Spreadbetting as a university student

[devildriver1]

Hi t2w,

I've finished my second year at university and am due to start the third this october. However I have a few weeks to kill and I've been reading up on this SB stuff that got me interested - enough to make me set up a demo account that I will play around with before any money is at stake.

I should like to mention that I am not doing this with the intent of paying for my education or becoming a self made millionaire. I am doing this primarily because I am interested in broadening my knowledge about markets.

Many people on this forum seem to be saying that SBing is not profitable for the vast majority and liken it to a casino, with the companies being market makers that profit from the loss of its users. I am therefore slightly skeptical and have a few questions regarding SB:

1) For someone like me who wants to experience the world of trading with a limited amount of money (say, £500), is SB a good option or would something like FX or trading stocks directly be more appropriate?

2) Losing £500 would not be ideal, but it wouldn't be the end of the world either. I want to make sure that I make use of stop losses to ensure that I don't end up losing more than that £500 I initially commit. Which company provides a safe account option that won't land me in bs?

3) Stop losses sound like a no brainer, other than the situation where your open trade is closed automatically but if you had waited a bit longer it would have rebounded and potentially earned you a profit or smaller loss. Are there any other drawbacks to them?

Thank you, responses will be greatly appreciated.

 

[BeginnerJoe]

Yes, stop losses are a no brainer. They can see exactly where they can take your money and they have no need to use their brain to work out where that point might be.

 

[devildriver1]

Yes, stop losses are a no brainer. They can see exactly where they can take your money and they have no need to use their brain to work out where that point might be.

Funny. But I hope I get some responses which aren't just trying to be witty

 

[BeginnerJoe]

Funny. But I hope I get some responses which aren't just trying to be witty

I think you are at least 5 years and £10k+inflation away from seeing I wan't trying to be witty.

 

[peakoil]

1) Spread betting (or indeed *any* other form of taking a position on market movements) is only possibly a "good" option if you can, hand on heart, say that you can afford to lose £500 without its negatively affecting your life.

2) Believe me too, even if you'll be placing stop losses better than most, it's perfectly possible to develop your £500 into £50 within a matter of months, that is *even if* you deployed stop losses repeatedly, and bet no larger than £1 per point at any given time. OTOH you are effectively paying for experience, and if you've any money at all left by Xmas, some would say you've got some experience for a cheap price.

There are reliable tales of a few professional poker players who made only one deposit in their life, and lo and behold, a few years later they're well known professionals - without ever depositing again. The tales of 'successful' spreadbetters (notwithstanding that definitions do indeed widely vary as to exactly what time-frame and amounts made are required before one can call themselves that) who've only made one deposit and later found themselves with a respectable run of results over several years, are not so readily forthcoming. It's not at all uncommon for people to lose sums well into the four figure territory before they've moved more than one foot out of the learning trough! So please don't believe that using well placed stop losses is the primary answer to your concerns. There's a lot more to risk & money management, trading plans and timing, than just being able to place stop losses in the right places!

3) Even if you one day come to acquire an intimate knowledge of trading signals, "whipsaw moves", like you've described are not uncommon, neither are "failed pattern setups", "premature breakouts", "bull traps" and "bear traps" etc. Btw, if you have to think twice about what I'm talking about, then you've definitely got some reading to do first. Such moves solely exist to take money from your pockets and donate it to the market - which, as it's a zero sum game (albeit some do have an effective argument that equities are not strictly zero sum), as such must continue to survive indefinitely from the losses of others. And always remember this, when all is said & done:

Markets are under no obligation to reward your correct opinions.

Btw, do you know anyone who is either employed professionally in the markets or who perhaps knows someone else who is? You could learn alot from search a person before you take any further steps!

HTH with your above queries.

 

[devildriver1]

...

Thanks for the reply, it helped a lot! I made around 1k from matched betting (I purposefully avoided mentioning this in the topic starter in case anyone got the impression I was looking towards SB as the next step, which is not true since they are very different things) so it's not money that will put my finances in total jeopardy in the worst case scenario.

After reading your response to my third question, it seems as though I do have a lot of reading up to do. I do indeed have a few people who are involved in finance which is a bonus, but for now it looks like I'll be sticking to the books and demo accounts and learn the basic terminology and fundamental concepts etc. myself before asking for help.

Once again, thank you for your reply!

 

[rawrschach]

if you want to know how markets work read reminiscences of a stock operator, mackay's popular delusions, go to nobsdaytrading.com and watch his videos.

 

[x4x]

Unfortunately you won't find your answer on here - all you'll get is people's opinions, and there will be as many 'fors' as there will be 'againsts'. Then it will become a shouting match, then a bitch fight.

IG's prices are very good, I trade many multiple positions per day and come within 0.0001 of my stop (probably) several times per day (and of course many get hit too) - my stop is quite likely somebody else's limit, so no, they don't 'push' the market around to chase each individual's stop loss.

