinking aloud here, most of the outside newsletters are for swing trading the e-mini, or the real cash index (signalwatch), so you're also at a disadvantage here as well. Best to trade small and remember to try and fit what they say to what you see on your own screen until you can work out to trade on your own charts.

Paradoxically I believe its a good idea to learn trading by scalping first with spreadbets! You need to learn how to tune into the price action, and get used to getting in & out quickly and often so that cutting your losses is not an issue. Spreadbets are great for beginners because you can trade really small and often - just don't expect to make much money for the reasons I've given.

Another word of advice is that if you enter a trade thinking the broker is out to get you then you're going to do daft things with your stops also - like take them off - I know I have - try to put it out of your money that the SB broker is going to zap you on purpose with a biased trade. That was the purpose of me starting this thread was - to try and get to the bottom of why people believe that there is some biasing going on so that I could improve my trading. I've decided that no one has proven this for sure and in future I'll just pay for these lessons - my trade was going wrong anyway.

I'd love to be proven wrong about scalping with SB's being only mildly profitable. I've been fulltime trading for nine months now, its not a hobby I'm trying to make money to live on, I've been wiped out once and just recapitalised to start again in 2003. I've tried breakouts, swing, position and pivot point trading in this time with SBs, read tons of books and websites and subscribed to many newsletters - I'm serious about learning how to do this. I believe I've paid handsomely for this education, so make of my thoughts what you will.

My current inclination is to try scalping the real S&P e-mini's with Interactive Brokers and then to longterm position trade the same index with my spreadbet broker when the no brainer but infrequent setups come up - e.g. buy and hold from 800 etc. The other big missing piece of the puzzle for me is L2 which is on my list of things to learn in 2003.

Good luck in your trading, Nick