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Is spread betting for fools?


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@TrendFollower regarding your question and why you don't see why I can't take along position on a small priced stock.

If it was a guaranteed move (which we all know there are no guarantee's) then sure, i could go long and take a profit at the end, but they don't always move.  This is why I would only commit if a suspected price change was imminent; News catalyst.  Also the main thing to consider is the  cost of the spread is proportional to my stake.  Some I have tested to be £50 under before i can even consider profit.  It's simpler to buy the stock.


My reason for what I'm doing is actually an income.  This isn't to be a part time gig.    I discovered Ross Cameron from Warrior Trading.  Turn $583 into 100k in 90 days.  I was watching a few smaller cap stock while using the demo a few weeks back and had some great success, with Motif Bio, Cadence Minerals, Sirius Min and a Shanta Gold and a few others.
The thing with spread betting on low price stock is that if it's not moving or has such low value the Spread can be as much as the cost of the stock.  For instance, If I bet 1k on a £2 stock with spread betting, the Spread may be as much as £1, plus If i bet £100 per point then I'm already £100 under.  If the stock moves only 50p then I'll still be in the red.  Not only this, I'll be very much under to start because of the Spread applied.  However, If I simply Buy the stock, I pay £5!

But Spread Betting is a different Beast.  I didn't actually know what It was and that it was in the UK, Ireland and Canada only.  (not exhaustive)

I've got to take my whole understanding of what I'm doing back to the table.  In the meantime, this is what i want to achieve, regardless of how I achieve it.

Trade for 2 hours a day and create a 50k per year income.

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I know this can be done, I'm just not sure whether Spread Betting is actually a Good thing or a Bad thing compared to Buying and Selling the stock directly.  I need to figure out what would make (or lose) more money compared to physically buying the stock the CFD/Spreadbetting.

I belive it was Cadence Minerals about 2 weeks ago.  I read the news, watch the chart and anticipated a break out.  It went up and up from £13 to £32.  Over 300%.  I made over £700 on that.......In the Demo

But I undertand my main concern has to be how not to Lose money and worry about making it later.  I just want to get back to £1400.

I'll be going back to the Demo for now.

Edited by nit2wynit
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9 hours ago, cryptotrader said:

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.

 

I'm confused that none of the big providers in the UK even mention options.  It almost seems that they don't want retail investors to know about options.  I find it strange.

Have to laugh when there is the ability to spread bet/CFD on options which totally defeats the point of options in the first place!

Edited by dmedin
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@dmedin I clearly have no idea what Options are.  In fact, it's becoming increasingly evident I don't know anything ha. 😮

However, i do know that I was watching EOH Holdings last week and yesterday and waiting for a break out which happened today.  Went up 50%.

Of course, it's way out of my comfort zone but could have grabbed around 2k today if i was Stupid enough to get involved in it.  I couldn't take the risk of it going south on me.

Apologies; it's not the right place for this.

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30 minutes ago, nit2wynit said:

@dmedin I clearly have no idea what Options are.  In fact, it's becoming increasingly evident I don't know anything ha. 😮

However, i do know that I was watching EOH Holdings last week and yesterday and waiting for a break out which happened today.  Went up 50%.

Of course, it's way out of my comfort zone but could have grabbed around 2k today if i was Stupid enough to get involved in it.  I couldn't take the risk of it going south on me.

Apologies; it's not the right place for this.

 

I'm no expert.  🤣

A call option gives you the ability to buy a stock at a certain price x months down the line.  You pay an up front premium and that's it.  You don't lose money for each point that goes against you.  In some ways it's even better than buying stock.  If I was looking at a company that I expected to do well (like JD Sports) I'd buy options if I could.

With a put, you can sell a share you own at a guaranteed price x months down the line.  Naked puts are puts where you commit to selling shares you don't own and aren't a good idea.

Spread betting/CFD are favoured by all the financial companies because they can clean you out by hitting your stops.  Your risk isn't limited to a premium.  An option is closer to informed speculation than SB which is closer to gambling on a fruit machine or betting on a horse but worse, because your losses are magnified.

CFDs are limited to 'professionals' and yet they are barely distinguishable from SB.

 

Edited by dmedin
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There are clearly many benefits to SB which are becoming very clear, and I may have misjudged the entire thing too quickly.

I mentioned earlier that i learned what i wanted to do from Warrior Trading.  Buying and Selling small cap stock of £10 and under.  In and out. 

I've discovered today that there are still opportunities to make money with SB, (EOH Holdings went up 50% with the potential to have made £1500 today) but the limit is actually on the platform itself.  For instance, the ability to simply arrange the Instruments by Volume, Volatility, Market Cap, Price etc.  It's very Basic and absolutely tedious to search thru the entire listing to find anything decent.  This of course is where Prorealtime comes in. and it's built in scanner. The basic platform is obviously limited on purpose so that you must invest further and pay for PRT.

