Is spread betting for fools?

[nit2wynit]

7 hours ago, Caseynotes said:

@nit2wynit, you are missing the point on spreads and what the spread is actually telling you. The spread is low when the asset has good volatility and good liquidity, spreads are high when the asset has poor volatility and poor liquidity therefore don't buy an asset when the spread is high. 

You can often easily buy a stock when there is poor volatility and poor liquidity but when you need to sell it is when the trouble starts.

In @ha05230 perfectly reasonable example what say the spread was 1 and not 10.

Please tell me what you see here Casey and relate it to the info you've provided above?

Within 30 seconds the Spread went from 45-62.  Updating glitch?  Normal?  Is this Volatile?, Liquid?

 

 

[Caseynotes]

4 minutes ago, nit2wynit said:

Please tell me what you see here Casey and relate it to the info you've provided above?

Within 30 seconds the Spread went from 45-62.  Updating glitch?  Normal?  Is this Volatile?, Liquid?

You would need to ask the liquidity provider but clearly something happened. Do you trade in the seconds following a big news event when price is whipsawing all over the the place, when spread is sky rocketing and there is massive slippage because orders at multiple handles being taken out instantly?

Here is an exert from my reply to the OP in this thread;

" I didn't realise I was competing in a two way auction, I thought I was just gambling like I do in Vegas where if the action is really hot and the big guys are throwing lots of money around and the spread is getting bigger and bigger then that is exactly the right time to jump in, boy was I suckered."

I understand you don't get it but until you do you risk a sudden wipe out of your account, that's just the way it is.

[nit2wynit]

Just now, Caseynotes said:

You would need to ask the liquidity provider but clearly something happened. Do you trade in the seconds following a big news event when price is whipsawing all over the the place, when spread is sky rocketing and there is massive slippage because orders at multiple handles being taken out instantly?

Here is an exert from my reply to the OP in this thread;

" I didn't realise I was competing in a two way auction, I thought I was just gambling like I do in Vegas where if the action is really hot and the big guys are throwing lots of money around and the spread is getting bigger and bigger then that is exactly the right time to jump in, boy was I suckered."

I understand you don't get it but until you do you risk a sudden wipe out of your account, that's just the way it is.

erm....I'm not sure if that answered my question of 'What do you see?'  I'm not asking you what you think happened inthe world to make it go up, I literally mean the Chart.

The vertical red line is 8am open.  It's a 5 min chart.  Up over 300pts in 5 hrs or 3.7%

Just wondering how you see it in relation to the info you provided.  Large Volume of action.  clearly moving on the 1 minute chart.  Mahooosive Spread.

[nit2wynit]

but to answer your question; No, I don't.

'Do you trade in the seconds following a big news event when price is whipsawing all over the the place, when spread is sky rocketing and there is massive slippage because orders at multiple handles being taken out instantly?'

[Guest davidbrister]

20 hours ago, nit2wynit said:

Yes, that's it @TrendFollower  But I know what the Spread is!!!  I know what Margin is and Leverage!!

You keep talking about Overnight, but I'm a Day Trader.  No open Trades.  I'll be trading for a few hours a Day, tops.  I'm also aware of overnight charges.

But you've picked a Share Price at the wrong end.

£1 share price, 1000 shares.

Move from £1 to £2.  Profit £1000.  cost £8.

Spread Betting cost to make the same money from £1 to £2.

 

From that example @nit2wynit how much are you betting per point? from $1 to $2 its 100 points of movement. If you had only used $1 a point you would make $100, but if you used $5 a point then you just made $500.

Most markets have a bigger spread when they are closed compared to when they are open.

I guess i never worried about the spread factor as much, if the item was worth $1 with a 3pt spread, then in the open market it would show a BUY position for say $0.97 and a SELL position for $1.03 and as long as i sold it on the other side of the $1 either way i was ahead.

It looks like you might have got your answer above, i hope so mate. Best of luck with it.

I still only see Nitwit, and laugh knowing its not that now, lol

 

Edited June 20, 2019 by davidbrister

[nit2wynit]

10 minutes ago, davidbrister said:

From that example @nit2wynit how much are you betting per point? from $1 to $2 its 100 points of movement. If you had only used $1 a point you would make $100, but if you used $5 a point then you just made $500.

Most markets have a bigger spread when they are closed compared to when they are open.

I guess i never worried about the spread factor as much, if the item was worth $1 with a 3pt spread, then in the open market it would show a BUY position for say $0.97 and a SELL position for $1.03 and as long as i sold it on the other side of the $1 either way i was ahead.

It looks like you might have got your answer above, i hope so mate. Best of luck with it.

