statistics

[wasp]

If 95% of spread betters lose, as everyone keeps pointing out, what are the statistics for 'traders' or peole who trade direct access?

I shall expand. I trade using the a 'system', I don't regard this as real trading as I used to trade for a forex brokers in Hong Kong years ago and indicators were never used and I traded purely on price and fundamental analysis, but, at the end of the day, I am making money without the hassle of 'a real job' and all it's greviances, and I don't care how its regarded. I am making money, consistently and comfortably. Which pleases me!

Anyhow, the point, ah yes, I trade with a spread betting company due to a small sum to start and a few years out of the business, it seemed the logical choice. Now I've built up enough to use a proper broker I am stumped on which way forward.

So, two completely different points really...

Firstly, for day trading spot cable, who comes highly recommended?

Secondly, if 95% of spread betters lose, what ARE the supposed statistics for 'real' traders?

Surely if i can make a profit spread betting, I should be laughing using a real broker, no?!

 

[frugi]

Stats are probably about the same although perhaps a little better for DA (85-95% losers?) as spread betting may attract more newbies. I don't know.

Sorry can't help with the spot cable, although Interactive Brokers are good for trading the CME cable future.

Whether you are "laughing" using DA is a matter of personal circumstances and trading style. You will have to consider factors such as:

Spread and commission costs.
Speed of execution.
Tax
Other income
National Insurance
Deductible expenses eg data feed, chart etc.
SB is an artificial market, DA is generally not unless using forex bucket shops and the like - does this matter given your trading style.
Do you need guaranteed stops.

Probably plenty more but the only way to work out whether you will do better from one or the other is to do all your sums very carefully given, say a predicted regular pips per day profit given an average number of trades.

 

[Roberto]

If 95% of spread betters lose, as everyone keeps pointing out ...

Everyone keeps pointing it out, but that doesn;t make it true.

The truth, as can easily be confirmed by talking to people involved in the industry, is that over the last couple of years there's been a slight increase in the proportion of SB clients _not_ losing. The reason for this is simple, obvious and has been commented on by many people here in other threads. It is that some of the small minority of people who _are_ making consistent money have been gradually switching over to SB (now that the spreads have improved so much) in order legally to keep the taxman away from their trading profits.

I trade using the a 'system', I don't regard this as real trading as I used to trade for a forex brokers in Hong Kong years ago and indicators were never used and I traded purely on price and fundamental analysis, but, at the end of the day, I am making money without the hassle of 'a real job' and all it's greviances, and I don't care how its regarded. I am making money, consistently and comfortably. Which pleases me!

Quite right too. I am in exactly the same position (of trading Forex by SB for a living, without using indicators, and being pleased. )

Now I've built up enough to use a proper broker I am stumped on which way forward.

I certainly can't advise you on that question, and I'm just slightly surprised that you seem to be moving "the other way" from what I've done. You realise that if you trade by direct access, after the first £8,500 in any tax year, you'll have to pay Capital Gains Tax on all the rest and can off-set very little against it? For many people that wouldn't matter, but you're "making money, consistently and comfortably", so it must surely be very relevant to you?

Secondly, if 95% of spread betters lose, what ARE the supposed statistics for 'real' traders?

Probably not much different, I'd guess. Whether one makes a living or not doesn't depend on the trading medium used, you know. It depends on whether you have a system with a genuine edge, and the ability to keep trading it with sensible money management, etc. etc. Doesn't matter where you're trading it, as long as you minimise the overall cost of doing business (of which, for the consistently successful trader like you, CGT is obviously by far the greatest expense).

Surely if i can make a profit spread betting, I should be laughing using a real broker, no?!

Doesn't follow at all, old man. What you're suggesting would be true only if SB were putting you at some great disadvantage compared with other sorts of trading. Which seems unlikely, really, from what you say.

 

[wasp]

Cheers for the replys guys,

The reason I was considering the swop over was the large number of people stating that its alot easier to make the profit from diret access since you don't have the bias or larger spreads. Saying that, part of the reason I stuck with SB'ing is the tax and CGT free element. I've never used any broker, apart from when woeking professionally, or direct access o I wanted a feel from those who've tried both.

I was half (or more) expecting a ton of replies telling me that of course I'll do better with direct access and I'm more than glad on the replies I've recieved. I don't find a problem with bias and my charts and my SB company are pretty much in sync at all times so no problems there.

Guess I was looking for a more positive outlook on the SB's being as good as direct access and I know Roberto, that your one of the few who consistently stand up for trading via SB companiesand theres plenty who shoot it down, but I am inclined to agree and stay where I am, so thanks to you both.