I'm happy to hear any other suggestions on it?

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12 hours ago, TrendFollower said:

@nit2wynit,

 For me those who lose money and have losing trades using Spread Betting find it easy to blame 'Spread Betting' rather than their trading strategy and trading system.

 

🤣

Probably true ...

SB is definitely aimed at the retail punter though.

Options have their place, but only big boys are allowed to play with that train set.

Edited by dmedin
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Apologies to whine, but the options aren't there for me.  Maybe you are a professional trader or else you have something enabled in your account that I don't?  I also don't have access to the new platform for sharedealing or ISA, which is a shame.

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On 23/04/2019 at 22:10, dmedin said:

Apologies to whine, but the options aren't there for me.  Maybe you are a professional trader or else you have something enabled in your account that I don't?  I also don't have access to the new platform for sharedealing or ISA, which is a shame.

I think you are miss understanding the ticket. the price you enter is basically the number of options you wish to purchase. The worst case is your option goes down to £0.00 but the trade is still open until it expires or you close it. Should your trade bounce back you are still in the game. I think there may be interest on your open positions similar to a rollover. The margin requirement is the full cost of the option.

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On 30/04/2019 at 09:46, FOXY said:

I think you are miss understanding the ticket. the price you enter is basically the number of options you wish to purchase. The worst case is your option goes down to £0.00 but the trade is still open until it expires or you close it. Should your trade bounce back you are still in the game. I think there may be interest on your open positions similar to a rollover. The margin requirement is the full cost of the option.

 

That's interesting, thanks.  Well I am genuinely confused because for me an option is something you pay an upfront premium for, and it's highly disconcerting to see huge 'profit/loss' swings.  IG deliberately makes it unclear I presume because they don't want us trading in options.

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Guys seriously, what is the deal with spread betting?

Let's say you want to go long on a stock.  You buy a call option and pay IG up front for the privilege.  That is the maximum you can lose, should the value of the stock go against you.

Now you might say that it is possible to set a 'stop loss' at a point which is significantly less than the premium.

But the option can still be a much better proposition even if the premium is higher than your stop loss.

Why?

Because the option remains open until expiry day, regardless of how much the price moves against you.

You can ride out adverse price movements and exercise your option if the price moves back in your favour again.  If your stop loss is triggered in SB, you are out and need to cough up more funds to get back in again.

With an option you are safe against flash crashes and other short-term 'chicanery'.

Why oh why oh why ... are people in the UK forced to spread bet instead of being able to buy options like people in civilized societies can?

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32 minutes ago, dmedin said:

Guys seriously, what is the deal with spread betting?

Let's say you want to go long on a stock.  You buy a call option and pay IG up front for the privilege.  That is the maximum you can lose, should the value of the stock go against you.

Now you might say that it is possible to set a 'stop loss' at a point which is significantly less than the premium.

But the option can still be a much better proposition even if the premium is higher than your stop loss.

Why?

Because the option remains open until expiry day, regardless of how much the price moves against you.

You can ride out adverse price movements and exercise your option if the price moves back in your favour again.  If your stop loss is triggered in SB, you are out and need to cough up more funds to get back in again.

With an option you are safe against flash crashes and other short-term 'chicanery'.

Why oh why oh why ... are people in the UK forced to spread bet instead of being able to buy options like people in civilized societies can?

They have extended trading on some US stocks

Why not give us options on some of these on the platform?

"That's why we've made sure our clients can trade CFDs and spread bet on dozens of key US stocks at the most important times - up until 1am Mon-Thurs and 10pm Fri (London time)."

https://www.ig.com/uk/shares/out-of-hours-shares

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8 minutes ago, TrendFollower said:

@dmedin,

Yes I agree with you. It would be good.

IG are there to make as much money as they can. They will have a reason or two as to why they are not offering Options on stocks. They will never admit the specific reasons to us but for example trading Options in the US is pretty much available on major broker platforms.

Sure I understand ...

Just means that I would have to spend money on a U.S. broker rather than on IG, if they do not wish to allow this.

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yes cme have just introduced micro lots trading but the problem you will face is that the US currently require initial deposits of min 10,000usd - 15,000 usd to open an account. The US used to do cfd's (sb's) which were the most popular way to trade till they banned them, now the 80% just lose their money on options and futures trading instead.

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I've learned so much simply from reading thru this thread, and the biggest learn was about myself.

Sure, we all need a Trading Plan; a Strategy, but before all that we need to understand what this is.  How it works.  The most important tool to have going into ANYTHING, is knowledge and a plan.  Fail to Plan, Plan to Fail.

