Spread betting question

[tom2019]

What happens if you deposit £100 but you're losses on a trade exceed this, will you owe the money, or will the trade automatically close when it reaches you're deposit?

[tom2019]

Just read some t&c , looks like you will owe the money plus interest

[megaphone]

Some accounts will not let you 'bet' more than you have in you're account.

[Hoofy]

Because of the nature of markets and spreadbetting, it's probably wise to not just cover how far you think the market will go but how far it might go in the event of st happening. For instance, if you fancy putting a bet on with a 10 tick stop, £10 per tick, when data is released you might get a brief 20 tick spike before the market quickly comes back to the original price either because the market panicked a bit or the spread was widened a lot. If you'd been more conservative with your bet, you'd have ridden the panic rather than take the hit (plus more depending on T&Cs).

[honest_delboy]

Even if you set a stop you can go past it before your position gets closed, i think it's called slippage? They asked me if i was aware of this and explained how it works etc when i opened my account with IG/Cityindex.

[Hoofy]

honest_delboy said:

Even if you set a stop you can go past it before your position gets closed, i think it's called slippage? They asked me if i was aware of this and explained how it works etc when i opened my account with IG/Cityindex.

Yep, slippage is a big concern and something to be aware of. You could have a guaranteed stop BUT the spread is going to be much wider than a standard spread.

[vegasboy]

Spread betting losses are enforceable by law so if your losses exceed your account balance you will owe your broker money and you will be margin called (unless you operate a limited risk account in which case your broker will apply a guaranteed stop to any positions you open and you can't lose more than your deposit)

margin call: http://www.financial-spread-betting.com/Margin-cal...

[Condi]

vegasboy said:

Spread betting losses are enforceable by law so if your losses exceed your account balance you will owe your broker money and you will be margin called (unless you operate a limited risk account in which case your broker will apply a guaranteed stop to any positions you open and you can't lose more than your deposit)

margin call: http://www.financial-spread-betting.com/Margin-cal...

No broker will put a guaranteed stop loss, as markets can gap lower or higher. Do NOT think a stop loss will protect you 100%. Any further losses are still your responsibility, even if you had a stop loss in place.

[Hoofy]

http://www.ig.com/uk/risk-management

[league67]

Condi said:

No broker will put a guaranteed stop loss, as markets can gap lower or higher. Do NOT think a stop loss will protect you 100%. Any further losses are still your responsibility, even if you had a stop loss in place.

This.

[Chilli]

league67 said:

This.

Really? I didn't know this. How can the broker justify a wider spread for a 'guaranteed stop'?

[Hoofy]

Hoofy said:

http://www.ig.com/uk/risk-management

[Condi]

Hoofy said:

Hoofy said:

http://www.ig.com/uk/risk-management

You learn something new. They are just charging you extra and taking the risk themselves.



But stop losses in general will not protect you from the market gapping. In my line of work we have no guaranteed stops!!

[Hoofy]

Condi said:

Hoofy said:

Hoofy said:

http://www.ig.com/uk/risk-management

You learn something new. They are just charging you extra and taking the risk themselves.



But stop losses in general will not protect you from the market gapping. In my line of work we have no guaranteed stops!!

Precisely. You pay extra in the spread. You have to think of the bigger picture. Not every stop is gapped. Most retail traders will end up giving loads of ticks away by going down the GSL route then get saved by the very occasional spike. IG aren't stupid.

[Condi]

Hoofy said:

Condi said:

Hoofy said:

Hoofy said:

http://www.ig.com/uk/risk-management

You learn something new. They are just charging you extra and taking the risk themselves.



But stop losses in general will not protect you from the market gapping. In my line of work we have no guaranteed stops!!

Precisely. You pay extra in the spread. You have to think of the bigger picture. Not every stop is gapped. Most retail traders will end up giving loads of ticks away by going down the GSL route then get saved by the very occasional spike. IG aren't stupid.

You would only use it for risky trades. If you were betting over some report or something like that, and it could move violently one way then you would use it. Im not sure why you would want it for betting on the FTSE or something more steady.

[Hoofy]

Condi said:

You would only use it for risky trades. If you were betting over some report or something like that, and it could move violently one way then you would use it. Im not sure why you would want it for betting on the FTSE or something more steady.

Yeah, but a newbie wouldn't think of that.

[anonymous-user]

I've never used a guaranteed. I'd never risk more than 1.5% of my account on any one trade with a maximum exposure of 4.5%, so I have a lot of room for any slippage.

The issue for a lot of new traders is put little money into an account and take on outrageous % risk levels. I'd never suggest they put lots in, but practising sensible risk % from the start is a good thing to do.

[walm]

I use guaranteed stops from IG.
Saved me precisely once, but it saved me A LOT.
I haven't run the numbers but I suspect the extra spread vs. the amount saved probably even out in my case.

[anonymous-user]

It depends on your time frames. I can only see it being worth it if you trade less frequently and with larger stops and limits, where spread is less of an issue (although the risk of a big move hurting you is less, so perhaps not). If more frequent and intraday then spread cost is more important.

It probably depends on your instrument, too. If you trade something extremely volatile then the price may be worth negating the risk.