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Is spread betting for fools?

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@dmedin What is your plan?  where are you country wise?  What is your account size? 

What are your Credit card details? lol

 

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lol, well I would like to start with a stock that I've had my eyes on for a while (I'm in the UK). 

Ocado has posted incredibly strong gains over a long time, but it recently seems to have topped out at around 1437p, and I'm happy to go short at this point because the stochs have fallen below 80%. 

The weekly chart shows three evening stars followed by a weekly reversal, however, the stochs are not as strong on the weekly chart and the MAs are still up.  So ... not guaranteed.  But I put skin in the game at £1 per point and I'm hoping for a 50% pullback.

 

ocado.jpg

ocadoweekly.jpg

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10 hours ago, nit2wynit said:

 What is your account size? 


 

 

Put it this way: it used to be a lot bigger.

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I've also had my eyes on TUI.  It seems to have rock bottomed and is starting to climb again.  Weekly stoch has crossed above 20.  Looking for a convincing breakout above the range 738 - 867p on high volume before going long.  Else, if it shows signs of being range bound it might be good to short it as it's currently at the very top of the range.

 

tui.jpg

tuiweekly.jpg

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On 01/05/2019 at 21:31, Caseynotes said:

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.

$10000? 

See AMP Futures for example - much lower or else I got it wrong Casey?https://www.ampfutures.com/trading-info/margins/

Edited by Turnip230248
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48 minutes ago, Turnip230248 said:

$10000? 

See AMP Futures for example - much lower or else I got it wrong Casey?https://www.ampfutures.com/trading-info/margins/

The 10,000 refers to the minimum deposit to open an account in the US not the margin, and different account types require even more. I think the answer on the other thread covers this but sing out if not.

 

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Hi, all sorry I went quiet mid discussion.  Bank holiday weekend and house renovations etc.

Anyway, something revealing has just occurred to me.  I've mentioned before how i got interested in Share Dealing/Day Trading after watching Warrior Trading.  I have assumed thus far, you all know what I'm talking about.

Spread betting is not available in the US so it's a unique thing here; and some other countries.

But here's the revealing part that was so obvious I missed it; i knew i was missing a huge piece of the puzzle and I just couldn't make the figures work.

CFD's vs Spread Betting vs Share Dealing.  £1000.  Motif Bio Instrument.

SB.  £1000 Margin.  £8.70 share price.  If it moves £0.50 I stand to profit roughly £240, No Tax.

CFD roughly the same, but losses offset.

Share Dealing.  £1000 down buys roughly 11,500 shares. (sure it's all capital tied up in shares, but they go up or down)  However, a £0.50 rise means a profit of £5750!!!!!


I've been doing it all wrong and couldn't make what I'd learned match what i was hoping to do with Spread Betting.

I want to Buy and sell shares quickly!  Eureka.  

 

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£0.087p  Sorry. lol.  my figures are way off.  I didn't realise this was a Pence dealing.

I'd make at least double on a £0.05p rise :D  So £575.

No wonder I'm losing. hahahah

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@trendfollower Motif Bio is UK shares so only available during UK hours.

When I try to place a bid to Buy Shares i can buy around 11,500 for £1000.  So this makes me think it's obviously 8.7p per share. with 1pt being 1 whole pence.

My point being that If I only have £1000, to make the most from my stake I use the full £1000 to cover my margin in Spread Betting (or CFD's) ; The Price per Point is £500.  This gives me 2 stops of movement and requires all of my Margin to cover.

To cover my stop losses would require around £350 of movement down, minimum.  Of course to play the same game with Spread Betting I would need to risk the entire £1000 Margin as a stop loss to take full advantage of the deal.  

So, here are the facts of it so far:

If i buy 11,500 shares it will cost me all £1000 plus the commission cost.  If the price rises 0.05pence or Half a Penny, It will generate 0.5x11,500 which is £575.

Using Spread Betting would require a stop loss at a minimum of 0.5pt or £250 seeing as I'm going for £500 per point.  However, the Spread to place the bet is already 0.5 either way so I'm already £250 under when I place the bet. (figures are now a guess).