So therefore my next question has to be,

Why do so many say that spread betters lose when its statistically likely that just as many direct access traders lose as well? Why do people have such an issue with peolpe who spread bet and give newbies such a bad vibe when they start out? Surely, if your not going to win, your not going to win.... Whether its SB or DA?!

Its not who you use but how you trade that makes all the difference is it not?

 

[frugi]

Cheers for the replies guys,

The reason I was considering the swap over was the large number of people stating that its a lot easier to make the profit from direct access since you don't have the bias or larger spreads. Saying that, part of the reason I stuck with SB'ing is the tax and CGT free element. I've never used any broker, apart from when working professionally, or direct access so I wanted a feel from those who've tried both.

Why do so many say that spread bettors lose when its statistically likely that just as many direct access traders lose as well? Why do people have such an issue with people who spread bet and give newbies such a bad vibe when they start out? Surely, if your not going to win, your not going to win.... Whether its SB or DA?

It's not who you use but how you trade that makes all the difference is it not?

No worries, hope I've helped.

I used SB for longer term trades and had no problem with it at all. Indeed on one occasion their system made an error considerably in my favour. Still that is irrelevant as I suspect it will not happen again! The slightly increased spread and alleged bias was no problem as the profit:spread ratio was large so a pip here and there made a minuscule difference to my bottom line, especially once the tax consideration entered the equation. In fact it is fair to say that SB was by far and away the best method for my particular past trading style.

However my style now is dangerously close to scalping and I simply cannot afford to pay even a 4 pip spread on the Dow or suffer the slight delay in SB execution. To do so would make the expectancy of my method decidedly negative. There are also technical considerations such as the inability (AFAIK) to set orders such as stop-limits and complex brackets with SB, which are vital for the way I trade. I also like to see a real traded price in the main market in order to enter or exit, rather than a possibly imaginary price provided by SB, but as the SB market develops it seems to be shadowing the real market ever more closely so this concern may be unfounded.

There is a lot of confusion regarding the taxation of full time DA traders. Apparently some pay CGT, while others (like me) pay income tax and National Insurance but can deduct expenses. This seems to depend on the view of your friendly local tax office.

As for why SB receives such a violent ill-thought-out slating from so many quarters - well, it is a mystery as you say. I suspect those who vilify it the most may perhaps have sustained some losses and would like to absolve themselves of personal responsibility. Blaming the SB firm and calling them evil is one such way to do this.

Again I would emphasise that the advantage of either platform hinges almost exclusively on your personal trading style and only you can make the necessary realistic calculations.

 

[wasp]

Is anyone out there going to shoot down trading via SB or have I been misreading all the posts wrong all this time?

Granted, trading via SB is not technically trading but if your earning a living then surely this is just a by product?

 

[wasp]

I have just read yours Frugi as i posted mine and I thank you for a more detailed explanation of your preferences and decision over whom you choose to trade with.

Like you say, when making considerable large moves a few pips here and there doesn't effect you too much, but I should imagine scalping requires the tightest possible spreads and a real market to ensure your profits.

Again, the tax benefits weigh mostly on my mind and thats what will keep me where I am. I have 'an edge' and earn a liveable profit so I think I will be content with my situation.

 

[Roberto]

Why do so many say that spread betters lose when its statistically likely that just as many direct access traders lose as well?

It is a bit of a mystery. I suspect that part of the reason is that there's a smallish but vociferous number of people who have in the past tried SB inappropriately, without proper money-management, with excessive position-sizes and/or with overtrading, have lost heavily, and contrived somehow to blame SB rather than themselves (as people sometimes will). This has left them thinking that the SB firms are crooks, and they're not going to change their mind about that, however small the spreads are now, however good the customer service is now, and however well regulated, safe and secure they are now compared with a retail forex bucketshop.

Why do people have such an issue with peolpe who spread bet and give newbies such a bad vibe when they start out?

I suspect that some folk have enormously strong opinions about it and just don't want to "be wrong" ... somehow they have some sort of emotional investment in SB being a "bad thing" and the reality that it isn't is unpleasant for them. That's my theory, anyway.

Surely, if your not going to win, your not going to win.... Whether its SB or DA?!
Its not who you use but how you trade that makes all the difference is it not?

Absolutely. Couldn't agree more.

It also depends to some extent on the sort of trading you're doing, of course. If you're scalping the Dow on a 1-minute chart, I imagine that SB will be absolutely useless for you. If (like me) you're daytrading Forex from a 30-minute or sometimes a 15-minute chart, it will be exactly what you want.