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Is spread betting for fools?

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Hello comrades

So I had a little bit of cash to spare when I signed up for IG last year.  I put most of  it into regular share dealing in the hopes of 'going long', and I kept a little pot of cash for experimenting with 'spread betting'.

I took the whole thing very seriously.  I did all the IG Academy videos and I invested in (and spend many hours studying) a book by John J. Murphy on 'Technical Analysis'.  I scoured the web everyday looking for tips and trading strategies.  At times I let this get the better of me and it became an obsession.  Losing days would make me depressed for the entire day and get in the way of day-to-day life, even my family and relationships.

Of course, the whole thing is a complete fraud - but I have no reason to complain because at all times the words '81% of clients who do this lose their money' were right in front of me.  I was greedy, wanted quick gains and thought I could be one of the 19 percent if I tried hard enough.

So there I was with my resistance and support lines, my weighted averages and MACDs, my rising wedges and my triangles - I fell for it hook, line and sinker.

Now, after losing a few thousand quid, I realize that this is a mug's game - 'a fool and his money are soon separated'.  Just look at IG's 'trade of the week'.  It's almost comical how often they get it wrong.  At one point I went short on USD/Yen simply because Chris Beauchamp advised going long - and it turned out to be one of the few occasions I made money.

I don't advocate banning spread betting or anything of the sort.  The words are always there in front of you - 81 PERCENT OF PUNTERS WILL LOSE THEIR CASH.

It's gambling - hence 'daily funded bet'.  It's not trading.  You are dealing in derivatives of derivatives.  Sometimes the bid/offer spread is enormous: I remember recently for Marks and Spencers there was something like a 40 point spread, and with a minimum bet size of £1 that meant you needed 40 points of movement in your favour just to pay IG's spread costs.  Talk about 'odds are against you'.

Obviously IG makes most of its money from spread betting and other professional activities.  And I know a lot of people enjoy day trading and spread betting.  I sure did and got some enjoyment out of it.  But now I wish I'd taken the cash to Vegas instead.  My chances of coming home rich would have been far greater and I would have had a much better time in the process!

David

Edited by dmedin
typo
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Thanks for that comrade.  Sarcasm is the wit of champions!  I take it it's working out for you then - you're one of the 19 percent. 😉

Comparing it to a four year university course is particularly amusing.  I will treasure that one!

Edited by dmedin
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Its really strange how difficult it is

When starting out you think you should have 50% chance of make a profit buy or sell

and if you buy in an uptrend it should be over 50%

 

but somehow its ends with stopping out with a loss

 

 

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You must understand that the market will do anything.

The only certainty is your strategy and risk reward set up money management.

Remember all technical indicators are laging indicators only show what's happened in the past. You must establish a few with the leading indicators and market sentiment and just use technical indicators for entry and. Keep it simple 

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Hi Demedin,

I wouldn't give up, but taking the advice of someone who has made all your mistakes might help. I understand the confusion which is out there, all you have to do is type 'forex' into a search engine and you will forever be bombarded with Jeff Bishop videos and Tim Syke's next big thing.  I would recommend to filter out all of that noise. Ask yourself what time frame you want to trade or are able to trade. Find a guru whom you think might teach you to trade that time frame.  Do not think that they are all charlatans, although many of them are (probably 81%), there are some earnest educators out there who can condense all the stuff you can find for free and apply it to a strategy. Stick to your strategy and focus on becoming a good trader, get your trading right.

In my limited experience, making a fast fortune is massively unlikely, unless you have one to start with. 

 

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think of trading like a race. Most people can drive, but those who are winners are the ones who put time and effort into practicing their starts, practicing the course, learning about the other drivers strategy, reading up about their car, talking to the mechanics, putting in the time and effort to lap their practice track day in day out.

the winners also are never going to be the ones who get in an F1 car for the first time after passing their Driving Theory test ... scale up power (leverage) and your opponents (assets)  

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On 13/01/2019 at 11:46, Kodiak said:

Its really strange how difficult it is

When starting out you think you should have 50% chance of make a profit buy or sell

and if you buy in an uptrend it should be over 50%

 

but somehow its ends with stopping out with a loss

 

 

 

Thinking you have a 50% chance (since the price can go only up or down) is a big mistake.

