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Getting stopped by the spread!


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Whilst idly watching my screen yesterday evening I noticed that my position on AUDNZD was moving slowly against me and was getting close to my stop. Nothing unusual in that, I think to myself, my stop is there for reason and if it gets hit I learn a small lesson and move on to the next idea.

But then quite unexpectedly the stop is breached and the position is closed. What the...??? I can see quite clearly that the price has not suddenly jumped through my stop yet it has been triggered nonetheless!

Then I look at the spread - to my surprise it is now a whopping 20 points! I next look at the clock - it is 10pm exactly. And as we all know, this is a significant time when holding overnight positions.

You can guess what happens next, of course. After a short time the spread closes up again and the price reverses and begins to drift away.

Out of curiosity, I now check my Account Transactions - not only was I stopped, I was also slipped 0.8 points! And to rub salt in the wound I was charged "Daily FX Interest for 4 days AUD/NZD". I don't know why it states 4 days - the position was only open for a matter of hours (Perhaps IG can explain this.)

 

Now, I don't trade large positions and I use sensible stops so it's not exactly a financial disaster. But come on IG - this game is hard enough without you pulling stunts like this on your clients. Would it not be possible for you to maintain the spread that a position was entered upon throughout it's duration? This would not only prevent the above occurring but also remove the worry of being spread-stopped when deciding to hold overnight.

 

I would also be interested to know if this was a freak occurrence or whether it has happened to other users.

 

Mac

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ironically i was long aud usd but kept the position until 11pm, and i have just checked the statement mine says 3days  DFX interest rate. Not sure why, but did not notice such a wide range for aud usd at 10pm. Just remember the spread is controlled by their ALGOS they dont physically do this, far too many securities otherwise, why 3 days worth of interest is a little strange.

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I understand the logic  but this happened at 10pm on Wednesday - I wouldn't have expected the weekend interest to be charged at this time?

 

 I did a quick check of other FX spreads and although all had widened, AUD/NZD was by far the worst at 20. The next closest was a 10 point spread (Can't remember which pair, though)

 

Mac

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Hi , thanks for the post - and thanks to  and  to contributing here so far.

 

I just wanted to clarify the terms of our FX overnight interest.  Our charges are based on the underlying tom-next rate, to which we add our fee, and this is settled on a 'T+2' basis.  Historically, this was to avoid delivery of the currency, and essentially means that you pay for 2 days ahead of the current day.  Therefore, if you hold a spot position through 10pm (charge cut-off time) on a Wednesday, you are actually paying for Wednesday +2 = Friday, and as such automatically the weekend days too.  Hence any spot positions held through a Wednesday night incur 3 days' interest, and if there is a public holiday on the Monday, this becomes 4 day's interest.

 

You can find more details on our charges on our website here (note 6).  There's also a good article on our sister website, Daily FX, here.

 

With regard to the wide spread at 10pm Wednesday on AUS/NZD, I've taken a look at the underlying market and there seems to have been a jump in price at exactly that time, which can sometimes coincide with the end of the forex trading day (5pm New York time) and when the tom-next rate is applied.  You should be able to see that on the larger chart candle.

 

I hope this clarifies these aspects of FX trading, but please shout if not!  Would be great to hear from more of our FX traders on this too.

 

Thanks,

Hannah

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  • 1 month later...
Guest Kaliroth

I've been stopped out before with similar circumstances and must say l think it's wrong to be closed out on guaranteed stops when the CFD never actually traded at the closing price. I can understand non guaranteed stops being closed out to avoid larger losses but if it's guaranteed then it should only close out if a trade happens at or past the given level, not just a purely made up spread. What would be far better is if the spread was all on the opening of a trade and the stops only activated on traded levels.

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  • 1 month later...
Guest SimonC

Hi

 

Positions and stops will work off the same price, be it on a position with a non-guaranteed or a guaranteed stop that is in place. When you say that the "CFD never actually traded at the closing price", please remember that with FX, there is no underlying exchange to be mirrored as there would be with something like a shares position. For FX pricing, we are taking the best bid / offer price quoted by a host of quoting banks, and then simply wrapping our spread around the market spread. In this way, there will be times where the market spread will fluctuate based on what is being quoted to us, as exampled in Hannah's response above.

