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FTSE250 spread is too wide


Guest 123abc

Question

The spread on the FTSE250 CFD contract is 0.2% of the index value, which currently around 37 points.

It is ridiculously wide to have a 37 point spread on the FTSE250 index, it's impossible to day trade.

 

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For the last year, the average intraday swing of the FTSE 250, i.e. intraday high to intraday low, is approx 170 points.

From the daily opening price to daily close, a half-percent, i.e.0.50% move in the FTSE 250 is typical in either direction, which is approx 100 points.

For a day trader to be lucky enough to capture the full average 100 point move in one trade, then hands over a third of that move, i.e. 37 points back to the IG spread.

In reality, a day trader would take multiple intraday trades. Being 37 points out of pocket when opening a trade is poor economics..

So yes, the FTSE 250 spread on IG makes it impossible to day trade the FTSE 250 index with multiple intraday trades.

The spread for the FTSE 250 index ought to be brought inline with the SouthAfrica40, Japan225 and HongKongHS50 indices; i.e. at an average of 6 points when the market is open.

As a side note, the current Italy40 spread of 20 points is also is too wide to day trade, and ought fall inline with the aforementioned recommendation.

Looking forward to replies from IG and other traders.

 

 

 

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Hi - unfortunately the FTSE 250 is relatively costly to hedge and it doesn't have the same types of assets in the underlying market (in the same way as the FTSE 100 which has a direct futures market for example) in any decent form. We therefore need to manually feed the FTSE mid 250 exposure in all 250 individual stocks which all have different liquidity and spreads, and is generally more expensive to hedge rather than just hedging a single futures contract. Hopefully this clarifies things for you. All the best. 

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Whilst these contracts do exist there is no feasible use of  them as liquidity is awful. As an example the FTSE 100 front month H9 contract (Mar19) has traded nearly 47000, whilst one of the FTSE 250 mid cap contracts you noted above, also on the H9 (Mar19) has only traded 100. In theory a single trade by an IG client could result in that client trading many multiples of the global daily trades volume in that contract.

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Caseynotes, thank you for the information; however, you may have made an error.

The spread for the FTSE 250 index during market hours (i.e. 08:00-16:30 UK) is 15 points on FXPro.com, see the following...

https://www.fxpro.com/trading/indices/uk_mid250

https://i.imgur.com/wTmzUTL.jpg

The FTSE 250 index is not available to trade out of hours with any broker.

The purpose of this thread is to request that IG reduce the spread of the FTSE 250 index, which is currently 0.2% of the index value (i.e. currently around 37 points). The spread ought to be reduced to a fixed spread that is competitive with other providers such as FXPro.com where the spread is 15 points. 

ftse250.jpg

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123abcuk, no I didn't make an error, I simply tapped your link a few minutes after you posted it which was posted supposedly to back up the 15 point spread claim but the linked page clearly showed a 30 point spread for the Ftse 250 on  FXPro (it still does).

I have no idea what the IG spread is for when the market is open but would be surprised if it was the same as for market closed. 

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it's worth noting there is a difference between 'min' spread and actual spread. Many providers advertise a 'min' however that only comes up once in a blue moon. It's a sneaky way to get to the top of comparison tables and some crappy providers know it's an easy way for themselves to stand out to those who are trying to compare. There is SO much more under the hood.

As a side note, I used to work in head office / hospitality and many restaurants do this with the price of a burger (i.e. many  looking at a menu will judge the 'expense' of a restaurant and compare it to others on their burger price because its a standardised product across the different restaurants.)

As another side note why do you think there should be consistency across different providers? It's like being like "this TV is £400 in John Lewis but £385 in Sainsbury's - therefore JL should make their TV's cheaper". Why? Why should they? With JL you get 3 years warranty, different returns policy, a better shopping experience, helpful staff, free home delivery etc etc etc.

FINAL side note :) why don't you just trade the FTSE 250 ETF? Currently only 10 points and should in theory track FTSE 250 1-4-1 ....

291728874_FTSE250.thumb.png.6c43794436a97789223dd0871b167950.png

...mic drop

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@cryptotrader Thank you for pointing out the ETF. However, during intraday day-trading, the 1-min and 5-min data on ETF is gappy, spiky and non-continuous. Also, most ETFs (like the other FTSE 250 ones listed on IG) don't allow shorting. The intent is to trade the FTSE 250 index (long and short) where data is continuous and where price swings create uniform waves. 

@Caseynotes In regards to the 15 and 30 point spread discrepancy as advertised on the FXPro.com website, I've requested to open an account to investigate what the real spread is on offer.

 

 

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slightly off topic but we have a Brexit round table today (Friday 8th Feb) which unfortunately won't be live, but we will be able to publish the video afterwards. Thought this may be of interest for those who are trading the FTSE250 and other associated markets. 

This will be with Simon French from Panmure Gordon, and Robert Oulds from Bruges Group. It should be a great discussion, and if you have any questions you wanted to put to the panel please add a comment and make sure to tag me with the @ symbol. 

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