When you're a little fish in a tank with big sharks you don't stand a chance.  BUT ... the sharks need something to feed on ... HENCE the encouragement to bring 'sheep to the slaughter' and the enchanting claims for the magical efficacy of 'technical analysis' (note: IF ONLY you will SPEND MONEY on MY BOOK / MY COURSE - say all the pros) ... and the 'idea' that you can become profitable after four years of losing your money ... LOL!

Edited by dmedin

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Something like that @dmedin, though mostly the sharks feed on each other, the dumb money is merely a morsel. Hence, as in the Dante quote, the first aim is survival, that is to say not losing money. It's funny how everyone who starts trading is thinking about making money rather than not losing it, as you say in the OP, the stats are there for all to see.

So if they make the first goal not to lose money and concentrate on that then they probably wouldn't even start on that long road which is so time/money consuming of searching for the perfect indicator/TA methodology combo and instead just stick to the basics, they would likely be much better off.

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I just wanted to point out something else for anyone who might be interested, with respect to technical analysis, the following is from Reuters one day after IG recommended going short on gold:

Pessimism about global growth drove down world shares and commodity markets on Tuesday and left investors seeking refuge in the dollar, government bonds and gold.

https://uk.reuters.com/article/us-global-markets/imf-pessimism-trade-tensions-sickly-stocks-idUKKCN1PG013

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Quite right @dmedin, we have been discussing that very point in the Gold thread and quite rightly TA can't be taken in isolation. Fundamentals (new news, new data) are the market drivers, TA helps explain how price might travel and where the eventual destination might be on a chart but it's the fundamentals that gives price the push and the direction.

In the IG 'trade of the week' short gold the point was that upward momentum had petered out and sellers were pushing price back and if buyers did not rally at support (1270) and the level broke then the sellers have gained control and a short could be a good trade at least for the short term.

As it happened buyers did protect 1270 and shortly after that the IMF report (new news) gave the buyers an added boost sending price back up into mid range.

 

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yeh @TrendFollower,  the lower IMF expectations for global growth means bets are coming off oil (as demand expectations are reduced), hampering stocks and indices, and giving gold and USD a boost.    

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Until something new comes along. The IMF, it must be said, don't exactly have a brilliant record for forecasting but it's the latest bit of news and so bound to cause some positioning readjustment.  

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Well another recent example ... there was a video suggesting to go short USD/YPY because of a possible emerging head and shoulders.

Now I am not an expert, have only been looking at TA for 9 or 10 months now, and I'm definitely a B book client (loser - lol) but I thought from reading John J. Murphy's book that H&S takes time to emerge and you need to factor in volume as a confirming signal. 

So you imagine my surprise when I see people finding H&S forming in the space of a few days or hours and they don't even bother to analyse the volume ... USD/YPJ is up quite strongly today and seems to me to be in a kind of symmetrical triangle formation right now.

With options you pay a premium and your losses are limited to the premium, but with spreadbetting you get cleaned out fast when the price goes against you.  I'm really surprised that SB is considered fine for retail clients but we don't get to trade proper options.  It's almost like nanny state thinks we're all stupid, it's okay for us to lose money on simple betting as long as we don't go near the big boys' playground.

Edited by dmedin

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Ah @dmedin,  I can see where you going wrong there. Too much faith in Technical Analysis, if the markets were scientific it would all just fall apart so relying on scientific tools will inevitably lead to confusion and sorrow. TA is not about rules, not even guidelines really, more just suggested possibilities, which is why you will find people using techniques very differently producing a multitude of signals that are all themselves just equal possibilities.