The final point being that unless i am absolutely certain the chart will move the way i want it, (there is No Certaintly) I must risk my entire £1000 as a stop loss.  If the chart moves only 0.05pence I will make around £220 using Spread Betting, but also risk losing it all because of the large stop loss needed to secure future movement.  if It moves only 2 whole pence I'm out and down £1000!

On paper, Buying Shares is Safer than Spread Betting, but it requires the entire Capital to buy.

In short once again, SB can work with a small account but you must play long and with little risk.




 

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@TrendFollower Sure i understand that.

But my point is to make money as quickly as I can as safely as I can.  Some Small Cap stock can be considered Safe!  Clear Trending upwards for instance.  But to make any gains with a small £1000 account requires either a Large Price Per Point and Narrow Stop Loss OR Small Price Per Point and Wide Stop Loss.  The only downside to this is the Time it takes to generate a profit, which will also tie up my funds.

As stated earlier, with £1000 available as an example, i can purchase 11,500 Motif Bio.  If it only moves half a penny i can make £575 profit.

This is impossible to do with SB and a £1000 account.  To make the same gains would require a PPP cost of £1150, a Stop Loss of 4pt or £4600, and a Margin of £2830.

Tell me something.  What do you recommend Do to make money as a Day Trader?  Spread Betting or Share dealing?
Thanks.

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All the info above is incorrect again.  I'm really struggling with the Price per point and pence denomination of Motif Bio, the spread being a minimum of 0.5 etc.  I'm clearly confused.  GBP vs GBX.  

So, as the price is currently around £0.087, which is around 9p per share, I've been confusing my decimal points while making calculations for profit.  If the price rises half a penny, or 0.005, It will generate £57 profit.

To achieve the same on SB over a 0.005 rise would require a Price per point value of £1160 a 1pt minimum stop loss of £1160 and a Margin of £2865.  

i think I'll leave this here and never mention it again.  Thank for the time to help me out while I figure out my own bad info :D

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14 minutes ago, nit2wynit said:

As stated earlier, with £1000 available as an example, i can purchase 11,500 Motif Bio.  If it only moves half a penny i can make £575 profit.

IG really needs a demo shares platform and I would certainly be looking for one to trial such a risky strategy. Putting your entire account on one trade doesn't have a very good long or even medium term survival probability.

Just looking at the chart below I see that price goes down as well as up and in AIM stocks when price is going down is the time when you can't sell.

1559038320_MotifBioPLC_20190508_11_32.thumb.png.65a7aa24bd0e2209618495afb70f9a1c.png

 

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@Caseynotes yes it is indeed risky, but what i was hoping to show was what was needed to achieve the same gains between both account; Share dealing vs Spread Betting.  Low and Long for SB but all in for Share dealing.

Ironically Motif Bio is one of the stock I made considerable gains on in my early days of the Demo.  I noticed a News article and then managed to catch the spike.  they are currently awaiting FDA approval for a new drug.  however the side effects and possible Liver damage is what forced the drop in share price.

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@TrendFollower @Caseynotes it's clear now I've learned enough to get me into trouble fast. hahha.  This is shown by my account balance.

I've spent 2 months learning charts and platforms.  It's time for Stage 2; Actually learning how the market works and defining what it is i want to achieve.  I want to do what I see Youtube Day Traders doing.  Finding stock that is about to break out.  Buying the dip selling the rise.  My available funds are now tied up in Pinterest Shares and Sirius Minerals.

Trendfollower I don't know what RNS is so that will require research.

I want to do what Ross Cameron of Warrior Trading does; Turn $583 dollars in to $1 million in 2 years.  Should be easy :D

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@nit2wynit, it's my understanding that the probability of finding those one in a hundred stocks that just take off is  er ... about one in a hundred 🙂  You are right that learning to trade is difficult and takes time as there is a lot more to it than just platforms, dealing tickets, charting, indicators, patterns, psych, strategies, risk management ....