 

This is where my knowledge has failed me David.  What is a Point is it'f a £1 share price?  I've only just realised the everything Left of the Decimal Point is Pence. lol  I've just been focusing on the Points moved and not the value of them.

It's like everything in life.  You can't ask the right question if you don't understand the rules.  Before we get any answers we need to understand what we're asking.

All my question really comes down to is this.  with 1k i can make more by utilising my Entire 1k Margin than i could if i bought the shares, but ultimately, if i use my entire 1k Margin i stand to lose a hell of a lot more than If the shares went the other way.

 

Edited June 20, 2019 by nit2wynit

[Caseynotes]

25 minutes ago, nit2wynit said:

Just wondering how you see it in relation to the info you provided.  Large Volume of action.  clearly moving on the 1 minute chart.  Mahooosive Spread.

Aren't you the same person I said was very brave trading the Dow straight into the US market open on another thread some time ago? Because the market open and close can often behave the same as a data or news release (that you don't trade), a large candle is the same as a gap, there is massive slippage because multiple orders are being taken out instantly ... haven't I said this before somewhere?, anyway, liquidity disappears and the spread widens.

[Guest davidbrister]

3 minutes ago, nit2wynit said:

This is where my knowledge has failed me David.  What is a Point is it'f a £1 share price?

Yes it seems you were mixing the Share Price with Points. Best thing about CFD or spread betting is you can make money both ways up and down, if you buy the share, you can only make money if it goes up. Which is why it pays to play with $1-$10 share prices as smaller lots of cheaper shares move more for you to cover the $16 fees that James showed before, but buying large priced shares with out much movement dont tend to cover the fees unless u have spent up big.

Compared to if the spread is 3 points and it moves forward/back 4 points im now in profit depending on BUY/SELL order.

[nit2wynit]

3 minutes ago, Caseynotes said:

Aren't you the same person I said was very brave trading the Dow straight into the US market open on another thread some time ago? Because the market open and close can often behave the same as a data or news release (that you don't trade), a large candle is the same as a gap, there is massive slippage because multiple orders are being taken out instantly ... haven't I said this before somewhere?, anyway, liquidity disappears and the spread widens.

erm...nope!  I don't think so anyway lol

[nit2wynit]

Annyyway, in the meantime waiting for the US to open this happened.

 

[nit2wynit]

@Caseynotes what does the Dow open have to do with the chart I've put forward for your opinion on?  That chart has been open since 8am this morning.  At the point I was showing you it had been open 5hrs!
 

I'm not sure of your point.

I just want your opinion on Volatility, Spread relating to that chart that been open 5hrs?  Why are we talking about the Dow? lol

Edited June 20, 2019 by nit2wynit

[Caseynotes]

1 hour ago, nit2wynit said:

I'm not sure of your point.

I just want your opinion on Volatility, Spread relating to that chart that been open 5hrs?  Why are we talking about the Dow? lol

You might have noticed people have difficulty answering your questions, one reason is that they are often not very clear perhaps because you might not have done the ground work on the subject. As James pointed out yesterday there are a number of tutorials on spreads in the Academy section that you could have followed up on.

So spreads are floating, at most times they will adhere to the minimum but during periods of low volatility or liquidity  they will change, such periods are often linked to periods such as market open and close, times of news and data releases or a just a sudden buy or sell panic. These intermittent periods with the associated change in spread may last just seconds or minutes, they rarely last much longer except for very illiquid stocks but it may occur multiple times throughout a day. I couldn't say in the case of your chart as I wasn't watching it. The more important point I was making was that if the spread looks unreasonable don't trade it, it makes it much harder to turn a profit if you are only looking to hold for the short term.

[nit2wynit]

24 minutes ago, Caseynotes said:

You might have noticed people have difficulty answering your questions, one reason is that they are often not very clear perhaps because you might not have done the ground work on the subject. As James pointed out yesterday there are a number of tutorials on spreads in the Academy section that you could have followed up on.

So spreads are floating, at most times they will adhere to the minimum but during periods of low volatility or liquidity  they will change, such periods are often linked to periods such as market open and close, times of news and data releases or a just a sudden buy or sell panic. These intermittent periods with the associated change in spread may last just seconds or minutes, they rarely last much longer except for very illiquid stocks but it may occur multiple times throughout a day. I couldn't say in the case of your chart as I wasn't watching it. The more important point I was making was that if the spread looks unreasonable don't trade it, it makes it much harder to turn a profit if you are only looking to hold for the short term.

Soooo, about that chart then?

I just wanted to know if that chart was Volatile or had Liquidity?  300pts 3.7% increase, 5 minute chart.

A lot of words spoken to get a simple answer.

Never mind.

Thanks anyway.

[Caseynotes]

41 minutes ago, nit2wynit said:

Soooo, about that chart then?

