Jump to content

Is spread betting for fools?

Recommended Posts

@nit2wynit

So for example Tesco which is a UK FTSE 100 share is 236.24 to buy and 235.46 to sell. This is £2.36 and £2.35. So it is in pounds and pence. 

To find out what the share price is you can merely just Google it or check another website or broker platform. Just check the share on Hargreaves Lansdown and the share price will be as clear as mud. 

  • Like 1

Share this post


Link to post

I've just read that the LSE is in Pence at all times.  Thanks lol :D

Share this post


Link to post

@nit2wynit,

Let us use a US share called Beyond Meat. Its current price 16952.00 to buy and 16909.00 to sell. This is effectively the 'Spread'. Now it is a US share so the price will be in Dollar ($) and cents

The minimum bet is £0.24p per point. So as I am using IG's UK Spread Betting platform though the share trades in dollars, I am trading in Pounds and Pence. So if I were to bet the minimum of £0.24p per point the margin requirement would be £814.51. 

Now if I want to increase the use of leverage and bet £1.00 per point then the margin requirement will be £3,378.60. 

There will also be overnight charges depending on your position and use of leverage. 

Now what you are asking is if you decided to physically acquire these shares using IG's share dealing service then what would the costs be and which option would cost more and more importantly which option would make you more money if the trade went in your favour. Right? If I still have not got it then I give up and shall leave it. 

@JamesIG, are you able to explain the answer to this to @nit2wynit as he has been asking this question for a long time now and he has not been given either a satisfactory answer or an answer he understands. Thanks.

Share this post


Link to post

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.

 

 

 

 

Share this post


Link to post
Posted (edited)

@TrendFollower


Explain this to me please.

Image shows 5ppp, Stop and Limit at 1pt or £5.  Why has it cost me £15 to place the trade?  The price between the Buy and sell is 3pts?  The charts is showing the Mid price. 

 

Thanks



 

Spread example.jpg

Edited by nit2wynit

Share this post


Link to post
32 minutes ago, nit2wynit said:

Explain this to me please.

Image shows 5ppp, Stop and Limit at 1pt or £5.  Why has it cost me £15 to place the trade?  The price between the Buy and sell is 3pts?  The charts is showing the Mid price. 

Can't stand the torture any longer :/, must be some kind of trick question.

So the cost of the trade is the spread, 3 points. You have entered at £5 ppp so the price to enter the trade is 3 x 5 = £15. That is taken at the entry so the trade immediately goes £15 into the red.  

  • Like 1

Share this post


Link to post
Posted (edited)

@Caseynotes lol.  I know.  I can feel the anguish in the Forum.

Something isn't clicking here inside me.  I had no idea the Spread was the WHOLE spread from Buy to Sell Price.  I thought it was Half the Spread.

you'll remember me saying that the spread isn't showing on the Demo.  It's clearly thrown me off.

Next i look at the ASK buy and Mid price and try figure that out.  ****.  thanks everyone.
 

Edited by nit2wynit

Share this post


Link to post
2 minutes ago, nit2wynit said:

you'll remember me saying that the spread isn't showing on the Demo.  It's clearly thrown me off.

especially when you're trying to place trades quickly, a small checklist on a post-it note on the side of the screen might help.

Share this post


Link to post
2 minutes ago, Caseynotes said:

especially when you're trying to place trades quickly, a small checklist on a post-it note on the side of the screen might help.

Well, to be fair, it's knowledge now.  Hopefully the Spread will be added to the Demo soon too.

Not hard to get confused when we're dealing with 4 number dealing prices that have gone from 5pt to 25pt Spread.  no wonder my trades went from -£20 to -£100 :O

Seems I've spent a lot of time learning chart movements and not enough about Spread Betting Fundamentals.

Like I've said, it was Share Dealing I'd been Studying.


Think I'll take this whole thing back to Pen and Paper and give this thread a rest. :D

Share this post


Link to post

@nit2wynit,

Oh dear. No wonder you were getting in a pickle. What made you think the spread was half the buy to sell? Yes the spread is from buy to sell in full. 

If I were you I would not worry about Spread Betting just now. Concentrate on getting your trading system in place and fine tuned so that you can implement your trading strategy both successfully and profitably. You can always come back to Spread Betting at a later stage when you are achieving your profit goals. 

Apologies yes if you were day trading then you would not have any overnight charges. I forgot. I keep positions open overnight so I get these charges. 

  • Like 1

Share this post


Link to post

@TrendFollower I think what's obviously happened in the past is I've noticed a Point Spread, but it's changed without me knowing.  This could be a reason why i was failing a lot early on.

Still learning the basics.  :D

Share this post


Link to post

@nit2wynit,

Listen the main thing is through your perseverance on the IG Community here on this thread you got to the bottom of it eventually.