- please remember that FX is a 24 hour traded market and therefore there is no "close" at which we apply a spike in our spread. Also, as we don't simply take the other side of client positions, we have no algo in place which hunts client stops at all. Again, we're simply taking the best bid / offer quoted to us and then adding our spread to create the price you see.

 

I hope this helps. Feel free to get in touch if there's any more questions!

 

Thanks,

Simon

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  • 2 weeks later...

Holding a position for a day and being charged for 3-4 days in advance is a day time robbery. As if as you book a hotel room for one night and when you check your bank statement a month later, you find out a charge for another 3 days automatically. Taking it up with the hotel, they simply tell you that they work on T + 2 basis....

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Guest RobertR

Hi . Thanks for getting in touch.

 

The settlement for the various different markets will vary and often mean that you'll be adjusted for the weekend on other days that Friday.

 

We do publish full details about our overnight charges on our website here so recommend you always fully research a product so you’re not caught out.

 

I agree It may seem a slightly strange system, however this is not something that IG have created, rather a historical market standard for FX, which existed to avoid delivery of currency itself (2 days prior notice).  Settlement like this can also be seen on the CREST shares system (T+2 for UK share settlement, and T+3 for US shares as standard).

 

You can of course avoid these charges, either by closing a position before 10pm UK time, or by trading one of our forward contracts, which do not incur any overnight charges. This interest adjustment is instead built into the additional spread.

 

I hope that clarifies, but please shout if you – or anyone – have any further questions on FX funding.

 

Thanks,

 

Rob

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Whatever the explanation, it doesn't make it right.

Further, one has to do a very deep research in order to find out how your charges and many other hidden traps may affect one's using IG. And when I believe that I know all there to be known, something else stabs me in the back. All I get in reply is another one of your explanations 'we publish ,you have to research, it is the market, we didn't make it up, we are going to speak to our developers, we will be introducing changes, etc'

FCA didn't make all the fuss because you were running a proper business. They did so, because it became impossible to continue turning a blind eye on day time robberies from spread betting companies.

 

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Hi , it's a shame you feel that way.  IG don't want to catch their clients out, but rather we aim to be as transparent as possible so as to ensure fair treatment, adhere to regulations, stand out in the industry, and ultimately retain happy clients!

 

There's of course no obligation to trade on your account and therefore pay any incidental charges.  We're always open to any feedback that may help us present our product information differently, so if you'd like to help us improve then please do leave your ideas - this is something the Community can certainly be used for constructively.

 

With regard to the ongoing FCA review, this is looking at the leveraged industry as a whole to ensure there is adequate protection for the retail client, and we are currently waiting for their next decisions.

 

As always, please do let us know your thoughts!

 

Thanks,

Hannah

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There is nothing shameful in feeling this way or another way.

Further, the last thing I'd say to my clients would be to go elsewhere, which is what you effectively convey in your post, Hannah.

Also, it goes without saying that FCA doesn't target IG alone, but the whole industry. I would've thought that noone has suggested to the contrary. References to "you" in that context means the spreadbetting businesses.

You say that you are open to any feedback and ideas. You will have it.

I'm going to start a separate thread in due course.

Have a good day!

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  • 2 months later...

I am a newbie but my understanding is that spreadbetting companies operate like casinos. The client does not win and if they do they will get told to go elsewhere. That is the reality that we will have to endure until the regulations over this industry improve.

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  • 2 weeks later...

Yoga, you are right.

However, the thing that most people do not know is that even the current legislation allows redress when retail clients have been fleeced by spread betting companies. Enquire and you will find out! FCA will simply make it easier to have this redress without having to commence a Court action.

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  • 1 year later...

Another jump in GBP/USD spread to 10pts at 13:30 today? How is this justified - isn't it time IG started looking after their clients rather than milking them? Otherwise we will all be pursuing direct dealing desk options instead. 

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  • 2 years later...
Guest Gann68uk

And I am another joining this list. I got closed out of a trade even though price never reached there. I had a chat with an agent who said that the bid price reached there. Guess what it was .02 lower than my stop. They know where the stops are, change their spread to capture the stop. Moving out and going to a proper broker and trade on the exchange!!!

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