If you were wanting to compare SB to share dealing maybe try running matching trades on 2 demos.

https://www.share.com/investment-accounts/free-practice-account

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@Caseynotes you are correct, it may be 1 in 1 hundred but when there are thousands of global stocks and screeners to help you,  it's not difficult to narrow your watch list down to 3 or more to keep an eye on.  What i have not yet achieved, is knowing which broker to go with, that offers L2 DMA etc.  This is the gap in my learning.  You see, I didn't know what IG was or that in the UK we had Spread betting.  It's a completely different beast to what I learned about Day trading and i simply cannot make the same gains using a small account.  If i only have £1000 but bought 45 shares of Pinterest (which i did) at it's peak I was up £12 per share, so about £550 in a week.  But Pinterest for me is a Long Retirement fund stock.  It'll sit there till it fails.

With only £1000 available in SB i would not be able to achieve this bacause of the Stop Loss required and the Margin to cover.  Even at only £1 per point.


i think we can compare apples to oranges all day long, but what it comes down to is a simple question, which is:

What will make you more money in Long or Short term?  Spread Betting or Share dealing?

I'd be interested to hear all of your thoughts on it and examples if possible.

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11 minutes ago, nit2wynit said:

What will make you more money in Long or Short term?  Spread Betting or Share dealing?

It doesn't matter whether you choose long or short term or SB or share dealing, until you've learnt all the skills needed to survive in the market place your mistakes will inevitably wipe you out. 

Survival is the first goal and 80% of those who try trading don't realise that and so won't make it.

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Yes, i understand that Casey, but in the real world, assuming your knowledge education Strategy, Risk Management is all sound.....

Which one will make more money, long or short, with only £1000 :D

Edited by nit2wynit

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Once you understand the market and have learnt how to survive you can do anything but not everything so you will need to decide on personal preference and what suits your core personality (which will have been changed by the journey). What and how you are most comfortable trading will provide the more satisfying experience and so the best returns for you.

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I see.  @TrendFollower  So with the same stock but only £1000, you suggest the potential is great to Spread Bet?

I'm trying to work out the figures.

Any stock at all that is available.  £1000 to buy as many shares as possible, Spread betting maximising Margin vs stop loss to the maximum value of £1000.  I know this is far from ideal strategy for Spread Betting, I'm just trying to figure out the euation principles of movement up or down.  It's obvious that owning shares limits your losses.  I can buy £100 and leave them forever, unless they actually Fail completely, but i can't do this with SB as eventually I should be stopped out at a greater loss than £100.


So, theoretically, (or even literally if I can find a stock as an example) I buy 100 shares that cost £1000.  £100 per share.  They go up to £200 per share.  I've doubled my money.

What would be required, or what would i need to do with SB and the same account value of £1000 only to make, or lose more money?

How would I best utilise the £1000?

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I'm still missing something in what I've learned over the past month or 2.

These guys that are dealing Shares.  I'm not actually sure if they literally buy and sell shares, or are speculating.  Some of them talk of Shorting, but you can't short your own shares, so they must be speculating.  While others must only be literally Buying Stock and Selling it at a profit.

i think I've got too many sources of info and they're conflicting with one another.

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Warren Buffett doesn't use leverage and I think there are a few professional leveraged traders who don't make as much money as him, and as I suggested before, no one tries to trade everything. 

So yes @nit2wynit, it is a big space which is why you need to discover what and how you are most comfortable trading.

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Right, to end my question I've worked out the equation with something i know the value of.  Pinterest.

If I bought £1000 worth of Pinterest @ $28.71 I would get 44 shares.  If they doubled to $58 per share (theoretically) obviously my £1000 would become £2000 or slightly more.

With Spread Betting and only £1000, I could only go £1 per point.  Stop loss would be around 200 points or £200 and the Margin around £700.  Therefore the Stop loss and Margin equates to the total £1000 in the account.

The potential return however if the stock then rose to $58 is around £2750!  And it's tax Free.

So there it is.  I can make more Spread Betting.  However, this of course only allows for a limited stop loss and a potential loss of the entire account failing Risk Management.

Point being, if I apply all rules learned to Share Dealing, then a breakout can still occur in Spread betting too and then greater profit and or Loss.  Pinterest came down 1000pts from 36 to 26  so the potential is to lose the entire £1000 Spread Betting.