It was hard work and you established that your understanding was wrong. I always say that no question is easy unless you know the answer. If you don't know the answer then the easiest of questions can be difficult. 

There are many things I do not know or understand. You cannot know everything and understand everything to do with trading. If anyone said they do then they are lying. Try and master small parts which are closely aligned to your trading plan and trading strategy. 

  • Like 1

Share this post


Link to post

@nit2wynit

Shares

Buy 1000 ABC shares @£1 (100p)  will cost you £1000 +£8= Cost £1008

Hold onto them until they reach £2 then sell = £2000 - £8 - 10%tax = £1792=  £784 profit

It is unlikely that a stock will double in price in a day, it often takes a year to double. But you physically own the shares (certificate) and can sell them whenever you want so potentially only sell them when you’re in profit.

Spread betting

ABC has buy price 100p and sell at 90p

your £1000 will allow 1000/(price x margin) = 1000/(100 x20%)= £50 per point

So straight away you will be down 50xspread = £500. But then you would only need the ‘sell’ price to rise to 120p to make a 1k profit ((120-100(your buy price))x50. Having said that if the sell price dips lower by 20 points to 70p then you will lose your £1000

You can see from this spread betting is riskier especially if you want to trade a low cost share because your stake (the price per point) is higher. But the leverage gives you access to more shares (which you don’t own). In the example your £1000 is actually representative of ((1000/margin)x100)= 5000 shares

I think what everyone was trying to say is that with spread betting it is unlikely  you will find a low price share that has a low margin or low stake (cost per point). 

With spread betting you would need to stake a lot of money to get a few point movement on a low price stock, OR you need a lot of movement if you don’t want to stake much money.

(I hope I haven’t confused you even more, but I had already written and saved this before @TrendFollower @Caseynotes or @JamesIG tried explaining to you, and if there’s any error in my explanation people please let me know. I am knew to spread betting myself)

@nit2wynit do the tutorials in the IG academy before you even play with the demo account.

Share this post


Link to post
1 hour ago, ha05230 said:

@nit2wynit

Shares

Buy 1000 ABC shares @£1 (100p)  will cost you £1000 +£8= Cost £1008

Hold onto them until they reach £2 then sell = £2000 - £8 - 10%tax = £1792=  £784 profit

It is unlikely that a stock will double in price in a day, it often takes a year to double. But you physically own the shares (certificate) and can sell them whenever you want so potentially only sell them when you’re in profit.

Spread betting

ABC has buy price 100p and sell at 90p

your £1000 will allow 1000/(price x margin) = 1000/(100 x20%)= £50 per point

So straight away you will be down 50xspread = £500. But then you would only need the ‘sell’ price to rise to 120p to make a 1k profit ((120-100(your buy price))x50. Having said that if the sell price dips lower by 20 points to 70p then you will lose your £1000

You can see from this spread betting is riskier especially if you want to trade a low cost share because your stake (the price per point) is higher. But the leverage gives you access to more shares (which you don’t own). In the example your £1000 is actually representative of ((1000/margin)x100)= 5000 shares

I think what everyone was trying to say is that with spread betting it is unlikely  you will find a low price share that has a low margin or low stake (cost per point). 

With spread betting you would need to stake a lot of money to get a few point movement on a low price stock, OR you need a lot of movement if you don’t want to stake much money.

(I hope I haven’t confused you even more, but I had already written and saved this before @TrendFollower @Caseynotes or @JamesIG tried explaining to you, and if there’s any error in my explanation people please let me know. I am knew to spread betting myself)

@nit2wynit do the tutorials in the IG academy before you even play with the demo account.

THIS ^^ is the Info I've been waiting for, and thru my research, have only recently figured.  This solidifies it for me.

To be immediately down so much, isn't a wise move.  However.....It is then also possible to Spread Bet on a higher priced Stock that will ensure I don't end up massively under from the off, and also make a profit of more points moved.  Is there a Spread Betting Sweet Spot where a fixed amount say 1k, can work equally well either Spread Betting OR Share Dealing?  Or are they simply not exchangeable strategies?  There must be a Price Point that allows me to place a bet that only costs as much as if i bought the shares.  For instance, I simply can't afford Tesla shares with only 1k.  Many of the top shares aren't even available at the lowest Bid.

I'm hoping someone is going to say 'Stay away from shares below £2 and no more than £20; as an example.  The Sweet Spot with a small account is.......The equation being Price per point vs Spread Cost vs Points Moved vs Profit taken.

Thank you so much for taking the time to outline the risk involved and not simply the benefits of Spread betting.

You see, I learned about Share Dealing first, buying and selling stock around £2-£10.  So trying to make it work with Spread Betting has been a challenge because my previous knowledge doesn't translate well to the Spread and the limitations that come with Penny Stocks and Spread Betting.

However, it's there in Black and white; the answer to my many months old question.