In books and on SM you will see loads of examples of technical patterns working out but I don't think I've ever seen a book on technical patterns not working, don't suppose it would sell very well really. You will find plenty of commentators who have swallowed TA books whole and then regurgitate everything back up onto a fresh chart, all you will see is a godawful mess.

Best advice I could give is to stick to Wykcoff and supply and demand, the basic mechanics of a market.

Most people prefer SB over options because of the greater level of control, with SB you pay a stop loss which will get you out of a trade as soon as the trade turns against you. But as demonstrated in the SSI thread, 80% don't seem be able to use this basic tool competently.

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What a great read, though i didn't get thru it all.  Her'es my bit.

I was demoing for about 1 month back in Feb.  I tried several Demo platforms before settling with IG.  I made a lot of losses and some gains.  By the end i thought I was about 50-50 but was curious about the Real World, so opened the Live account.

Long story short, I'm down £400 in 3 weeks from a £1400 account.  Not great; in fact I'm at a loss.  I've mostly traded Spot Gold, so after a few £25 losses I went back to the Demo to make 8 straight wins and up £300 in a few hours using the same account balance.  I thought I'd cracked it.  Went back to the Live account with New Improved Strategy and lost £200!!!!!!!!!!!!!  I can't win.  Spot Gold is ruining me.  I watch.......It moves in a direction, i go in, the chart stops moving, it goes the other way  90% of the time! if not 100%.  My own Buy in Price becomes the Resistance Point going either Up or Down.  I was going to video this fact but figured it was all in my head.  It's not.  My Buy in Literally becomes the point where the chart will reverse, hit the support and come back down to my Buy in and go back again.  I sit in trades fighing gor £15 for hours....Then sell, then it breaks.

This can't be real.  I can't be this unfortunate?

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33 minutes ago, nit2wynit said:

This can't be real.  I can't be this unfortunate?

@nit2wynit,  it's not unfortunate, that's what's supposed to happen, the market is always trying to trap the unwary and inexperienced, why wouldn't it when it's so easy to do.

So you're found that the market moves in fits and starts even when the overall progression is one way, why would it do that. A bull trend is made up of big players buying then stop buying, take some profit, let the market fall back a bit then start buying again, they can time it anyway they want. You are seeing the buying, you are waiting a bit just to be sure, then jumping in just as they stop buying.

Once you have bought in you are totally dependent on having a big player come in after you and buy the market up and carry you along with it, but your timing/execution is all wrong.

Also, you have discovered that demo is not like the real thing at all, the market moves the same but inside your head it's all different.

So two problems identified, what to do about it.

TO BE CONTINUED

 

 

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Yes Casey.  My learning has moved from charts to myself and what I am doing wrong correclty 100% of the time.  As I figure it out, I look forward to the 100% right state of mind.

I am correct in my mistakes 100%.  I like the odds. :D

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20 minutes ago, Caseynotes said:

TO BE CONTINUED

(apologies @dmedin for hijacking the thread)

@nit2wynit

Problem 1.  When going live shift down to the lowest position size available so that's £0.50 and look to a market that has low volatility. Position size start low and build up as success and confidence grows, most people do the opposite, start big and down size as their losses mount and confidence collapses at the same rate as their account. With the small bet sizes a loss won't worry you so much and you wont be putting yourself under ever increasing pressure. 

Problem 2. Good chart reading and good trade execution is everything. They are far more important than technical analysis or identifying patterns or flipping a coin. I'll think of some good educational material to study but first some simple examples.

You mentioned gold so lets look at that first (bottom chart).

Simple, the bears had taken control of the market yesterday, look at the size of those red candles and the speed of the move down, if you were looking for anything it would be shorts but the market consolidated anyway so stay out.

usdjpy 30min, good steady chart, can day trade on or swing trade on it and the stop loss is not too big (expensive).

So practice simple chart reading with nothing cluttering up the chart. Learn to identify the different market formations early and when and where the big players have re-entered the market. 

image.thumb.png.77e96b66569ec73dc34d8a86c4ee2dd7.png

image.thumb.png.122031a578a4662fafdb466ad7966ce7.png

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@Caseynotes thank you so much for this info.  Where were you 4 weeks ago? pahahah.