I just wanted to know if that chart was Volatile or had Liquidity?  300pts 3.7% increase, 5 minute chart.

A lot of words spoken to get a simple answer.

Never mind.

Thanks anyway.

Volatility can eat up the liquidity so price has to move because there is no liquidity left, price is not only pushed it can be pulled as well and that can produce gaps and large candles 

But I can see you're not really bothered, never mind. 

[nit2wynit]

1 minute ago, Caseynotes said:

Volatility can eat up the liquidity so price has to move because there is no liquidity left, price is not only pushed it can be pulled as well and that can produce gaps and large candles 

But I can see you're not really bothered, never mind. 

lol

 

 

So....the chart?? lol

Was that a volatile stock?  I didn't think so, but the spread was 60pts.

 

I'm none the wiser on your answer this time I'm afraid.


As for my Questions being difficult to answer.  Clearly haha.

Cheers for everything so far.

[nit2wynit]

@Caseynotes before this gets out of hand as i can clearly sense a hint of sarcasm or reluctance, i want to make sure of a few things.

This is not my post.  It's an All Welcome to discuss if SB is for Fools.  There are clearly issues with the Demo.  If i must be directed to the Entire IG Academy before I warrant simple answers to simple questions (clearly some struggle where others don't) then what is the purpose of the the thread or the forum?

I don't why why you've mentioned the Dow or Large Candles???

I showed you a 5hr chart and asked if you thought it displayed what you had outlined re Volatility etc.  Things that would affect Spread size.  to me it appeared that this chart over 5hrs was Not Volatile, but Active.  Had Volume.  So I couldn't see why the Spread was so large and so variable.  I've assumed, maybe wrongly, that a person such as yourself, would be able to look at that chart and give me some clear understanding on it.  I'm now assuming again that I am mistaken.

I still don't know your answer to that chart and my question and entire Novel of words ago.

But I value your input, so thanks.

[Caseynotes]

4 minutes ago, nit2wynit said:

But I value your input, so thanks.

Do the Academy. 

300 point moves is high volatility which keeps the spread low unless it eats up all the liquidity which keeps the spread high.

Large candles or gaps are an expression of high volatility and low liquidity.

The Dow market open reference was in relation to periods where you can expect high volatility and low liquidity, same as during news events.

Yesterday was a great leap forward on learning what spread meant in context to trading, keep it going.

Do the Academy.

 

[nit2wynit]

6 hours ago, Caseynotes said:

Do the Academy. 

300 point moves is high volatility which keeps the spread low unless it eats up all the liquidity which keeps the spread high.

Large candles or gaps are an expression of high volatility and low liquidity.

The Dow market open reference was in relation to periods where you can expect high volatility and low liquidity, same as during news events.

Yesterday was a great leap forward on learning what spread meant in context to trading, keep it going.

Do the Academy.

 

I've assumed Volatility as in Volcanic Eruption i.e Market open or News...as you've stated....where the Candle shoots up and down.  This is a 5hr chart of 300pts.  only 3.7% on the day.  That's 0.74% per hour.  

II will watch ALL vids on the Academy, but what am I missing that I will understand from IG Acedemy vids?

At this stage in my learning, what I posted earlier is no way near a volatile Chart.

Seriously confused.  I will research Volatility and come back to this question.

By all means anyone else chime in.

[dmedin]

@nit2wynit

The spread becomes large because so many traders are doing the same thing ... so there is an imbalance between sellers and buyers.

I believe SB is based off futures, even for stocks ... it's like trading in 'derivatives of derivatives' ... direct market access might give you tighter spreads but you need to be trading on behalf of an institution or a large fund to qualify for that privilege.

 

[Caseynotes]

3 hours ago, nit2wynit said:

I've assumed Volatility as in Volcanic Eruption i.e Market open or News...as you've stated....where the Candle shoots up and down.  This is a 5hr chart of 300pts.  only 3.7% on the day.  That's 0.74% per hour.  

II will watch ALL vids on the Academy, but what am I missing that I will understand from IG Acedemy vids?

At this stage in my learning, what I posted earlier is no way near a volatile Chart.

Seriously confused.  I will research Volatility and come back to this question.

By all means anyone else chime in.

On the daily dashboard thread the screen shots list some 80 odd assets, how many move over 3% on the day, usually none, maybe 1.

If the spread seems 'unreasonably' high on an asset you should not be trading it because there is a 'reason', it's just that you don't know what it is, if you are signaled that you are missing information on an asset you are about to buy you should not be buying it.

True it may be that the asset is about to turn from an ugly duckling into a swan and that's the reason for increased volatility and lower liquidity and if you know all that then you may well be prepared to pay the premium as the spread is not then 'unreasonably' high. But if you don't know stay out, treat the spread as a potential warning signal and red light to taking a trade. 