All things the same i.e 1k Shares or 1k margin, It will risk more and initially cost more to bet on the same £1 instrument.  as we're nearly always talking about Risk Management and Strategy here, it's important to take note of this.

I just needed to hear it from someone else.  Thanks :D

Share this post


Link to post
1 hour ago, ha05230 said:

I am 'new' to spread betting myself

How do I edit a post in Mac? I noticed my spelling mistake.

Share this post


Link to post

@ha05230 i went Live on here back in march with £1400.  Up and down succes but left £400 down to buy Pinterest Shares.

Went back Live again 2 weeks ago and lost £230 in half a day.

Using the Demo with a fixed 2k margin 1 trade at a time, i win most days.  But there are kinks I'm only just becoming aware of and Fails i didn't anticipate; the latest being Real Time Variable Spread.  A trade i was repeating on went from 5pt to 25pt without me noticing.

I'm only using the Demo for the foreseeable future now.

Share this post


Link to post
Posted (edited)

@nit2wynit

I called for a short on Ocado a couple of months ago (after the second bounce off 1435), and you see below how that has been going.  (Although I cashed out far too early)  ;):P  It might not be day trading profits, but you can quite easily make reasonable money from swing and position trading in shares.  Are you 100% opposed to it?

OCDO-Daily.thumb.png.8af0ee7a351fb52389d4490a13e6ec53.png

 

Edited by dmedin
  • Thought provoking 1

Share this post


Link to post

@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.

Share this post


Link to post
18 hours ago, nit2wynit said:

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 ask about academy because there is a specific course for exactly what you are asking questions about...

IG academy

Also, whilst @ha05230 has provided a worked example (thank you for that one @ha05230) there are other things to consider. For example having a 10 point spread on an asset worth 100p is huge, and if the ABC stock is the same asset on the share dealing example then you would immediately be down by £100 on that example as well. If you're leverages 5:1 on the spread betting side then yes, of course the initial value would be 5x (as everything is 5x, including any profits or losses). That is of course only if you are referring to margin of £1000 on SB, rather than a notional value of £1000.

When it comes to cost the charge to get into and out of a share deal is £8 each way, whilst with SB there is a 'cost' incorporated into the spread of 0.1% of the notional. This is the easiest way to think of the 'cost'. 

11 hours ago, nit2wynit said:

I'm hoping someone is going to say 'Stay away from shares below £2 and no more than £20; as an example.  The Sweet Spot with a small account is.......The equation being Price per point vs Spread Cost vs Points Moved vs Profit taken.

As I read this, it doesn't really make sense. There is no sweet spot for what you're trying to do. 

  • Thought provoking 1

Share this post


Link to post

@JamesIG,

I think with Spread Betting two main procedures can be applied for making meaningful profits. One is to use high margin on those assets which do not move a lot. The other is to use low margin or high margin based on those assets that do move a lot of points in a day. Obviously the higher the leverage the higher the margin requirement so it needs to considered on a risk/reward basis.

It is all about how many points the asset has the potential to move. Of course your trade has to be in the correct direction and this is key. Which is why trading with the trend rather than against it is the only sensible approach when spread betting. Anything else is akin to gambling and increasing your risk of depleting your trading capital pretty quickly.

  • Like 1

Share this post


Link to post

OK everyone, listen now.

Everyone is telling everyone they're missing the point.

Here is the point lol.


I learned about SHARE DEALING.  Pick a Share of around £2-£10 that has news, a great Set Up and wait for the Break out.  Wait for the 1st Dip, Buy the 2nd green Candle.  Operate on a 2:1 ratio or Risk/Profit, but 1:1 till you get good at it.  Buy The Dip, Sell The Rise.  Move on to the next.  Don't try and ride the same Stock.


Spread Betting has entirely different mechanics.  All the prices and size of Spread can change and notably Do!

Yes you can make more money, by using More Margin etc. but the Spread will put you under a considerable amount.  There is no option for this to happen Buying Shares.  You can also lose hugely.  

I can place a Bet for £5000 per point!!!! but it will put me under massively.


I have my answer now people.  Thank you all so much for getting involved in this.  However, these is a Sweet Spot oto be found and it is the equation between, Price, Spread, Points Moved, Volume Volatility.  There is clearly a range, bacause as I've mentioned i can't even Buy Tesla Stock, Or Amazon etc.  This tell me that although there are High Priced Stocks i cannot access, there are also Penny Stocks that do not work.


Some stock don't move much.  Some may only move 1pt.  But if the Spread is 1pt, then i'm 1pt under so it's won't work for me.

There is a range I will find.

Thanks.

Share this post


Link to post

Sorry, to make it more clear, the question was never, 'Explain Spread Betting to me', but 'How is it the Same or Worse than Share Dealing if i only have £1000' and which will make more money in the Short Term. 

All I've been hearing is the Good points about SB.  Not that you can seriously get int o trouble on Margin.

