Spreadbetting Vs Real Trading

[BBB]

Fortunately, when it comes to taxation I am able to get he best advice for my circumstances so I am fully aware of where I stand.

I am merely pointing out that spread betting is not as bad as it is made out to be and I leave individuals to make their own choice. It is of no advantage or disadvantage to me if they choose to do 'Real Trades' as opposed to Spread Betting but it is better to put forward both sides of the argument.

Option trading is for people that understand options and the fact that a high percentage of options expire worthless is of no major relevance just as the fact that a high percentage of traders losing money is irrelevant. The object is for the individual to make money, find a niche and excel at it.

I realise that you are probably very good at what you do and have many years of experience but does it mean that anyone who does things in a different way is a novice or incompetent?

Fair points.

As for the last paragraph, we are always learning and no one individual can ever claim to know everything. It does anger me though when people insist they know what they are doing (probably only to massage their own ego), when they post stuff that is incorrect, plain wrong, or worse, out right lies, that if a newbie were to take as gospel truth, would lead to losses.

I wouldn't like to think anyone would lose money unnecessarily because they believed some anonymous idle postings that were only made in attempt to console himself that he/she knows what he/she is doing after yet another losing day. If an IFA gives you details that are wrong - he can go to jail. If some self proclaimed expert posts some rubbish here and it is believed then....

I'm open to others opinions - or ideas that are made on sound principle, or at least some thought has gone into them. Geez - I must have posted some dross in my time, but I've never made false claims about what works, my profitability claims or stuff that I haven't thought through.

 

[LION63]

BBB,

I cannot and will not try to argue with your post as I would like to think that I am a reasonable and logical individual.

 

[BBB]

The points weren't made with you in mind, but general observations of T2W /ET(sometimes)

 

[wisestguy]

SBs x DAs

Thanks for your message Wisestguy you wrote "trading with SBs have some problems" can you please elaborate what they are and back to my original question which of the two direct access or Spread betting is more trader friendly?

Best regards

Rizwanuk

Well , regarding SBs:

Some of the more unscrupolous firms / dealers may :

- deny deals when confirmed because they quoted a wrong price ( too far from the market ) .

- bad / problematic dealers in general

- softaware breakdowns

- price given online does not match price when deal is done

- price given online changes too fast

- spreads changes about too much.

just a few off the top of head , but let me say DA brokers could give you just as many problems .

I would say for smaller amounts , especialy if you can use credit ( big advantage ) then go for the better SBs , finspreads, D4F ?

O/w for bigger amounts the try DA .

 

[wisestguy]

>>when they post stuff that is incorrect, plain wrong, or worse, out right lies,


such as ?

 

[Tuffty]

BBB. I'm interested how you came by your views on Spread Betting. If you don't mind can I ask if you have had accounts closed at spread betting companies (for being too profitable) and did you have to pay tax on these earnings?

 

[Novak]

Hi all,

I'm a novice to spreadbetting (1st post!) so apologies if these are stupid questions :

are the SB brokers in anyway legally bound in the manner the price they quote/give affects that of the 'real' entity?

Is being issued a contract which is not at the current price quoted a common problem (also applicable to closing a contract)?

Thanks,

Novak

 

[Edster]

I was under the impression that SB companies made money whether you won or lost. Is this wrong?
I use Spreadex and Cantor Index.

 

[LION63]

Spread betting companies make money on the 'spread', so they effectively make money irrespective of the outcome on an individual trade. You will tend to find that their spreads are wider than those obtainable in the market, the difference is theirs. However, some of them get greedy and want to make more profit by becoming the principal in the transaction, then it is really a case of anything goes.

Example:
IG Index will quote you RBS 1718-1719 plus IG spread whilst Deal4Free will quote you 1718.5-1720.5 but the quote in the market is 1718-1719. As you can see, they both make money from the transaction but they may choose not to hedge the position in the market in which case, you are trading against the house. It is not practical to hedge all the small trades that they take on.

 

[stopped out]

Hi all
After buying/selling shares and traded options i find spresdbetting far easier and less complicated to do, the tax free advantages and not having to keep cotract notes are a real + for me.

