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Is spread betting for fools?

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2 hours ago, nit2wynit said:

Right folks, probably close to my Posting Limit for today.

Her'es an update I wasn't aware of.

The Spread can change by the Tick at anytime without notice.

Trading the Instrument above.  I'm pretty certain I started with a 5pt spread.  then it went to £15, then to £25.  I didn't even notice till it went to £25 and got stopped out twice..........

What a **** joke and a con this platform is.  How can you justify going from £5 to £25 without notice??

When you are trading on shares there is a chance of a variable spread. Any IG spread is a fixed percentage wrapped around this underlying market. Spreads are variable because this is a free and open market where buy and sell prices are dictated by those who are willing to buy and sell at that specific value. This is not a feature of IG or our platform, but rather the underlying global market. If you're a mulit-million dollar hedge fund manager in the US or a retail trader buying shares via IG in the UK, both would be subject to such an event. 

We have a wealth of information and education on trading available on IG. Please make sure you are fully aware of how the underlying market works and any risk/reward which comes with leveraged trading. It may be worth checking out our Academy area here (and on mobile) https://www.ig.com/uk/learn-to-trade/ig-academy

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@JamesIG I'll simply need to make sure the Spread hasn't changed between each trade on the same Instrument.  Today could have been very costly if I were Live and Not Demo'ing.

 

Thanks.

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38 minutes ago, nit2wynit said:

@JamesIG I'll simply need to make sure the Spread hasn't changed between each trade on the same Instrument.  Today could have been very costly if I were Live and Not Demo'ing.

There is no way to make sure the spread doesn't change. It's important to note that spreads can widen at any point, especially over market swings or high volatility events. I'ts important to take this into consideration when trading.

37 minutes ago, nit2wynit said:

While you're here @JamesIG can you tell me why some of the Auto Stop Loses are so massive?

Are you referring to 'Guaranteed Stops' or something else? 

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41 minutes ago, nit2wynit said:

While you're here @JamesIG can you tell me why some of the Auto Stop Loses are so massive?

The minimum stop level changes for the same reason as the spread, sudden increase in volatility. Don't forget you are looking at the spread when you hit the buy or sell tab though it would be more clear if the ticket format was the same as on mt4 for example where the spread is in a separate box. This was recently highlighted in another thread and was passed on to the platform developers.

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Also note the spread is within the deal ticket (example below) 

image.png

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@JamesIG Of late, on the Demo there has been No Spread Info like that above, at the point of placing the trade.  Maybe something is up on the platform or the Demo?

The only way for me to see the size of the spread if by counting the difference between the Buy and Sell price.

I'm referring to the 'Minimum Stop' that is applied that I cannot change.  It's either Zero or something huge.  I should have made a note of it last week.  It meant I couldn't walk away from the trade.  I limited my stop to 20pts, but on this occasion the minimum was about 150pts! so I need to wait to see if it went the wrong way to Stop it manually.

There's little point in me referencing it now without the evidence so forget about that for now.  Thanks.

But the Spread info is definitely missing from my trades over the last week.  I'll see if I have any evidence of screen shots to prove it, in the meantime this is from right now.

 

no spread info.jpg

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13 minutes ago, nit2wynit said:

But the Spread info is definitely missing from my trades over the last week.  I'll see if I have any evidence of screen shots to prove it, in the meantime this is from right now.

It's a new feature that hasn't been completely rolled out on the demo platform, it's there for indices and fx but not on stocks just yet.

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Ah, Cheers Casey.

Handy but quite essential thing to have one thinks.

Market close is also inside the ticket info.  I've been left with an open trade again.  Luckily I have a stop in place.  I've no Idea what market it's on but closed at 3.55pm!!

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20 hours ago, nit2wynit said:

Well...................Somehow on this stock the Spread changed from 15pt to 25!!!!!!!!!!!!!!!!!!!!!!!!

Anyone shed any light on this???  Down £120 on my profits today.

 

That's something I noticed when I was trying to trade on 5 - 15 min charts on stocks, using the 'Day trading for a living' approach.  The spread can become enormous, meaning that you cannot make a profit this way.

I believe that that approach (i.e. making money on individual stocks in short time frames) is only viable for people using a U.S.-type system where they are actually buying and selling shares, even though temporarily.

With spread betting you can make money, just not enough money to replace the 'day job'.