I lost £400 on a £1400 starting account, over 2 weeks.  The more I lost, the more fear I gained, and the more mistakes I continued to make.  However, I got to a point where it all clicked, but then Pinterest happened.  I took the £1000 I had left and bought about 45 shares at £24.  I watched it go up and make £350 profit in 2 weeks.  This would have put me almost back to where I started, which is what i wanted to do as the loss has become a psychological barrier to moving forward.

On paper, it's easy.  In hindsight it's easy, but moving from the Demo to Live is the worst.  The Demo, it's not real money, you can Place a Bet as high as you like because at the back of your mind, it's not real.

Maybe we could set up a Demo Thread as an exercise?  Using £1000.  Pick a stock UK and see where it goes.  We can talk about the ideas the day before.  What News did we watch, what research etc.  What we expect and where we ended up at the end of the day.
 

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@trendfollower I think you have missed my point entirely.

This relates to Day Trading.  My Plan, my strategy is to Day Trade.  to turn a profit on a daily or weekly basis to provide an income.

there are thousands of Instruments available.  If you (not you personally) can't find a stock to trade within the day that returns a profit, then I don't think you know what you're doing or how to find profitable stock at least.

I lost £400 over 2 week thru poor execution and close Stop Losses.  Most of my trades worked, but stopped me out too early.

I could almost guarantee i could find a US stock when the market opens and make a profit today, though I'll hold off on the Guarantee haha.

You're correct though, you could go so many ways with £1000.  the point is to make a decision for the sake of 'The Exercise' to find a suitable stock to trade within the Day and turn a profit.  Then highlight why you picked it, what you expected etc.

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erm...:D @Caseynotes That's a bit extreme.  lol.  there's no pressure at all in Picking Daily stock to trade.  It's simply a case of watching for movers, volume, News and and anticipating the breakout either Pre-market or at open.  The research can be done the night before then fine tuned into a selection half hour before.  All of this is a measured exercise that involves a prerequisite checklist.  If the checklist fails on a given stock then it's on to the next one.

What i lack at the moment is a source for News.  I currently use Trading View and Market Watch but not sure it's giving me what I need.

Either way, I'm not currently trading as my finds are tied up with Pinterest.  I don't have a Weekly income, so until i have funds free again I'll be using the Demo.

 

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Here's an example of my successes when i started.  Of course this is the Demo and using a larger account, but the Picking of the Stock was still a measured activity.  I had research to do and a checklist.  Ironically it's when I went Live i started failing as the account size was lower and I didn't adjust my Stop Losses and my Stake to match the account size.
 

 

Decent day.jpg

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13 minutes ago, nit2wynit said:

erm...:D @Caseynotes That's a bit extreme. 

Not extreme in the slightest, you can pick up a perfectly serviceable colt 45 from your friendly neighbourhood gangsta for next to nothing these days and it won't half concentrate the mind a treat. Quick decision making needs practice.

Probably what you really need is a screener, so see to which requirements you are looking for in a stock. I posted a link to one just recent that had a very long list of possible inputs, you should find by putting 'screener' in the forum search bar.

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Yes, it is indeed possible, though I find it hard to believe that one could not find a stock to trade for the purpose of an exercise out of many thousands of available options.

Maybe you are focussing on a psychological barrier?  It's possible you play Long most of the time and it does not suit how you relate to the market and how you normally trade?

I have a short attention span and i am impatient.  For this reason i understand how i must trade.  I need quick answers to most things.  My impatience is not a limitation, only the solution to it is.

I can work quick and make direct decisions.  I live with the result either way.  I am spontaneous.  This is why Day Trading suits me.

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1 hour ago, nit2wynit said:

I've learned so much simply from reading thru this thread, and the biggest learn was about myself.

Sure, we all need a Trading Plan; a Strategy, but before all that we need to understand what this is.  How it works.  The most important tool to have going into ANYTHING, is knowledge and a plan.  Fail to Plan, Plan to Fail.

I lost £400 on a £1400 starting account, over 2 weeks.  The more I lost, the more fear I gained, and the more mistakes I continued to make.  However, I got to a point where it all clicked, but then Pinterest happened.  I took the £1000 I had left and bought about 45 shares at £24.  I watched it go up and make £350 profit in 2 weeks.  This would have put me almost back to where I started, which is what i wanted to do as the loss has become a psychological barrier to moving forward.

On paper, it's easy.  In hindsight it's easy, but moving from the Demo to Live is the worst.  The Demo, it's not real money, you can Place a Bet as high as you like because at the back of your mind, it's not real.

Maybe we could set up a Demo Thread as an exercise?  Using £1000.  Pick a stock UK and see where it goes.  We can talk about the ideas the day before.  What News did we watch, what research etc.  What we expect and where we ended up at the end of the day.
 

I would love to share trading ideas and graphs, although I find that with graphs everyone has their own way of doing it and it's difficult to understand other people's lol

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