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Is spread betting for fools?

dmedin

By dmedin,
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Caseynotes
Caseynotes

Indeed I have been sat here for a good many tears, I mean years. Did I get rich quick, no. I do treat it as a business though, a buying and selling business. So like all careers there is a lot of

Caseynotes
Caseynotes

Ha ha, yes, exactly the same thing happened to me. I started a 4 year university course but realised I knew it all after the first year so I took the final exam and unbelievably I didn't pass. Clearly

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DSchenk Established Contributor

DSchenk

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First of all I'd like to say that I absolutely love this thread!
Thanks to dmedin, nit2wynit, and obviously caseynotes for this elaborated discussion.

I read a few pages like a few months back until I logged into the forum yesterday night and couldn't believe my eyes that the tread is still going! Love it guys.

To add my 2 cents to this discussion:

Similar to nit2wynit, I also discovered Ross from Warrior Trading about a year and a half ago and thought, that doesn't sound that hard and I'm a smart guy, surely I can do this as well. So after watching a few of his youtube videos and also read his book, I opened a spread-betting account with IG and tried my luck.

However, as I couldn't trade the US market open, as in a 9-5 job back then, I decided to trade the same gap-and-go strategy on the UK market open. So along I went, built screeners and other tools to help me executing the strategy.

Fast forward, one year later, I had exactly 12 month of losses and within those about 13 profitable weeks, the rest (probably around 30-35) negative ones.
I just couldn't crack the **** nut.

Then I had a new idea, which was to pull a lot of historic data out of the IG databases and calculate the probability of gap-and-go's actually happening in the UK market. Maybe it was a US phenomenon? (surely in the UK we don't see those 100%+ gappers for starters).

So ahead I went, my data science skills helping me out here, pulling over 9000 data points, and voila, I actually discovered that a gap-reversal pattern is way more likely to happen than a gap-and-go in the markets I was trading. When refining the variables in my statistical program a bit, I was able to forecast gap reversals with a statistical success rate of 71%. That's 7 winners out of 10 trades, I thought. Happy days. Let's try that.

So I amended my tools and strategy, to focus on gap-reversals instead of gap-and-go's. What can I say, another blow!
I discovered, that while on paper the strategy works, it seems that also the market makers know about that and adjust the spreads accordingly, so that it is seemingly impossible to profit. For example when a stock closed the day before at 290p and opens in the morning at 300p, a gap of 3.4%, the strategy would set a target, based on historic data of like 292p, what would be a 2.7% profit margin. I could then see the stock opening at 300p and falling down to 290p within usually the first hour of the day, however the spread was typically so large, that the best entry I could get was like bid at 294p, ask at 306p or something like that. Meaning I would never be able to make a profit on this. What I would've needed was a bid of 299p, ask 301p. Then the stock falls to 292p, and I can get out at 293p. That's 6p profit or 2%. But spreads were just too large.

I monitored this for a couple of weeks and then abandoned the strategy, the market makers just wouldn't let me win on this one.

That was about a month ago in August. For some reason I can't quite remember, I discovered the FTSE 100 index and thought, why not give this a try.

The first day I reached my daily profit goal in 45 mins. I thought, wow, is this finally it? The spread was laughable small, compared to the stocks I traded the year and a quarter before. Like laughable! Talking about 0.01% spread vs  2-3% before with those gap stocks. And the index is actually moving. (Often with the gap-and-go stocks, I entered my position and then they were just not moving out of the spread zone for like hours). So I was pretty excited as you can imagine. On my second and third trading day with the FTSE 100 index I also managed to make my daily target within the first hour of the day. All well I thought. I upped my account balance to really get started.

Unfortunately, my luck (was it beginners luck?) didn't hold on long. The past few days I'm back at my usual losing streak (about 4 days of losses vs 1 green day). Guess I just need to keep trying - hoping that one day I find something trade-able for me. Might look into forex next.

But for now, I think I'm going to start a new thread on this forum to discuss my daily trades on the FTSE100 index. Hope some of you can join me in the discussion.

 

So to answer the question of this thread: Is spread betting for fools?

No, I don't think so. I think the opposite is the case. It is for the 0.01% of the smartest asses in the population. A fool could never win here.

 

Take it easy

Dan

Edited by DSchenk
forgot to answer the main question of the thread, lol
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nit2wynit Respected Contributor

nit2wynit

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55 minutes ago, DSchenk said:

First of all I'd like to say that I absolutely love this thread!
Thanks to dmedin, nit2wynit, and obviously caseynotes for this elaborated discussion.

 

Hi, great to see a new Avatar in the thread.