 

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In hindsight and upon reflection, it's still safer to buy the stock, don't you all think?

If I only have £1000 and my entire account is now tied to the trade (not to mention, i'm already starting negative with SB because of the spread) then i can't do anything till it moves up.  So both scenarios lock away my Capital.

OK, so I make 2750 using SB, and about £2200 on the shares, but the fear and potential to lose it all if it drops more than 200 points is scary, especially considering it dropped 1000pts last week.   If the shares dip, they can literally go down to 10p, but always they can go back up.

I've still a lot of research to do it seems.

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I agree @TrendFollower, reading some of the posts I wasn't sure if a trailing stop was going to be used for SB to lock in profits and prevent a total loss of any gains or indeed too much loss of capital.

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That's all very true @TrendFollower,  one of the biggest traps at the moment are the fake signal service sellers on instagram. Very tempting to walk into that once you realise how hard trading is and how long it takes to learn, to just look for someone to tell you which trades to take for a fee. By the time you've lost all your money they have run off and started up again with a new name. I saw one that was tracked down who had re-started 5 times in the space of a year taking 10s of thousands each time, and it's not actually against the law.

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4 hours ago, nit2wynit said:

Right, to end my question I've worked out the equation with something i know the value of.  Pinterest.

If I bought £1000 worth of Pinterest @ $28.71 I would get 44 shares.  If they doubled to $58 per share (theoretically) obviously my £1000 would become £2000 or slightly more.

With Spread Betting and only £1000, I could only go £1 per point.  Stop loss would be around 200 points or £200 and the Margin around £700.  Therefore the Stop loss and Margin equates to the total £1000 in the account.

The potential return however if the stock then rose to $58 is around £2750!  And it's tax Free.

So there it is.  I can make more Spread Betting.  However, this of course only allows for a limited stop loss and a potential loss of the entire account failing Risk Management.

Point being, if I apply all rules learned to Share Dealing, then a breakout can still occur in Spread betting too and then greater profit and or Loss.  Pinterest came down 1000pts from 36 to 26  so the potential is to lose the entire £1000 Spread Betting.

 

@nit2wynit

I am sorry but your numbers are way off. £1.00/point = 100 shares. vs 44 shares. (Because you gain £1.00/£0.01 you would need 100 shares to receive the same £1.00 Profit, hence £1.00/Share = 100 Shares)

44x $28.71 = $1263.24 Profit if they double in price, note Dollars.

100x £28.71 = £2871 Profit if they double in price, note Pounds. This is because you gain £1.00 / $0.01 it adds leverage to the exchange.

Also, take a look at KnockOuts this way your Stop Loss = Margin 

Finally, if you only have £1000 in your account you need to be sure you have mastered your strategy so you may be well advised to use your demo account. I know that's hard because I have done the same in the past.

I wish you the very best of luck.

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@Foxy Hi bud, yeah my numbers are well off aren't they, but the starting figure of £1000 is the same.

I've been using the Demo for 2 months and went life for 2 weeks where I lost £400 on a £1400 account.  I've posted my wins using the demo, but didn't adjust for the smaller account so lost about 70/30.  I left with £1000; £400 down, to buy Pinterest shares @ $24.  The shares price rose from  $24 to 436 where my profit on 45 shares was approx $650.

Apologies for mixing up my Dollars and Pounds inthe euation, but the principle and answer to my question remains the same.

With a £1000 account, using the same stock, which method 9SB vs Share Dealing) would create the most profit?)  All other things equal.

I don't actually follow what you've posted above I'm afraid.  the deciding factor is the £1000 limit.  This buys what i have stated above.  44 shares of Pint @ $28.71.  The best i could do using SB and £1000 on Pint was £1 per point again with the figures above.  A Margin of £730 roughly and a Stop Loss of £200, or 200 pts.

My point has always been to find out. what makes the most money, all other things equal.  My findings show that SB creates the most profit, but carries the most risk.  Unless I've really mis-understood it, which at this stage, is likely. lol.

Thanks for adding to my knowledge base :D

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