 

[BBB]

BBB. I'm interested how you came by your views on Spread Betting. If you don't mind can I ask if you have had accounts closed at spread betting companies (for being too profitable) and did you have to pay tax on these earnings?

LOL! No. I have never had a spread betting account and I never will. Like I said earlier, the business model simply isn't geared towards allowing the average 'punter' to be successful in the long term.

I simply could not trade on probabilities using a spread betting account - it simply doesn't allow you to do this. When I trade I need probability to be on my side - not against me. Hope and prayer doesn't seem like a very intelligent way to speculate in my opinion - no matter how good an analyst I may or may not be - and the spread betting bookie knows this too! I know it, he knows it, but half of Trade2Win dont know it - despite being reminded countless times.

 

[Battler]

Well , regarding SBs:

Some of the more unscrupolous firms / dealers may :

- deny deals when confirmed because they quoted a wrong price ( too far from the market ) .

- bad / problematic dealers in general

- softaware breakdowns

- price given online does not match price when deal is done

- price given online changes too fast

- spreads changes about too much.

just a few off the top of head , but let me say DA brokers could give you just as many problems .

I would say for smaller amounts , especialy if you can use credit ( big advantage ) then go for the better SBs , finspreads, D4F ?

O/w for bigger amounts the try DA .

What is the minimum required before you go DA?

 

[dr_d_michaelson]

I have never had a spread betting account and I never will.

Wow. Really? Absolutely NO real experience at all of spreadbetting? And on the basis of all that experience you have such strongly expressed opinions? It's a very great pity for the other members here that you've chased away from this thread with insults and allegations of lying one of the few people who actually knows a lot about the subject, isn't it? Some of them might have wanted to learn something from him. But you have no need to, I suppose, because you already know that you're right. And heaven forbid that the facts should ever get in the way of that.

 

[wisestguy]

>>What is the minimum required before you go DA?


in my view , around US40k for initial margins and another 10-20 k reserves for your top ups.

 

[wisestguy]

>>Hope and prayer doesn't seem like a very intelligent way to speculate in my opinion - no matter how >>good an analyst I may or may not be - and the spread betting bookie knows this too! I know it, he knows >>it, but half of Trade2Win dont know it - despite being reminded countless times.


oh yeah , then why is it that I have been consistantly profitable on SBs .

winning is the same everywhere , you have to know the game ( Theirs ) inside out and take advantage of them.

nothing to do with praying and less with analysis then you may think.

the majority of traders lose FULL STOP whether on SBs or DA .

side note : on a number of occasions I have had mistakes from SBs IN MY FAVOUR . that were fun ! how I cashed in .

 

[Tuffty]

BBB, As I understand it your views regarding spread betting are based on their business model. The fact that they don't hedge all the positions layed onto them is a big issue for you hence you don't have a spread betting account.

If one assumes that the average trader looses and that some (a small minority) do consistantly win. My assumption is that the spread betters are happy to keep these winners on their books for two reasons. 1) If they didn't the rest of the client base would know about it via boards like this.
2) The spread companies view winning and loosing as random events (maybe with some bias due to the average trader loosing) so they will always have 'consistant winners' at the winning end of the distribuiton curve which they view as 'luck'.

That is why I was interested if you had had a profitable account closed as it would have confirmed the argument you make and undermine my assumptions about their business model.

 

[BBB]

BBB, As I understand it your views regarding spread betting are based on their business model. The fact that they don't hedge all the positions layed onto them is a big issue for you hence you don't have a spread betting account.

If one assumes that the average trader looses and that some (a small minority) do consistently win. My assumption is that the spread betters are happy to keep these winners on their books for two reasons. 1) If they didn't the rest of the client base would know about it via boards like this.
2) The spread companies view winning and loosing as random events (maybe with some bias due to the average trader loosing) so they will always have 'consistant winners' at the winning end of the distribuiton curve which they view as 'luck'.

That is why I was interested if you had had a profitable account closed as it would have confirmed the argument you make and undermine my assumptions about their business model.

Yes, I agree with these points to some extent. I dont understand why you think the spread betting companies hedge or not is an issue for me - it isn't really.