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Posted (edited)

@dmedinI know where you're coming from, and I agree.  But you can make a living from it.  My main problem (regardless of my lack of knowledge about the Spreads growing exponentially) Is the Risk vs Reward as I've mentioned.

There are 2 scenario's that I need to work out in detail.  These being the Capital needed, vs the Stake placed to make the same profit or more either using SB OR Buying Selling Shares (which we can do here also by the way!)

For Instance, to Buy shares here with IG cost anything from £5 to £15 I think depending on the Market.  



Let's assume we know a share is going up for the purpose of this exercise.

With 1k, If I want to Buy shares i'll need to literally put up 1k, but the cost to buy the shares in UK is only about £5.  So although I have used my entire Capital of 1k + £5 to buy them, at this point I am down £1005.  If i was to Sell Immediately at the same price, i would get the full 1k back so only be down £5.

If I use Spreadbetting, Although i wouldn't need to put down the 1k, i would need to use the 1k Margin.  However, depending on what stock I'm Trading, the Spread could be anything from 1-200?????  So as shown last week in my screen shot, the stock I had at the time put me under 2pts, but at £170 pp i started £340 under.  If i got out right away i would be down £340.

This scenario alone tells me to Stay Away, but I'm still trying to work out the Price per point ratio, vs Margin vs Profit etc. 


But I think it goes like this.

1k will buy me 1000 shares @ £1 +£5 to Buy the shares.  If they go up to £2 I make 1k?  Seems right?

If i want to SB the same stock, i'll need that stock to move more than 1pt or 100% because of the Spread of 1pt. (assuming in this case 1pt =£1)  Regardless, to make 1k on SB i'll need to stake £1000 ppp and need it to move more than 100%.  (1 for the Spread 1 for the profit) I'm guessing here but I'll be under by £500 just to place the trade. 

But......If my bought shares Dip 50p,  I'll be down £500 if I sell.

If they Dip on SB I'll be down 1k.  



Can anyone confirm this about about right?

 

Edited by nit2wynit
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@nit2wynit - check out the following for an overview of SB Vs Share dealing: https://www.ig.com/uk/spread-betting/spread-betting-vs-share-dealing There is an example of Barclays which I've included below which you may find interesting and a little clearer. The share dealing fee of £16 is a round trade of £8 in and £8 out. 

The Spread Betting cost is incorporated into spread price. 

image.png

 

You can also check out the 'Spread betting examples and calculator' section for more examples on this page: https://www.ig.com/uk/spread-betting/how-to-spread-bet

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I think the key point is that Spread Betting can be more profitable if the right trading strategy is applied.

This for me involves trading the strongest trending assets which move a lot of points in a day. These will also be the highest risk assets but trading is all about risk and managing it effectively. A lot of traders will not even go near or touch such assets and therefore their chances of making larger profits diminish on Spread Betting. 

One of the reasons why this is crucial is because of the wide spreads and therefore you need to trade an asset which can move a lot of points quickly when using Spread Betting. Unfortunately for some this entails the likes to Commodities and Cryptocurrencies as well as more smaller shares rather than large caps. 

Leverage is the key tool if used effectively can boost returns when compared to a share broking account. Thus if trading the strongest trending assets and applying leverage then the returns can far exceed that of normal share brokering services. However, if sound risk management is not applied than it can blow your capital pretty quickly. 

The reason why traders struggle is because they choose to trade the most safest / most liquid and least volatile assets using Spread Betting and due to the wide spreads and inefficient trading strategies being applied to Spread Betting they just simply cannot make the returns they aim to achieve. 

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@TrendFollower @JamesIG Thanks for the input here.

James I appreciate the info above, but what would you start under by using SB vs Share Dealing?

There's obviously a sweet Spot Re; Price of a Stock vs Price per point vs Commision Price.

Is there a way to determine which stock's provide similar returns using sharedealing?

My own example is of a £1 stock.  By your example against mine it appears that the smaller the stock price, the more Initial Price per point must increase?  Therefore a higher priced stock may be more akin to Buying and Selling shares.

For me to make this work, i need the Price per point to Equal the Commission cost of Buying the shares, plus make the same or more per point move.