Ironically, what you have suggested, is what i am now doing.  I told myself if i got down to £1000, then it was time for a rethink.  The rethink it to bet low and long after a decent chart study.

I did actually make £80 yesterday going short on that Bear, but bet wrong on the pullback thinking it was a reversal, and lost half going down.

I bought at the bottom for the smallest i could go and took an overnight position on it, hoping to see a gain in the morning.  Alas, it was as is seen; a consolidation.  The news suggested Low Dollar so i guessed it was going to go Up all day so put in for a long position.  I bought in the the 3rd up right at the top thinking it was going to break out.  It then took 6 hours to go down, up once to my Buy In then back down to support where it stopped me out with a £20 loss.  It's still sitting around 1290.

The only good thing i can take from it all is I know what I'm doing wrong.  I've been playing with a small account and risking only 3 moves at a loss of £50!!!  I've been a total fool.

My plan was never to Spread Bet but to Scalp/Buy and Sell shares based upon News that are below £10.  I only realised there is a Shares/DMA/L2 option yesterday, so I've got my next stage of learning to start asap with the £975 I have left.

Thanks again.  I need to make more use of the Forums.  

Any advice obviously appreciated.

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@TrendFollower

Totally sound advice, and nothing I don't already know; but always fail to follow.

However, I'm here now with a new challenge; to undo my already formed, bad habits.

However, I learned watching videos about Buying and Selling Shares, not Spread Betting.

I want to buy Low cost stock.  Wait for a Break and sell.  I want to buy 1000 shares, and see the price rise by 10p then sell.

I can't do this with SB.  

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In fairness I'd be happier being able to buy an option for a company I think is going to do well over a few months to a year, and pay that premium rather than risk getting stopped out by the intervening 'noise'.

Conversely the ability to PUT shares that one already owns, for a guaranteed price plus a premium, is more attractive in many ways than shorting via SB.

Once again I appeal to those who better than me, why SB is considered just fine for retail clients but options are only for the big guys.  Surely it's got something to do with the fact that retail clients get cleaned out easily and since they are trading on 'derivatives of derivatives' they have almost no impact on the real markets.

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All SBs and CFDs and Options are just a type of CFD. 

SBs are just a tax efficient (UK only) CFD, why do UK punters use SB instead of CFDs when 80% lose therefore there is no actual tax benefit? 

90% of options expire worthless though a large percentage are only taken out as a hedge anyway and are expected to expire worthless.

Is there actually any real difference between any of them?

The real difference is the size of the account. Small account holders can happily chose to use either cfd, sb or options. Large account holders will use cdf on dma with options to hedge, unless they are US based where plain cfd's are banned and they can only use options for speculation and hedge.  

 

 

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6 hours ago, Caseynotes said:

SBs are just a tax efficient (UK only) CFD, why do UK punters use SB instead of CFDs when 80% lose therefore there is no actual tax benefit?

 

Indeed.  If the number of successful traders goes up I'm sure the govt will look at taxing it SB.  🤣

Here's a great example of where a trader would prefer an option vs. SB.

jdsports.jpg

 

It's clearly a company on the rise, rated a strong buy by almost everyone, but the 'flash crash' on 13 March would have triggered more than a few stop losses I'm sure.

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2 hours ago, dmedin said:

Here's a great example of where a trader would prefer an option vs. SB.

Quite right, and that's actually a very nice chart, usually the sign of a well managed company. Not the norm unfortunately, most charts look more akin to the outline of a double humped camel. ☹️

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Seeing as options have been mentioned a few times, I thought it would be worth pointing out that you can trade Stock Options with IG, but you do need to call them though. It's not ideal, but you can see the open position on your computer. You have to call to close as well.

Other options like FX etc can be done on the platform. Would hope to see stock options on the platform at some point. Would be interesting.

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