Yes, we know this is about Risk Management, but I spent 2 month learning about Share Dealing before I found IG and Spread Betting.  It can work the same, but it doesn't work the same as Share Dealing.  I know the benefits of Spread betting Tax Free* etc.


What no-one has done is actually say 'You know, Spread Betting is a safer more profitable way to deal than Buying and Selling Shares.'
 

 

Is Spread Betting Safer and more profitable than Buying and Selling Shares, or is it just a Tax Free High Risk option?

Share this post


Link to post

@dmedin it's a no go for me I'm afraid.  When the Sun Shines, Make Hay.  why would you want to wait so long for profit?  If you've bet Short, then why not go all in on a smaller move?  To me you've got more change of Change the longer a trade is running.  Plus, we don't live forever, Time is short.  If you can make money today take it.  Pesonally Going Long on anything doesn't suit my personality.  That's not to say i don't Invest, Like I have with Pinterest, but this is My Day Job.  It's not a Hobby.  It's not Pocket Money.

I will most likely lose a lot more money.  But I lost it/gained an education in Photography in the same manner.  Student Loans, accommodation, Cameras.  All money gone.  If I lose but gain an education in learning to Day Trade as I go, it's a Fair Trade off to me.  :D

You're telling me you'd rather make £100 over a month than £50 in ten minutes?

Share this post


Link to post
2 minutes ago, nit2wynit said:

What no-one has done is actually say 'You know, Spread Betting is a safer more profitable way to deal than Buying and Selling Shares.'

No one can answer this for you but you, it will depend on how you trade them, each can be traded with high risk or low risk while trying to compare apples and oranges, yes they are both fruit but that's about as far as it goes.

Share this post


Link to post
Posted (edited)
10 minutes ago, nit2wynit said:

@dmedin it's a no go for me I'm afraid.  When the Sun Shines, Make Hay.  why would you want to wait so long for profit?  If you've bet Short, then why not go all in on a smaller move?  To me you've got more change of Change the longer a trade is running.  Plus, we don't live forever, Time is short.  If you can make money today take it.  Pesonally Going Long on anything doesn't suit my personality.  That's not to say i don't Invest, Like I have with Pinterest, but this is My Day Job.  It's not a Hobby.  It's not Pocket Money.

I will most likely lose a lot more money.  But I lost it/gained an education in Photography in the same manner.  Student Loans, accommodation, Cameras.  All money gone.  If I lose but gain an education in learning to Day Trade as I go, it's a Fair Trade off to me.  :D

You're telling me you'd rather make £100 over a month than £50 in ten minutes?

 

lol no, it's just that I am 100 times more likely to lose £50 in ten minutes than make £50 :(

Ocado has fallen several hundred points, at say £5 per point you would have made a huge return on a £2000 deposit in just a couple of months.

 

Edited by dmedin
  • Thought provoking 1

Share this post


Link to post
10 minutes ago, dmedin said:

 

lol no, it's just that I am 100 times more likely to lose £50 in ten minutes than make £50 :(

Ocado has fallen several hundred points, at say £5 per point you would have made a huge return on a £2000 deposit in just a couple of months.

 

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.

I'm pretty sure i can make this work for me.  I just need to find the range that suits my Strategy and stay away from the riskier 10pts moves at £170 per point that i just happened to go right for me last week.  Those i can't do for Real.

I only need to make £200 per week for this to benefit me.

£40 per day.

£10 per trade.

2hrs.


There is another Psychology at play here.  I'm used to earning good money fast as a photographer.  Anything from £100ph upwards, or £800 per day.  So my time trading vs profit realised is important to me too.  

  • Like 1

Share this post


Link to post

@nit2wynit,

I don't think anyone will tell you that SB is more safer and profitable than share dealing. It is down to the trader and their trading strategy and how effective their trading system can apply it. For a bad trader, SB, is hell. They will lose their capital, end of. Even for a reasonably good trader they are likely to lose money when SB. 

I appreciate you have received comments, posts and answers that have not satisfied you but you must look at your question as well. You needs two hands to clap. You are looking for an answer to your question which no reasonable and sound trader will give you. 

If you are not convinced and satisfied with using SB then I would advise you to leave it and not spend too much time worrying about. Stick to share dealing account and spend the time you save thinking about SB on day trading using a normal share dealing account. 

This will free up a lot of time for you which can be used to really fine tune your day trading so you can meet your goals.

If it makes you feel better then yes Spread Betting is for fools. I define a fool in this instance as someone who does not have a trading plan, trading strategy, trading system, does not apply risk management, does not read, research, analyse, learn and cannot making informed trading decisions which are efficient and effective when faced with information and data in front of them. 

Share this post


Link to post

Join the conversation

You are posting as a guest. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
You are posting as a guest. If you have an account, please sign in.
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


×
×