Spread betting on Indices

cmarty

Ok, Im not sure if this is the right forum, as technically im talking about gambling, but having read through a lot of threads here before I know ye guys seem to know your stuff when it comes to markets/shares etc..

So im sure most of you know about spread betting, where you bet on the movement on a specific option (up or down) without actually owning the option itself. Recently ive moved onto betting on indices, specifically the FTSE 100, and have concluded that there is serious money to be made on the movement of such indices as they can be pretty volatile at times. The problem is placing you bet at the correct time, as the losses that can be incurred through spread betting are equally serious.

Im wondering is anyone else out there already doing something similar? Is there any basic strategy they are following that they have found to be successful? Any particular index they found easier to trade on? The reason i picked the FTSE was its immense coverage in the media and with a lot of spread companies in England the spread on the FTSE can be low, so less movement needed for you to make money.

hmmm

cmarty wrote:

Ok, Im not sure if this is the right forum, as technically im talking about gambling.

I don't mean to hijack your thread, I'm sure some others will answer your questions properly. But..I think spread betting is a mugs game - I'm glad you realise it's gambling. The factors that will drive markets on a daily basis usually depend on information and the markets reaction to that information. I work someplace where we have active traders and let me tell you, the sources of information they have available are unbelievable in terms of volume and speed. To think that an individual investor without access to expensive Reuters/Bloomberg feeds can find and act on information quicker than market professionals is not something I'd bet on. Sure some people make plenty, but is it luck or skill?

PDelux

My view on it is that you can make alot of money if you know what you are doing.
There is an article in the Sunday Tribune every week( for the last couple of months) written by a guy trying to see if its possible to make a living from it. He started with €25,000 and is currently just below €35,000.
He gives some useful advice, worth reading. You can get the articles here:
http://www2.deltaindex.com/aboutUs/news/MarketMonkey1.asp

But the basic idea with spreadbetting on a security is that the security has a trading range and you sell when it gets to the top of the range and buy when it gets to the bottom of the range. The range is determined by the moving averages on the chart. With this idea you have a better 'chance' than if you are blindly guessing whether you should buy or sell.

Another good point in his articles is to only bet 2% of your total on one position. It is tempting to bet alot if you think you have a dead-cert but the 2% rule is a good idea.

dunkamania

spreadbetting is like online poker,if you want to make money you need some fish who is prepared to donate,if there is no fish you are unlikely to make money in the long term

PDelux

spreadbetting is like online poker,if you want to make money you need some fish who is prepared to donate,if there is no fish you are unlikely to make money in the long term

I dont get what you mean?

dunkamania

Its a negative sum gain,because the broker takes a cut.

For every €1 you make,you need someone to be willing to lose €1.10.
If you are consistently making money than the person on the other end is going to stop trading with you at some point.

cmarty

dunkamania I dont think you are right with your views on financial spread betting. You seem to be getting it confused with the notion of "laying a bet", such as on websites like BetFair. Here for you to make a euro, someone else has to be willing to bet against you for an equal or greater amount in order for your bet to be placed.

With Financial spread betting any company is going to take your trade, no matter what the amount, it doesnt have to be matched by another punter. They are always going to be losers as well as winners, but that has no bearing on whether or not you get paid.

dunkamania

i oversimplified,the spreadbetting firm doesnt take positions in the market they hedge the net portfolio of punter bets in the underlying markets.

The result is still the same,its a negative expectation game ,you are unlikely to make money in the longterm

cmarty

Ok dunkamania, in one way I can see your point, no-one is going to keep betting against you if they are consistently losing, but are you making an assumption that il be making the same bet over and over..i.e. that the FTSE 100 will move up?? if you are making that assumption then your wrong..I talked in my first post about betting on the FTSE100 during volatile periods, it can go either way, the direction in which I bet is not pre-determined, it will depend on a number of factors, and of course I could be wrong, but at any given day are you tring to tell me that there are not enough people out there that are going to be betting in the opposite against me?

you are unlikely to make money in the longterm

How is this true? I am unlikely to make money in the long term if I am consistently wrong with my bets, otherwise I will continue to keep making money.

One of the myths of spread betting is that if you get too good at spread betting company will stop accepting your trades, is that what you are referring to by not making money? This is not true, although I would advise people making big spread bets to spread across a few compaines because if the market goes against you and falls/rises very fast and you have all your position with one company then they have you by the balls when your tring to close a trade.

I have been spread betting part-time for almost 2 years on stocks in US and UK, so im not a novice to spread betting, the point of this thread was to discuss spread betting on indices, something I have been doing research on and I believe can be very profitable, if you have any views on this or any previous experience with this I would be very interested to hear them.

PDelux

Apparently the first guy on this webpage was asked by one spread betting company to stop trading;
http://www.financial-spread-betting.com/Spread-betters.html

By the way, there seems to be lots of information on that website including examples of day trading on the FTSE.

hmmm

PDelux wrote:

Apparently the first guy on this webpage was asked by one spread betting company to stop trading;
http://www.financial-spread-betting.com/Spread-betters.html

If he's so successful, why is his pimping his "60 minute trader system" on a website? One of these websites that come with RANDOM BIG words and lots of exclamation!!!!! marks. All only $149.

Bet he sells apartments in Bulgaria too.

PDelux

If he's so successful, why is his pimping his "60 minute trader system" on a website?

Yea, and the Google Ads..must be raking in the money:)

bullrunner

dunkamania wrote:

Its a negative sum gain,because the broker takes a cut.

For every €1 you make,you need someone to be willing to lose €1.10.
If you are consistently making money than the person on the other end is going to stop trading with you at some point.

Spreadbetting mkt works in the same way as a cash settled futures market. So are you saying that a cash settled futures market is a negative sum market also?

PDelux

Going back to the original question about tactics for betting on the indices, i don't know what else you could use apart from looking at the trading range and buying as it bounces off support, selling when it hits resistance.

For example, i was looking at the EURO STOXX 50 this morning. It was continuing to fall from yesterday. Looking at the chart i'd be looking for support at just below 4120(Friday). If it went through support you dont do anything but as you can see it bounced off support and that is a nice buy signal. There's a good 10-15 points!
See chart:
http://uk.finance.yahoo.com/q/bc?s=%5ESTOXX50E&t=5d&l=on&z=m&q=l&c=

dunkamania

bullrunner wrote:

Spreadbetting mkt works in the same way as a cash settled futures market. So are you saying that a cash settled futures market is a negative sum market also?

Yes,broker's take commission and market makers take spreads,therefore negative sum market for participants

Reyman

What's the total commission taken by the broker on spread-betting?

It seems to me it must be a lot lower than the total of broker commission, stamp duty, buy-sell spread when buying shares. My estimate approximately 3%

So given that the selection of shares is a pretty random event i.e the layman doesn't have any information allowing him to get an edge over any other trader, then spread betting may be more profitable in the long term because the transaction costs are lower