 

Thanks

 

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@nit2wynit,

One example I can give is Bitcoin. It’s margin requirements are far higher than other Cryptocurrencies that IG offer but its price is far higher too. Now why would someone pay the higher margin requirement? Well traditionally and historically Bitcoin moves more points a day than the other alt coins so from a trading perspective both Long and Short it becomes an excellent vehicle to use when spread betting per point. It is the points movement which is crucial. It also requires an asset which is volatile which Bitcoin is. Volatility throughout the day makes it an attractive day trading asset for Spread Betting.

To be effective and profitable in Spread Betting it is imperative that the more appropriate asset is being traded in relation to points movement. If you don’t have an asset that has a high points movement then what traders end up doing is over leveraging and throwing risk management out of the window. This leads to one path and that is generally failure and loss of capital.

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 @JamesIG Of course, we know that IG makes money from the Spread.  It's better to make more on the spread than only the Commision, right? :D

Comparing an outlay of over 4k to that of a Margin of £800 isn't the same really is it.  That price is specific to that stock at those amounts.  What about having only a 2k account?  The equation must work backwards now.

What about a £1 share price?  Can you do the same equation to make the same profit, including the Spread?

@TrendFollower as above, yes, this is what I've come to understand.  Large point moves vs Price per point etc.  Trying to find the Balance between the two is proving tricky.


However, I've put this question down many times now, and no-one thus far has been able to give a definitive answer to Stock Price Vs Margin, vs Account Size, vs Profit in relation to Share Dealing Directly.

Maybe it's so obvious I'm missing it?


£1 share price x 1000 shares = £1000 + 1point move @ £1pp = £1000 profit.

What is the equivalent in Spread betting?

Thanks

 

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On another note previously mentioned, why is the Minimum Stop on this over 7pts?

It's only gone up about 4.3% or 15pts on the day in 6hrs?

 

 

Minimum Stop.jpg

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@nit2wynit,

If the share price is £1.00 and it moves 0.01p or 1 point then you would not get £1000 profit on a share dealing account. The share price would need to rise to £2.00 so 100 points at £1.00 per point to get £1000 profit on a share dealing account.

I do not really spread bet shares so I appreciate I may have misunderstood your example but you would need the price to double from £1.00 to £2.00 in your example to get £1000 profit in a share dealing account. Worth spread betting it would all depend on what the margin requirement is, what the minimum bet per point is, any leverage, etc.

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Thanks, but how do i know if i'm dealing in Pounds or Pence?

For instance Greatland Gold UK Small Caps.  it's GBX.  it's showing 1.47.  

Is this £0.147 pence, or £1.47p?
I'm assuming it's £0.14p?

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I'm not entirely sure what you're asking. 

£1 a point (where a point is anything to the left of the decimal place) = 100 shares on a UK listed equity.

With DS Smith at 360p right now, if you traded £1 a point on SB you'd make or lose £1 if it went to either 359p (down) or 361p (up). This would have a notional value of £360, which is the same notional value if you bought 100 shares via a share dealing account. 

If the stock went up 10% on both the share account or the SB account, you share dealing position would be £36 in profit, whilst the SB would be 36 points up, at £1 a point is also £36. 

The difference is to open the share position would require £360 of cash, whilst the SB would only require £72 (assuming a 20% margin requirement). 

Furthermore

  • SB is tax efficient 
  • Share dealing commission is £8 in and £8 out, whilst SB would be incorporated into the spread. Looking at this example right now, the spread is 0.36 points in and out, so 72p around trade as a 'cost'. 
  • SB has overnight funding costs to maintain the leverage trade.
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@nit2wynit

I hope @JamesIG explanation above helps you to understand SB better.

I don’t tend to SB shares and it is mainly Cryptocurrencies, Commodities and Indices. 

I tend to focus on points and tend not to get bogged down over monetary value apart from my profit or loss. I just think this is the entry number and this is the exit number and this is the amount of points the asset has gone up or down. The more leverage you apply in terms of £ per point the more profit or loss you are going to make. There will be a minimum £ per point depending on the asset you are trading.

I would start off with minimum bets first and really ensure that your trading strategy is robust and effective before applying any leverage. That will come later once you have a sound trading system to make you more profits than losses on a consistent basis.

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Right, Greatland Gold is £0.0147pence right now.  So about 1.5p per share.  1 point is 1pence?  If i buy £1000 worth of Greatland Gold shares the cost is =£1000.  This equates to 66,045 shares.  If it goes up 1point to say 2.5p per share, I get 66,045x£0.01p=£66.045

Spread Betting the same Stock.