Remember that they will tolerate the small winners, but if you are drawing massive amounts of money from a spread betting company, they WILL close you down. I'm not interested in trading to be a small winner - that is within the toleration threshold of a spread bookie (If I wanted to be a small winner, I may as well get a 9-5 for a lot less hastle). I want to trade for big money. So youre selling your self short with a spread bookie. They may even allow the odd massive winner now and then, but as you rightly say, they will put this down as a marketing cost to draw in new accounts. I doubt they would tolerate some guy taking out £500,000 regularly (Not suggesting I make that much ).

Apart from the business model, the main disadvantage is that it is very hit and miss. You take youre punt and thats it. Back to hope and prayer. There is no way to manage your position is there - just a stop loss which in spread betting is probably more of a hinderance than a help.

 

[BBB]

Wow. Really? Absolutely NO real experience at all of spreadbetting? And on the basis of all that experience you have such strongly expressed opinions? It's a very great pity for the other members here that you've chased away from this thread with insults and allegations of lying one of the few people who actually knows a lot about the subject, isn't it? Some of them might have wanted to learn something from him. But you have no need to, I suppose, because you already know that you're right. And heaven forbid that the facts should ever get in the way of that.

Now you're being siilly - or ignorant. Why don't you read the thread again?

The guy implied spread betting is his main source of income and he supports his family with it as it is tax free. As I pointed out, spread betting is not tax free if it is your main source of income - so it would apear he doesn't know as much as he would like people to believe.

I dont need to jump off a cliff to know I can't fly. However you are more than welcome to try.

Good luck.

 

[BBB]

Spread betting companies make money on the 'spread', so they effectively make money irrespective of the outcome on an individual trade. You will tend to find that their spreads are wider than those obtainable in the market, the difference is theirs. However, some of them get greedy and want to make more profit by becoming the principal in the transaction, then it is really a case of anything goes.

Example:
IG Index will quote you RBS 1718-1719 plus IG spread whilst Deal4Free will quote you 1718.5-1720.5 but the quote in the market is 1718-1719. As you can see, they both make money from the transaction but they may choose not to hedge the position in the market in which case, you are trading against the house. It is not practical to hedge all the small trades that they take on.

LION - this isn't quite right. You're confusing a spread bookie with a market maker.

A spread bookie wins when you lose - by keeping the margin, and he loses when you win. Thats why he makes a wider spread - so he can hedge if necessary, but also to make it harder for the punter. This is also why is you become incredibly successful he will start widening your spread, insist you phone in orders etc.

Don't want to sound too harsh about this, but you really do need to understand every aspect of speculation before you get involved.

 

[BBB]

BBB - just a quick point here. In a way, some banks ARE starting to use these methods. Not actually spread betting per se, but many FX desks at small and medium sized shops are now starting to get the big single bank dealing platforms in as part of their armoury (UBS FX Trader, Deutsche Bank Autobahn etc). And these platforms share many of the traits that you are listing as negatives in spreadbetting (they arent direct access, you are trading with someone who has a vested interest in you losing, they do from time to time go down / widen spreads / requote etc). They wouldn't ever be given 'true' spreadbet platforms as that's the wrong way round in terms of the price 'food chain' - it's their activity when they access the interbank market that drives the spreadbet platforms' prices. But the banks, when they use the fx platforms of the big boys, ARE able to manipulate the price a bit (depending on the sophistication of the price engine).

I'm not necessarily disagreeing with you on all of the points you have made, just thought this piece of info might be relevant.

GJ

Good points GJ. Correct me if I am wrong here - but you seem to be describing an OTC market? In most OTC transactions, the other party always has a vested interest in seeing the other side lose don't they - unless one party offsets with a third party? (not so clued up on OTC)

I am sure you will agree though - there is a HUGE difference between an 'insider' at one of these organisations and some chap sitting in an office at ACME Widget Corp sneaking a spread bet on his lunch hour who has no inside track or ability to front run in anyway, let alone the time to bother with considering the best ways to adapt a position to market conditions - or the importance of being able to do this?