A very interesting read right there that I'd love to hear more about.  The 1st thing I'd like to comment on is your point about not being able to catch the US open.  That's a big tell right there that has only just occurred to myself over the last 2 weeks.  The market is massive compared to the LSE and while I may be wrong, I'm assuming the volume that goes with the NYSE creates it's own success because of the sheer amount of people trading it.  Being in the UK we're in a great position as we don't need to be up at the crack of dawn to catch the US open.  Even now on a daily basis, I struggle to find ANYTHING to trade on LSE.  In retrospect, the %'age is probably the same with NYSE albeit with more to choose from; therefore a few extra Instruments to add to an already very short list.  The great thing about this is you only need one good one. (example this week could have returned £800 with a £38 risk!)  You also only need to trade one at a time, and even one per day; find the right trade and it's one per month!  As I'm sure you're aware I've defaulted to the Demo while I niggle out some performance issues and some fine tuning of the Breakout Strategy.  There was nothing to trade yesterday for me on the Demo, but this week I'm up £420 down £188 trading Breakouts on the US with only £1000 margin or less.  For the 1st time since I started trading, not only is my Win/Loss up but also the Profit/Loss per trade.

You may not have read the entire thread (or maybe you have) so you may be perplexed to hear that on the 'Demo'  trading Breakouts (I know, it's a different beast-but I'm treating it as real money with a realistic account size) my success was actually more than 50% and closer to 70% 80%.  I've screen shot a lot of them in this thread over the months, so I can feel your frustration and confusion as to why it's not been working for you, especially in light of only using the LSE to find trades.  Of course, I myself have had almost zero success Live,(who am i kidding- I've lost £1400) but as I have stated, I was not sticking to the Breakout Strategy.  Ironically, I've lost a lot on the FTSE and Gold as with a small account my profits are limited to my Risk.  Anyway........Back to it.

I've been meaning to do a Noob Recap myself re; Small Account and Finding Breakouts, so again, I'd love to hear what you've been using to find trades, what platform you're using etc.  A rundown of an example of a losing trade or winning one.  How many trades per day etc.  You mentioned you built a scanner?  Please tell me more. :D

It's also important to point out re; Ross Cameron.  What he teaches now is 'Trade the Best Dump the Rest'.  The missing part of his equation is the 80% of other Winning Trades he has had, just with less accuracy OR Profit.

For instance.  His Best are above 5% Pre Market, 20 mil volume or less, less than $10 and more likely around 2-5$. (may have a few numbers off here) so we need to also realise that 3 or 5% gappers that are $20 with 20mil shares floating are also do-able espacially as we can alter our stake size on Spread Betting.  He just concentrates on his own Sweetspot i.e those that more closely 'guarantee' profit potential.

Anyway, phew.   Looking forward to sharing Ideas.  I hope to make some profit again today to finish off a good week.

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DSchenk Established Contributor

DSchenk

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Hey nit2wynit, thanks for the comment. Let's get into it.

US market open. Indeed, now that I'm no longer a slave of the 9-5 dynamics, I actually do have time to trade the US open. Might be worth having a look into. I keep this in mind. This month I want to certainly focus on the FTSE100, but if I don't see any light at the end of that tunnel, I might have a look at US equities at US market open. Good shout.

Platform I use: ProRealTime with IG spreadbet account

Timeframe I focus on: 1min, 5min, daily chart

Trades per day can range anything from 1 to 10+ (my 'record' is around 20 a day I think, but my sweet spot is like 2-5 trades per day I'd say)

Scanners I was using for UK equities gap-and-go and gap-reversal strategy (all self-built into ProRealTime using their coding language ProRealCode. If you are using the platform as well and interested I'm happy to share the code with you):

- Momentum scanner, showing stocks with above average volume ordered by the largest absolute rate of change (positive as negative) on the day

- Volatility screener , showing stocks with largest movements in last 10 minutes

- Top Gainers over last 3 days, ordered by highest rate of change in last 3 days

- Top Dippers over last 3 days, ordered by highest rate of negative change in last 3 days

- GAP scanner, showing gap ups and downs on market open, ordered by highest absolute gap%

I was using the Top Gainers and top Dippers before market open to add stocks on my watchlist, which looked interesting. Then the GAP scanner on market open to get all gappers. And then moved over to either Volatility scanner or Momentum scanner to watch throughout my trading session.

 

One example where gap-and-go worked particularly well, was on the 3rd of June with Kier Grp PLC.

Gap down by 25%, then falling another 20% on the day. I was in the game with 10 trades, 8 green. All short trades obviously.

 

Another example, 17th May with Thomas Cook Grp PLC.

Gap down by 6%, then falling on the day 35%. I was in with 3 short trades, 3 winners.

 

The problem is, as you can already see at the dates chosen - these opportunities happen in the UK market once per month or so, whereas I made losses most of the days the rest of the month which outweighed the winners on these particular days. But maybe you are right and the US market has these opportunities almost on a daily basis, so probably worth a closer look into that.

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nit2wynit Respected Contributor

nit2wynit

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1 hour ago, DSchenk said:

The problem is, as you can already see at the dates chosen - these opportunities happen in the UK market once per month or so, whereas I made losses most of the days the rest of the month which outweighed the winners on these particular days. But maybe you are right and the US market has these opportunities almost on a daily basis, so probably worth a closer look into that.