 

 

[nit2wynit]

Don't wish me Luck, wish me Success.  

Have a great Friday people.  I may go Live to apply the new things I've learned this week.

Another typical Successful Run Yesterday and this morning on the Demo using only 2k.

Thanks

 

[nit2wynit]

I have The FEAR lol

2 trades running for £1pp.  

Wow, I can't believe how much this effects me for only £2.  I spent £20 last night on Wine and Food.  Jeeez what is the problem here....haha

[dmedin]

On 20/06/2019 at 11:38, nit2wynit said:

But it would have tied up my Capital for 2 months or so?  No income from it.  There was a stock I was using last week where it dropped several hundred points in the day.

£5 per point, 355 points in 2 months = £1775, for me anyway that would have been awesome if I had held on to my short until the end.  Stop loss would have been around 1445 for a max loss of £50 or so.

[Caseynotes]

18 minutes ago, nit2wynit said:

I have The FEAR lol

2 trades running for £1pp.  

Wow, I can't believe how much this effects me for only £2.  I spent £20 last night on Wine and Food.  Jeeez what is the problem here....haha

The problem is either you don't trust your system because you haven't tested it properly or that you don't trust yourself to stick to it. 

You should all ready know what's going to happen after you've entered the trade, when price does this I do that, when price does that I do this.

The actual result of one trade doesn't matter, what matters is the collective results of many trades, like what you did for testing 😶

[nit2wynit]

My 'System' isn't he problem.  My Fear of losing money is.  It's clearly Psychological.  It's not about Trust.  It's the Fear of Loss.  Fear causes Hesitation and doubt.  Same psychological fear that has governed every single endeavor I have undertaken.  I don't fear failure, but I do fear financial loss.  

I bought and sold cars a few years ago.  Pulling out 2 or 3 grand at a time had a similar effect.  It's Gambling.  I know my way around a car and how to fix them, what to look for, I know my way around a camera as I pull out 10k for gear, I know my way around my Carpentry tools, but this is also about Random Chance.  It's a different beast.  I'm going to stop playing on the Demo as @davidbrister suggested and get this Fear under control.

I've proven time and time again my success rate on the demo with the same Strategy.

I am the problem.

I could throw 20k at this, but my Plan is to turn 2k into profit.  When I've proven this, I'll Graduate myself to the next level.

I was fearful simply placing the 1st bet today.  The amount doesn't seem to be the problem.  It's just a Fear in the background.  

It's going to take time before this is part of my psyche.

However, I did it wrong straight away today.  Picked to Stocks that were consolidating.  I've tried to beat the drop again.

I just wanted to take the first step back into the Live arena.

The 2 trades I'm in now have been going for 1hr and 2 hrs.  lol.  So much for in and out in 10 mins.


Slow moving traffic.  They've both gone the other way and the anguish of a 2 hr wait ruins me.

Soon I'll be stopped out on both for -£15 in total.  I can live with a £15 lesson today.

@dmedin Ocado......I won't try and save it.  It's gone the wrong way on me so i'll let it fail.

I'm calling it a day folks.  Enjoy the weekend.

 

[dmedin]

Ocado looks like it is turning into a potential long now. 

[dmedin]

JD Sports is due a little correction. 

 

[nit2wynit]

My God lolololololol

 

[Caseynotes]

You don't have a system unless you have a set of rules that govern every step for every trade. Most people's system actually comes down to 'I'll pull the trigger when I think things look right', that's not a system, you are instead relying on emotion to make consistently correct decisions, when the decisions become inconstant self doubt creeps in and then the fear, you may as well stop right there.

As I said further back, you need to get scientific, otherwise you are shooting from the hip at shadows.

Develope a rule based system, test it to prove it's validity and then trial it live. If you are not doing this you are wasting your time.

[Guest davidbrister]

40 minutes ago, nit2wynit said:

My 'System' isn't he problem.  My Fear of losing money is.  It's clearly Psychological.  It's not about Trust.  It's the Fear of Loss.  Fear causes Hesitation and doubt. 

 It's a different beast.  I'm going to stop playing on the Demo as @davidbrister suggested and get this Fear under control.

I am the problem.

I could throw 20k at this, but my Plan is to turn 2k into profit.  When I've proven this, I'll Graduate myself to the next level.
 

@nit2wynit It is dangerous beast to train and control, and even with the strictest rules set in place, (type type them up and print them out, stick on PC side or wall above monitor) once you press the Go Button, doubt and 2nd guessing yourself turns you into a monster. 

Even now with my Auto Trading, im analyzing the open trades too much and get that fear of should i adjust something instead of just let it go. I dont touch it, but by god do i want too, lol.