To gain £66 from £0.01p move, the Stake must be £66 per point.  Margin of £25.  This puts me under £1.82


But to be honest, I'm really REALLY struggling with this pence and Pound equation lol.


 

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I think I'm not being clear and you're all missing the point.

Over ANY Trade with only 1K to use to either BUY shares, or Spread Bet, which Platform can make the most money over the same point moves, with the least risk? lol.  This is the Cost of the Commision vs the Spread.  So if the Commision is £10, then the Spread must also be £10.  If it moves in the Wrong Direction, which Platform will reduce my Losses?  The account size is 1k, regardless. 


The Same Stock.  Not different stocks.  Side by Side.  Buying and Selling vs Spread betting. 


Is there a Formula that suits Spread Betting, that does not suit Share Dealing and Vice Versa?

 

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If this STILL isn't clear.............

1k account.

Commision to Buy shares £8

Spread Cost must also be £8  How do I calculate what the spread will actually cost me?

It must cost the same for me to Place a Bet as it would to Buy the Shares.


If I haven;t been clear since i joined back in March.................



I learned about Share Dealing!!!!!!!!!!!!  not Spread Betting.

I'm still trying to work out if Spread Betting is actually a Benefit over Share Dealing.

Thanks.

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Oh Dear @JamesIG

I know what Trading is.  I know what charts are.  I understand Spread, Tax free, Capital etc.  Trailing Stops Market opening times;  I understand most of it.

But there is something missing in the Jigsaw, that may be staring me in the Face.

I learned about Share dealing, Not Spread Betting as it is not available in all parts of the world.

I can see the benefits of Spread betting.  They are clearly outlined.

I am working on being a Day Trader.  I'm simply trying to work out, that if I only had £1000, what would make the most money, in the shortest time? For instance,I did a trade last week for £170 per point.  It put me under 2pts at -£340 to start, but moved up 4pts to take £340 profit.  Using a 2k margin.  But I want my Spread Cost to match the Commision Price.  But only is i can make the same profit on the same Instrument over the same point moves.

Theoretically, I have One go.  Spread Betting, vs Share dealing.  Which makes more sense, more money, all other things equal if I only have 1k?

I have £1000.  I see a Stock that is £1.  I can buy 1000.  It goes up to £2, or 100%  I sell and make £1000.

I see the same Stock using SB.  I still only have £1000 account.  The cost is £1 Plus the Spread of??.  I want to make £1000 going from £1 to £2. Same scenario, just different methods.   How much will the Spread cost?


Is there a Price Range of Stocks that I need to concentrate on where the Spread cost would equal the Commission Price?

Buy the shares cost £8.

Place a Bet £8 under.  

You all see where I'm going with this yet? lol.



  

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@nit2wynit,

The problem with your example is that all things are not equal. If you have £1k and decide to both Spread Bet and trade shares then the costs are different. They will never be the same. With share dealing say it is £8.00 to buy and £8.00 to sell. Well under Spread Betting it will be what ever the spread is plus any overnight charges. Depending on how long you hold the position will determine how many overnight charges are applied because of the use of leverage. It will not necessarily be £8.00 even if you are using the same capital and the same share. 

You are trying to compare apples with oranges. Both are different ways to trade. In terms of which one will make more money based on capital allocation then it is Spread Betting because you can leverage so your £1k position would be worth far more than £1k worth of shares and because of this you could make more profits. However it is far more riskier as if the trade goes against you then...(you know what, you are in trouble).

So the least riskiest option is trading shares and the higher risk is with Spread Betting. However the potential to earn more profits based on margin trading and leverage allows the greater ability to make more profits on the same amount of capital. Also the tax free element also means more profits stay in your account. 

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Posted (edited)

@TrendFollower forgive me, The £1000 IS THE SAME!  
You've been very active here with advice that i appreciate, but it's all the same.  We know it's different.  We know the Risk.  That's what i'm trying to outline.



Let's assume 'We know it's going up'.  £1000.  £1 per share price = 1000 shares.

Spread Betting Vs Share Dealing

To Buy the Shares cost £8

To Spread Bet Costs?

Answers???

 

:D

 



 

Edited by nit2wynit

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My problem is i can't find a stock that is only £1 to do an example with.  Otherwise I'd just put the numbers in to Share dealing to see how many shares, Obviously 1000, or what it would cost to make £1000 moving from £1 to £2 on Spread Betting.

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