Spreadbetting or using a broker?

[Johnny Bravo]

Hi!

Don't want to sound daft but when trading stocks or commodities, when should you spreadbet and when should you use a broker?

I know spreadbetting is tax-free, but the spreads seem a little on the large side on thin markets.

Thanks,

J

 

[Trader333]

If you are position trading (ie holding overnight or for several days) then using a SB company makes more sense. If you are trading intra-day then in my view you really should use a direct access broker.


Paul

 

[Johnny Bravo]

Thanks Paul. I will be position trading. So you would use SB even for small companies of under £50M cap?

 

[Trader333]

You may find a problem in companies with under £50M being listed by SB companies for trading in the first place so I would look into this a bit more.

The advantage of direct access diminshes the longer that you hold the trade which is why if you are holding longer than a day you may as well use a SB company in my view.


Paul

 

[adrianallen99]

I had a look at trading small companies with a spreadbet firm. Problem is, due to the low volume in those sort of markets it is difficult to get a reasonable quote from a spreadbetting firm. Also for a share that cost something like 8p a share they would only allow me to place my stop at 0.01p a share.

I use to trade a lot of AIM listed stocks and found it far less hassle to just use a broker. I would hold position from 2 hours to about a week. I never made more than 1 trade in a day and sometimes only made 2 trades in a month.

 

[Uncle]

Unless your trading companies in the FTSE 350 or similiar sized companies in non U K markets forget Spread Betting companies there isnt enough volume for them to make a decent market and therefore you will have problems.

John

 

[Racer]

If you are shorting I wouldn't use spreadbetters but prefer CFDs as you will not only get a better price but you will get interest on the trade whilst it is open. But you will have to pay CGT.
I use spreadbetter for longs on large caps if for a long period of time.. e.g. months, as long as the spread isn't too wide. Small caps, very difficult with spreadbetters as already mentioned