Trading is technically very easy, your success or failure will almost certainly come down to your psychological strength - sticking to your money management and trading rules is difficult but doable, but it may take many years before you find the resolve to surrender yourself to the whims of the market and simply follow your rules.

Either way it will likely be a long, difficult journey, which will cost as much as you allow it to cost, and the cost may not be only financial.

Like everything else in life - it just depends on how badly you want it - if you don't want it really badly, just don't bother with it.

 

[ssks]

One consideration that nobody has mentioned yet is that if you do look to work in financial markets after graduating, a history of actually taking part in markets during your studies will look good on your CV, or will at least demonstrate genuine enthusiasm.

 

[chinabean]

Hi t2w,

I've finished my second year at university and am due to start the third this october. However I have a few weeks to kill and I've been reading up on this SB stuff that got me interested - enough to make me set up a demo account that I will play around with before any money is at stake.

I should like to mention that I am not doing this with the intent of paying for my education or becoming a self made millionaire. I am doing this primarily because I am interested in broadening my knowledge about markets.

Many people on this forum seem to be saying that SBing is not profitable for the vast majority and liken it to a casino, with the companies being market makers that profit from the loss of its users. I am therefore slightly skeptical and have a few questions regarding SB:

1) For someone like me who wants to experience the world of trading with a limited amount of money (say, £500), is SB a good option or would something like FX or trading stocks directly be more appropriate?

Have a look and see what you are interested in. Spread-betting firms are like most companies in a particular sector, some are good, some are crap and some are ok. I went back to go and do my MBA a few yrs back and wanted access to a large range of markets without having to front a heap of margin so I went with IG who I found to be ok. If it's the limited amount of money that is an issue than FX wise, there are some firms that deal in much smaller sizes. I started with only £250 in my account and managed to grow that to around £5k in a few months however, I had previous trading experience but my point is that starting with a small amount of cash is not a problem. If anything it's good as you know you can't go with a scattergun approach and so forces you to really consider the trades you want to put on.

2) Losing £500 would not be ideal, but it wouldn't be the end of the world either. I want to make sure that I make use of stop losses to ensure that I don't end up losing more than that £500 I initially commit. Which company provides a safe account option that won't land me in bs?

I can only talk about IG but they had guaranteed stops which cost you an extra few ticks/pips in spread. ie if the market is £10.01 bid@ £10.03 and you want to buy, instead of paying £10.03 you may pay £10.05.....as an example.

3) Stop losses sound like a no brainer, other than the situation where your open trade is closed automatically but if you had waited a bit longer it would have rebounded and potentially earned you a profit or smaller loss. Are there any other drawbacks to them?

When you start out, definitely 100% use stops. As you develop, you may (or may not) find that your idea of stop levels morphs into something else but at the beginnning stops are one of your best friends! IMHO It teaches you discipline plus you can only learn and develop your trading style and technique by winning AND losing!

Thank you, responses will be greatly appreciated.

I'd definitely recommend trading a demo account for a while first to understand which markets you like and are interested in as well as how to trade. Don't get me wrong, you need to eventually trade live (ie with money) not only to try and actually make some money but some lessons can only be learnt from actual trading. However, your really really rookie mistakes can be made on and learnt from a sim!

Hope that helps and good luck!!

 

[gle101]

I am not to fond of the idea "trading" a demo account, other than as you say to get to know the instruments, the platform and test out a specific trading setup, especially if you are trading on the MT4 platform you might need it. Demo trading is definitely not trading, without bringing in the emotion part of trading it is really not much to gain. It is better to start with a micro account asap in order to have some idea on what it is all about.

 

[chinabean]

lol me too, sim trading is way too easy without the pain of actually losing! Was more talking about really silly mistakes e.g. buying instead of selling, misplacing tech analysis lines, getting stopped out for margin reasons etc etc. But say 1 month of demo trading initially to get comfortable with basic technical analysis, the kind of things that can move the markets etc might be a good idea if completely new to markets. I agree though, a live account is only when the move up the learning curve can really get going.

 

[SimonK]

Hi t2w,

I've finished my second year at university and am due to start the third this october. However I have a few weeks to kill and I've been reading up on this SB stuff that got me interested - enough to make me set up a demo account that I will play around with before any money is at stake.

I should like to mention that I am not doing this with the intent of paying for my education or becoming a self made millionaire. I am doing this primarily because I am interested in broadening my knowledge about markets.

Many people on this forum seem to be saying that SBing is not profitable for the vast majority and liken it to a casino, with the companies being market makers that profit from the loss of its users. I am therefore slightly skeptical and have a few questions regarding SB:

1) For someone like me who wants to experience the world of trading with a limited amount of money (say, £500), is SB a good option or would something like FX or trading stocks directly be more appropriate?

2) Losing £500 would not be ideal, but it wouldn't be the end of the world either. I want to make sure that I make use of stop losses to ensure that I don't end up losing more than that £500 I initially commit. Which company provides a safe account option that won't land me in bs?

