Bucketshop betting (tax free beer money)

[themickey]

It doesn't have to be, you can trade 2 hours a day or 20 hours a day. Entirely up to the trader.
As for Systematic vs Discretionary vs Hybrid. I don't see much difference between them, in that the deciding factors are things like patience and emotional control (how you emotionally handle losses).

I note on your opening post mention of stock indexes, so I'll assume maybe a handful?
My mind had wandered off and was thinking of stocks, so a larger universe, which then brings in issues of too many choices.
Yep, so just a few indexes is probably a good idea.
Do you think perhaps trading discretionally will give you some further new trading ideas for using in the sometime distant future, what do you normally trade?

 

[Businessman]

Do you think perhaps trading discretionally will give you some further new trading ideas for using in the sometime distant future, what do you normally trade?

At this point i don't want to complicate my automated trading with more systems, as long as I can trade big size I will print money with what i already have, even if it isn't optimal or even the best i can do in terms of consistency of profits.
It is the same underlying issue you mention about having too much choice. Yeah diversification with lots of systems is good in theory, but so is keeping things simple. It seems to be easier to maintain discipline and emotional control with a simpler approach.

 

[tradingpoker]

Sorry what's YM? Only 18% CGT! Wow!! That extra tick is probably what we pay for PFOF we just don't know. LOL yeah it's not bad at all. I need to move to UK LOL.



Yeah they are one of the largest bucket shops in retail forex too. We are going to have to agree to disagree on them being the "most reputable" though. LOL They certainly had their fair share of blocking traders from withdrawing their profits and they do trade against their clients. Now they've created a DMA mode I see so they must be b-booking. Glad you are making good money with them but just be careful.

This is not true btw. I know traders making 6-7 figures a year with them, some withdrawing funds weekly/monthly. Of course if someone is breaking rules etc, then there will be problems and they will not be able to withdraw/deposit.

Believe it or not, they actually make good money from their winning traders. I have been to a few of their hospitality day outs.

Lets say you deposit £5,000 and lose that in 5 days, that's no good for them. It's actually very bad.

Lets say you deposit £50,000 and make £5,000 a month, that's very good for them. That will mean you are making lots of trades. Via those trades they are making lots of money, vs the trader that blows up their account and leaves. They make from slightly wider spreads btw.

They are far from some chop shop. Most here will know tasty trade, the options trading channel/broker. IG index just bought them for a 1 billion dollars! Also they are regulated here in the UK, which means if they go under, up to £85,000 of your money is protected by the government. (BTW they have about the same chance as interactive brokers of going under)

They have been in business since 1974

 

[Businessman]

Believe it or not, they actually make good money from their winning traders. I have been to a few of their hospitality day outs.

Lets say you deposit £5,000 and lose that in 5 days, that's no good for them. It's actually very bad.

Lets say you deposit £50,000 and make £5,000 a month, that's very good for them.

As long as both parties make money. Everyone is happy. If the spread bet firm can make money on the spread and is able to hedge the bets of a consistently winning trader in the underlying market. They are happy for you to win.

Issues occur when they cant hedge your bet, in which case, your profits = their losses. Then they don't really want your business, (cant really blame them, neither would I) and your account gets flagged and you find any non trivially sized bets you place getting held. But if you consistently lose they will happily take your bets, instant fills at any size, even when they cant hedge, because in this case: your losses = their profits.

 

[tradingpoker]

As long as both parties make money. Everyone is happy. If the spread bet firm can make money on the spread and is able to hedge the bets of a consistently winning trader in the underlying market. They are happy for you to win.

Issues occur when they cant hedge your bet, in which case, your profits = their losses. Then they don't really want your business, (cant really blame them, neither would I) and your account gets flagged and you find any non trivially sized bets you place getting held. But if you consistently lose they will happily take your bets, instant fills at any size, even when they cant hedge, because in this case: your losses = their profits.

Lets say an average trader is trading 100 shares of TESLA, that is just £1 a point. Even larger trades like 1000 shares is only £10 a point.

All they do is take the same position out as us, but charge us a larger spread, that's all.

Say someone wants to put in a big order, like £1,000 a point on TSLA, pending what is going on in the underlying market they may or may not fill you. As with the real order book, you will probably be filled but at a wider spread.

