Zero spread vs DMA discussion?

[SanMiguel]

Is there any need to stay DMA with the current advent of zero spreads brokers in the UK?
The brokers need to make money but in offering this kind of trade it is clear that either:
- they make most of their money from losing clients or
- there are other things like slippage/bad fills that play into their favour.

There is also the old issue of the broker knowing your trade and betting the other way to the net of the clients in the actual market.

Any thoughts?
I find DMA very fast and enjoy being able to see the order book but perhaps zero spreads SBing is okay for the occasional trades or the FX market?

Edit:
I guess my question can be more specifically asked by:
"If you currently trade DMA, would you consider swapping to a zero spread SB company?"

 

[meanreversion]

Who is offering zero spreads? Never heard of that before!

 

[SanMiguel]

Who is offering zero spreads? Never heard of that before!

Prospreads, worldspreads probably shortly followed by some others.
If you're being sarcastic, it's the not the companies I care about, more the application of whether it's worth it in DMA vs SB.

 

[meanreversion]

No, not being sarcastic at all. Are you saying these companies are showing bid same as ask?

 

[SanMiguel]

No, not being sarcastic at all. Are you saying these companies are showing bid same as ask?

not on all instruments but on a fair few, yes.
The question however is in application, quality of software, the fact that it's not actually a real DMA system, etc.

 

[HowardCohodas]

Financial Spread Betting - A Trader's Guide

 

[SanMiguel]

Financial Spread Betting - A Trader's Guide

Yeah so they say, except the spread disadvantages most traders more than they think especially if you are a scalper style trader.
It still doesn't take into account the actual software efficiency and the fact that the SB company knows your position direction.

I guess my question can be more specifically asked by:
"If you currently trade DMA, would you consider swapping to a zero spread SB company?"

 

[LiamH]

Yeah so they say, except the spread disadvantages most traders more than they think especially if you are a scalper style trader.
It still doesn't take into account the actual software efficiency and the fact that the SB company knows your position direction.

I guess my question can be more specifically asked by:
"If you currently trade DMA, would you consider swapping to a zero spread SB company?"

Paying no spread would mean an extra 20-30% gains per trade as I only aim for around 10 pips so yeah, provided the software and execution is good I'd go for it. In fact, don't Prospreads offer this on a DMA platform but call it spreadbetting?

The only thing stopping me from trying it out is my tiny account size.

 

[SanMiguel]

Paying no spread would mean an extra 20-30% gains per trade as I only aim for around 10 pips so yeah, provided the software and execution is good I'd go for it. In fact, don't Prospreads offer this on a DMA platform but call it spreadbetting?

The only thing stopping me from trying it out is my tiny account size.

No, they call it "DMA like" but it definitely isn't DMA.

 

[LiamH]

No, they call it "DMA like" but it definitely isn't DMA.

In that case probably no... I mean, what do they have to gain by letting someone scalp successfully with no spread? Slippage and re-quotes would be inevitable surely?

Also, for swing\position traders the spread wouldn't make much difference at all to profitability so this must be to attract scalpers right? I guess no spread is still a bonus for anyone but I'm assuming scalpers are the target?

 

[LiamH]

Sorry, just noticed you basically said all of that in your original post...

The answer then, from my point of view, is nope. Well, unless they could guarantee spot on excecution which they'll never do if they ever want to make money.

 

[scose-no-doubt]

Well, unless they could guarantee spot on excecution which they'll never do if they ever want to make money.

Lol.
You obviously never used T2W when somebody got hold of a list of IG client P&L's for the year.

Worldspreads offering a £300 cash back offer (can't withdraw for 12weeks after claim) too but you need to deposit £5k to get zero spreads. Says tight spreads for £500 deposit. Might give that a go.

 

[LiamH]

Lol.
You obviously never used T2W when somebody got hold of a list of IG client P&L's for the year.

Worldspreads offering a £300 cash back offer (can't withdraw for 12weeks after claim) too but you need to deposit £5k to get zero spreads. Says tight spreads for £500 deposit. Might give that a go.

I hear what you're saying but with Zero spreads and good execution, surely every profitable scalper in the land would jump on board? Not saying I'm gonna take all their money lol but there are many who could.

 

[scose-no-doubt]

I hear what you're saying but with Zero spreads and good execution, surely every profitable scalper in the land would jump on board? Not saying I'm gonna take all their money lol but there are many who could.

I think it's a case of they'll deal with that problem once they get all the new punters' money on deposit.

 

[meanreversion]

I guess my question can be more specifically asked by:
"If you currently trade DMA, would you consider swapping to a zero spread SB company?"

I think I would answer "no" to this question. I use Interactive Brokers, which is an ECN; the spreads are fairly tight. Zero spread SB just sounds dodgy!!

 

[SanMiguel]

I hear what you're saying but with Zero spreads and good execution, surely every profitable scalper in the land would jump on board? Not saying I'm gonna take all their money lol but there are many who could.

It's true but the business model could be successful.
Imagine the 90% of punters lose "myth" / "theory" is true, why wouldn;t they have zero spreads, they get the money coming in anyway. It's not all instruments (maybe it is for the £5k account - not an issue as you should have that much to trade anyway) but I can very well imagine it being all instruments within a few months seeing how quickly the SB companies are moving.
DMA allows you to do some expenses / tax deductible stuff that SB wouldn't.

 

[Luc.Chase]

I'm not 100% certain of this but my suspicion is that the volumes in spread-betters that offer zero spread are too low to trade properly as a day trader. The pricing is too erratic. For longer term trades it may be fine, but then the spread becomes less important. If they do manage to pick-up good volume as a result of the zero spread offer, then it could be a very good thing for a day trader.

 

[arabianights]

Except DMA you can pay negative spread

 

[Luc.Chase]

Except DMA you can pay negative spread

Never seen that .... doubt the order would get filled.

 

[arabianights]

of course it can, you just have to be patient