3) Stop losses sound like a no brainer, other than the situation where your open trade is closed automatically but if you had waited a bit longer it would have rebounded and potentially earned you a profit or smaller loss. Are there any other drawbacks to them?

Thank you, responses will be greatly appreciated.

Don't do it. I guarantee you will lose the £500, and then your losses will consume your thoughts and cause you to lose your focus for your final year of study.

I can count the profitable traders I know on one hand and it took all of them years to get profitable.

Finish your degree and then if you still want to trade, enroll on a graduate course with somebody like Futex.

By all means, come back in October and tell me I was wrong.

 

[advfntrader]

I agree don't do it. the odds are stacked MASSIVELY against you. 98% likely your £500 (and more) will be gone within a few weeks.

 

[Luc.Chase]

If you can be patient and accept that it will likely take several years for your trading to be reliably profitable, go for it.
Have a strategy (I would recommend Al Brooks price action books, etc.), stick to it and understand that you're play the long-game.
Remember you're trading against a large number of very successful institutions, so only trade when you're at your best and most disciplined.
Choose a spread-betting firm with pricing that tracks the open market.
Don't trade news... you can't be as fast as the servers that are designed to do well at that.

 

[capitalspreads]

if you can bear to take advice from an insider i would also say do not do it.

Spread betting clients generally fall into two camps
1) people who do it for fun
2) serious traders (or people who consider themselves to be such)

oddly enough the results for both are pretty much similar.

but the one thing they have in common is that they are generally trading with excess monies that will not affect them if they lose (of course there are exceptions). Our average age of dealer is 43 (!) by which time a client generally has enough money to consider a different investment tool strategy (cfd/SB).

this does not mean that we do not have university students as clients who do well/badly in their own way. But it is fair to say that we have very few clients under 25 and Capital Spreads is quite happy for this situation to continue as it is not good PR (unless of course they win!).

Simon

 

[malaguti]

1) For someone like me who wants to experience the world of trading with a limited amount of money (say, £500), is SB a good option or would something like FX or trading stocks directly be more appropriate?

Why not just buy yourself a low priced stock and in a years time it may just pay for a mere fraction of your loan. And in that time paper trade as you will likely learn as much and then you may be ready to reinvest that 500 + into an account with a decent broker and have perfected whatever strategy you come up with. You'll have more than enough on your mind in your third year.
That's my humble advice.

 

[chinabean]

Sorry got to disagree, if the guy was doing it to pay his way then i'd agree it would not be worth it but realistically, to actually follow what's going on the markets properly, you can't do that from the perspective of a demo account or simply just reading, you need money on the table. Obviously, there are exceptions to that but that's generally what not only I've found but what most other traders will tell you.

I mean let's face it, as a student, you'll likely spend the money anyway so rather than p1ssing it up the wall, why not use it to get some experience. The only caveat I would add would be to actually read up on what's going on in the market (on a macro basis) as when it comes to the interviewing for a position, I'm thinking more asset mngmt or IB than prop shop, you'll know what's been happening recently and relate that back to specific market moves......something that can't be under-estimated when it comes to the final rounds.

In terms of trading style, I'd advocate using both technical and fundamental analysis but ideally look for trades that can run for a few days rather than hours as that way you won't get stopped out by pure "noise". There should be some decent trends to get on the back of over the next few months particularly once Europe gets its act together!

If you do decide to open an account, I can't emphasise enough, pay particular attention to what the main central banks do and also what happens with the main economies ie US, EU and China (also to a lesser degree Japan and Australia). If you want to understand what really drives market sentiment
that'll be your starting point!

 

[malaguti]

Sorry got to disagree, if the guy was doing it to pay his way then i'd agree it would not be worth it but realistically, to actually follow what's going on the markets properly, you can't do that from the perspective of a demo account or simply just reading, you need money on the table. Obviously, there are exceptions to that but that's generally what not only I've found but what most other traders will tell you.

I mean let's face it, as a student, you'll likely spend the money anyway so rather than p1ssing it up the wall, why not use it to get some experience. The only caveat I would add would be to actually read up on what's going on in the market (on a macro basis) as when it comes to the interviewing for a position, I'm thinking more asset mngmt or IB than prop shop, you'll know what's been happening recently and relate that back to specific market moves......something that can't be under-estimated when it comes to the final rounds.

In terms of trading style, I'd advocate using both technical and fundamental analysis but ideally look for trades that can run for a few days rather than hours as that way you won't get stopped out by pure "noise". There should be some decent trends to get on the back of over the next few months particularly once Europe gets its act together!

If you do decide to open an account, I can't emphasise enough, pay particular attention to what the main central banks do and also what happens with the main economies ie US, EU and China (also to a lesser degree Japan and Australia). If you want to understand what really drives market sentiment
that'll be your starting point!

I'd not advocate putting real money on the table until you were comfortable with what you were doing...bad idea imo. But like i say, thats my opinion.

 

[hacks]

If you have limited funds of only £500, you could always trade 10p per point.