Why difference in price?

[alanp314]

Why is it that when most of the time I put a trade on the price difference between Actual FTSE price and Spreadbetting firms price differs.
I have recently been told that they do actively STOP-HUNT, and its a thing they all do.

Not too worried about losing this one, just move on, but it does get a bit annoying when the prices are so different.

Alan

Platform reads 6173.5. Sharescope 6180.1

 

[TheBramble]

Why is it that when most of the time I put a trade on the price difference between Actual FTSE price and Spreadbetting firms price differs.

Because the SB companies like to make a profit. The price offered by the SB normally bears only a passing resemblance to the underlying on any instrument.

Their price will reflect their professional expectations and biases and will not normally operate in your favour.

Not all is lost however. You can use this bias as a useful yardstick to assess fairly precisely what their bias currently is. Especially if you have access to more than one SB and they are all leaning the same way. You can then either trade with the SB overhead, but with increased confidence you’re more than likely right in your direction and momentum and still make some profit, or you can trade with a ‘cleaner’ broker and make even more well-earned trading profit.

 

[Trader333]

The clue is in the word "Betting", all betting companies make money by betting against their clients. This subject has been done to death previously on here but there have been some almost unbelievable activities by SB companies to take money off people.

One incident stuck in my mind: One guy was trading Forex using a one of these companies and had a stop placed 50 pips away from where the market was trading and it got taken out. When he complained about it, the company concerned said that the market had moved to where his stop was for 1 second and took him out.

This, of course, was rubbish and even though he could prove that the market had gone nowhere near his stop price they refused to reinstate his trade.


Paul

 

[TheBramble]

Which company was that Paul?

I know this subject been done to death, but it does keep cropping up and anyone thinking of starting their trading career with an SB might just be looking at this thread right now.

Name and shame....

 

[peto]

Why is it that when most of the time I put a trade on the price difference between Actual FTSE price and Spreadbetting firms price differs.
I have recently been told that they do actively STOP-HUNT, and its a thing they all do.

The s.b. firms base their 'cash' prices on the futures market, i.e. their quote will be that of the current front month, plus or minus 'fair value'. This enables them to hedge their positions (should they wish to) against the wider market, and continue to offer quotes after the normal market hours. The discrepancy you are noticing may simply be due to the faster responsiveness and greater volatility of the futures markets over the FTSE index.

 

[grantx]

Alan,

As an indication, if you can create a dde link of the future price into Excel this will give the ‘fair value’ for the Casi index, as per Peto:

A1 = FTSE future dde link
B1 = interest rate
C1 = days to expiry (future)
D1 = A1/(EXP((B1)*(((C1)/365)))), ie fair value.

Be aware, especially given the volatility of late, that discrepancies (premium/discount) may occur although theoretically this should be arbitraged out and thus, temporary.

Grant.

 

[Paul71]

Why is it that when most of the time I put a trade on the price difference between Actual FTSE price and Spreadbetting firms price differs.
I have recently been told that they do actively STOP-HUNT, and its a thing they all do.

Not too worried about losing this one, just move on, but it does get a bit annoying when the prices are so different.

Alan

Platform reads 6173.5. Sharescope 6180.1

Poor tradesmen always blame thier tools.

Bottom line....

If you can't make SB work, forget IB, you need more practice.

Have a nice day!

 

[Splitlink]

Don't chase the price, let it come to you. You are getting into the market at the same time as everyone else. There are plenty of other trades--tomorrow, if necessary.

Split

 

[grantx]

Alan,

'Casi index' should read 'Cash index'.

Grant.