spread betting

[Dexi]

Hi,is it really possible to make money doing this ?Seen quite a few ads in magazines by new SB companies some offering to give away $200 to get new members to sign up.Does this meen its just like most forms of gambling where the only player making a consistant profit is the house/dealer? :thumbdown:

[wonderlust]

Do you mean spread betting on the financial markets? Making money on the markets is hard enough (you're competing against some of the best brains in the world) but with spread betting it's you against the bookmaker and the bookmaker controls prices and execution. Guess who wins?

[pe7e]

If you can accuratley predict the rise or fall of the market you can make huge sums of money but equally you can lose hugh sums if your prediction is wrong. If the spread betting firms are offering cash incentives to sign up then that should be telling you he advantage is firmly in their favour. It would be a great earning oppertunity for a fortune teller :smirk: or someone with real inside information.

[pe7e]

but with spread betting it's you against the bookmaker and the bookmaker controls prices and execution. Guess who wins?

I would rewrite that to:

but with spread betting it's you against the bookmaker and the market and the bookmaker controls prices and execution. Guess who wins?

 

[junglesoup]

I traded with Finspreads spreadbetting company British pound/ Japanese yen contracts for about a year. I made a 172 percent return on my starting capital. However, I wouldnt ever use a spreadbetting company again...they take the opposite sides of your trades. They are a market maker...basically a bucketshop. The spreads are really high, and the slippage on the entry price is terrible.

 

I made money with them yes, but my account wasnt that big to start with so I wasnt trading larger size contracts. I have spoke and read about many other traders who were trading larger contracts. The stories I ve heard are criminal. Platform freezing up and unable to get out of a trade, they always let you out of a trade when the market moves in their favour. However when it is moving in your favour they requote you many times and this eats away at any profits.Forget about trading with them around any news times as the spread could widen to 10 to 15 points on FTSE 100.

 

They are ok for a small punt but if you become successful they will do everything to squeeze your money.

 

I read alot into this industry of market makers. Another one to avoid is the retail forex brokers. They are another form of bucketshop.

 

I now use a proper ECN (electronic communication broker)named Infinity Futures. They are excellent. They have DOM(Depth of market) and it is a direct access broker. They are the the market maker. In an already hard business you need to start on a level playing field.

 

I trade on the Chicago Mercantile Exchange trading S+P emini contracts. This means that it is a central exchange which matches the buyers and sellers and their is no dealing desk intervention. The price you see is the price you get. No spread. YOu just pay about 4-5 dollar round turn commission per trade. That isnt too much when you consider one tick on an s+p contract is $12.50.

[colorwolf]

...

Another one to avoid is the retail forex brokers. They are another form of bucketshop.

...

JS, have you traded forex with any of them? some brokers do quote tight spreads and in a market that liquid i would think there wouldn't be too much of an opportunity for hanky panky? am i wrong?

[junglesoup]

I have traded forex with cmsfx and interbankfx. Both these companies are market makers. Yes most retail fx brokers quote tight spreads but the reality is very different. For example they will quote on GBP/USD a spread of 3 or 4 pips. However the reality is that these quotes arent honered alot of the time. The spread can widen up to 15-30 pips. Again they make it difficult to get out of the market, by requoting you.

 

They also advertise commision free trading. However, lets say 1 lot on GBP/USD which is worth 100,000dollars, that means that 1 pip movement is equivalent to 10 dollars. A four pip spread means you are paying 40 dollars comission. And if the spread is any wider then you are paying 60 dollars for example if the spread is 6 pips.

 

Whereas on a direct market access broker you may not even have a spread. Yu just trade at the price, and pay 5 dollars round turn in commision. This is a much better deal than paying the 40 dollars plus to the bucket shop.

 

Also the danger with many of these retail forex brokers is that they are under capitalised. If you are winning they are losing. FX has no central market exchange. It is an OTC(over the counter market) meaning that they can make their own market where there price derivative is truly eschew from the true market price.

 

These brokers are ok for learning the basics but its a very crude way to trade. Shifting to a DMA broker was the best decision I ve made.

[wonderlust]

I hate to nitpick but technically Infinity are neither a market maker nor an ECN nor a DMA broker. OK I lied I love to nitpick. Infinity are a broker who route orders to a clearer who route orders to an exchange.

 

If you want direct access (for both futures and forex) you can use Interactive Brokers.

[junglesoup]

HI Nitpicker,lol,

I ve treid Interactive Brokers. Really dont like them. I dont like the TWS workstation. The staff are unhelpful IMHO. I m pretty sure Infinity anf IB have the same set up. They are both just middlemen who route your orders and use a clearing house. ANyway, I just feel alot better trading with these types than the bucketshop set ups. With Infinity I m getting to trade at the price and I know my broker isn't taking the other side of my trades. :thumbup:

[wonderlust]

TWS isn't the best but there's plenty of third party software you can use. They're a broker and clearer in one so there's no middle man and they offer forex with direct access to the banks. They do have the world's rudest staff though.