That's a fantastic amount of detailed info and I'm sure it will be of use.  It's certainly about time I looked at PRT for sure.  Can i ask you the cost per month?  They couldn't give me a figure based upon what Low Trading Value was so no Idea if I'd be paying.


As you're not new to the concept of trading breakouts, it would be great to buddy up on some ideas.

All I have at my disposal is the Retail Platform.  Therefore I need to literally wait till 2.30 for all to go Live and scan thru as quickly as possible to create a watchlist.  Most of the time I never get past D in the A-Z list before I feel I have enough to look at.

As for trading 20 per day??? that's what I used to do.  It's exhausting.  I put it down to Fear of Loss.  However as an exercise last month I traded the Up on the FTSE.  20 Trades up and down, long and short.  If I'd just gone long I'd have made £20, but trading in and out I made £50 but lost £16.  Now I've got 5 in me tops and a max day loss of £100 or there about.

I definitely like to know more about PRT and the codes.  hopefully there's a balance between us of what is needed to crack it.

 

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DSchenk Established Contributor

DSchenk

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I've never paid a penny for PRT. You have to transact at least 4 times per month. I usually do that in a day. Otherwise £30. I can recommend the platform certainly.

According to IG:

You can get access to ProRealTime charts at no extra cost if you transact at least four times in a given month. However, if you don't meet this requirement, or your trading activity is of extremely low value, then a £30 per month fee will apply on the last day of every calendar month.

 

Agree, 20 trades per day are way too much and stressful. Sweet-spot, 2-5 ideally.

Happy to buddy up on trade ideas or help out with setting-up the PRT platform, if you have any questions.

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nit2wynit Respected Contributor

nit2wynit

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11 minutes ago, Caseynotes said:

there is no set value but IG will tell you in advance if they intend to introduce a charge for use to give you the opportunity to stop using before they do.

....but No Idea at All??

Is it less than £100 or less than 10k?

i can't see how no-one can give me an answer on this.  Even a round about figure.

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nit2wynit Respected Contributor

nit2wynit

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...He who Hesitates.... plus a bit of slippage.  Up to E on my A-Z.  It's too difficult to find and create a Watchlist on Retail in time.  Late getting in, early getting out.

I'm ready for next stage PRT.

Current Watchlist MallInckrodt. and Bitauto Holdings.

 

 

He who hesitates.jpg

Edited by nit2wynit
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DSchenk Established Contributor

DSchenk

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21 minutes ago, nit2wynit said:

....but No Idea at All??

Is it less than £100 or less than 10k?

i can't see how no-one can give me an answer on this.  Even a round about figure.

Probably IG themselves don't have a fixed rule for that and use it as-and-when they see fit and want to charge someone for the platform. Sounds like a typical clause you want to put in a contract to secure yourself from not needing to drag non-profitable customers for years along the way. 

 

As i said. I never paid a penny for it in a timeframe of a year approx.

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DSchenk Established Contributor

DSchenk

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Just looking at the stocks in your watchlist. All nice gap-and-go opportunities indeed. How do you find them? Just clicking through the entire NYSE from A-Z and seeing if there's a gapper anywhere?

Even when using a screener, one potential issue is still, that IG is not providing pre-market data, like Ross has in his platform, right? Or can you activate that somewhere?

Last candle I see in PRT is 20.59pm day before and then 14.30 open next day.

So you won't be able to run any screeners pre-market, like Ross does every morning as he showcases in his videos.

To work around that, I was using additionally the L2 platform and purchased the L2 datastream for LSE (which is like £7 per month). There at least you already see prices in the 10 minutes before the market opens of the auction phase.

Not sure how this works for US equities, would need to have a look at it.

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nit2wynit Respected Contributor

nit2wynit

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21 minutes ago, DSchenk said:

Even when using a screener, one potential issue is still, that IG is not providing pre-market data, like Ross has in his platform, right? Or can you activate that somewhere?

I think at this stage it's not as important for me/us to get in and out Like Ross does.  He's literally Buying Shares and pays commission/Tax etc. so the emphasis is being as close to the Penny as possible In and Out.  The benefits of spread betting  outway the Cons providing we can find the Instruments quick enough.  Even If i can shave 5 mins of my searching it will make a huge difference.  Would be even better if i could omit shares that aren't even tradable too.

Even without Pre market data, it's still possible to create a Watchlist (I assume) as soon as the Market opens, but only you can tell me different.

MallIncdrokdt was what I found on Tuesday.  If I let it run it was worth £800 with £38 risk.  Seems it's struggling to break out.  Big breath for MDC Holdngs though.  Has great potential on it's way to 6000

As of now, I'm pretty much finished.  Up £450 on the Demo with 1k account.  Down £186 = + £264.

I can defo live with that.  Excited for next week.

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