If the shares/contracts are there in the underlining market there is no reason you will not get filled.

Of course there will be shady spread betting firms that will take risk/hedge etc. But IG index are the market leaders, so they don't have these issues.

 

[Businessman]

Lets say an average trader is trading 100 shares of TESLA, that is just £1 a point. Even larger trades like 1000 shares is only £10 a point.

I am specifically talking about stuff they can NOT hedge. They will move the goal posts if you make too much money trading in an instrument or way they cant hedge. They wont let you trade size. You might think that is ok, maybe it is, after all they are not a charity. But then they will happily take size from consistently losing traders on those same markets and bucket those trades for a 100% profit.
Dumb money can bet big on anything at anytime, Smart money can only bet if the Spread bet firm can hedge those bets.

 

[tradingpoker]

I am specifically talking about stuff they can NOT hedge. They will move the goal posts if you make too much money trading in an instrument or way they cant hedge. They wont let you trade size. You might think that is ok, maybe it is, after all they are not a charity. But then they will happily take size from consistently losing traders on those same markets and bucket those trades for a 100% profit.
Dumb money can bet big on anything at anytime, Smart money can only bet if the Spread bet firm can hedge those bets.

but their model does not need to take this risk. They can't just pick and choose which trade will be winning/losing.

Lets say you do £10 a point in TESLA with 10 point spread. You buy at $200, they will just buy at $200 in the underling market, easy.

The spread in the market will be 5 cents, they charge you 10 cents. Easy money for them risk free. No need for risk or hedge.

Maybe you mean they will take risk if the position is too big and the shares are not in the market. But in that case you will just be charged an even bigger spread. Also factor in they have so many clients to use against each other. I want 100 shares and you have 100 shares, easy, they do this all the time. Again that is risk free for them and they make on the spread.

 

[Businessman]

They can't just pick and choose which trade will be winning/losing.

These Spread bet firms (all of them) know which customers make money and which lose.
Same as the old A and B book from the FX brokerage industry.
They will bucket trades from losing traders, at any size with instant 1 millisecond fills, effectively keeping 100% of the money that was deposited.
Profitable traders, the trades go to the market for hedging. If not possible to hedge trade, say the price moved fast, the order gets rejected with a message like "price no longer valid, please retry"

 

[tradingpoker]

These Spread bet firms (all of them) know which customers make money and which lose.
Same as the old A and B book from the FX brokerage industry.
They will bucket trades from losing traders, at any size with instant 1 millisecond fills, effectively keeping 100% of the money that was deposited.
Profitable traders, the trades go to the market for hedging. If not possible to hedge trade, say the price moved fast, the order gets rejected, "price no longer valid, please retry"

CMC markets do this for sure, I don't think IG index needs to. Why take the risk when they have so many clients printing money for them on spreads. A losing trader could put £1,000 a point on TSLA long, TSLA has a profit warning + terrible news and drops 30% over night. No way would they put themselves at such risk, even though this is a losing trader.

Don't forget you can trade underlining shares in the market with them, CFDs and of course spread betting. They just don't need to take any risk with the amount of clients they have. Orders getting rejected will just mean that size is not there in the underlining market. Interactive brokers will do the same if the size is not there, you just won't be filled.

If you had a business that makes money every time losing/winning traders trade, why would you take any risk?

I get you can take risk and make more money, hence why many shady firms will do this. But when you are so big and making so much, you don't need to take these risks.

 

[Businessman]

A losing trader could put £1,000 a point on TSLA long, TSLA has a profit warning + terrible news and drops 30% over night. No way would they put themselves at such risk, even though this is a losing trader.

If Mr Whale wants to bet £1000 a tick on Tesla. That requires over £6 million in margin at todays prices.

So Mr Whale needs to put up £6million.

For Mr Whale to be considered a consistent loser, he would have already have had to have lost £10 million+ to the spread bet firm already. Anything less might not be enough for Mr Wale to be flagged yet as a big time loser based on the size he wants to do.

So yeah, if he has already lost £10 million to the spread bet firm may well take the other side of his trade next TSLA at £1000 a point. If not they will hedge enough of the risk off in the underlying as they need to.