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IG, Finspreads, other...

I'm new to spread betting - is there a generally preferred / established platform for UK users? IG and Finspreads seem to be the main players but it's not that clear how much cash you need to deposit with them in order to begin 'trading' :D
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  • foxwales
    foxwales Posts: 590 Forumite
    These are not trading platforms, they are gambling platforms as you do not trade real buy/sell orders.

    This industry is poorly regulated and the odds are in the providers favour.

    If using these gambling platforms, be prepared to lose a lot.
  • IronWolf
    IronWolf Posts: 6,426 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    I use finspreads and haven't had any problems, I chose them because they allow the most precise bets on currency futures, using very small increments. I opened the account with only £100 and began betting immediately.
    Faith, hope, charity, these three; but the greatest of these is charity.
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Post of the Month
    edited 26 June 2014 at 10:47PM
    I use IG and have done so for years. I thought the product was good and bought shares in the customer offer at IPO, which proved lucrative as they've grown their business as planned with a reliable and well liked product which has been good for shareholders. Their technology platform is sound.

    I no longer hold the shares but still use the product. By contrast my Cityindex account has been dormant for years ; I principally opened it to supplement my original shares exposure to IG Group plc, because IG weren't doing a market on their own share price...

    I'm closing my Cityindex account right now because from 1 July they're implementing a £25pm inactivity fee on accounts that have been dormant 12 months, like mine - the kind of incentive I need to actually get around to closing it.

    I did try finspreads a long time ago but had dropped it in favour of IG, so couldn't comment on it now.

    With IG you can bet a lot of markets 'controlled risk' or with 'guaranteed stop-loss' which means you can absolutely know your downside risk on a market (although you pay a price for it, in the spread) and not have the risk of waking up to a share price that opened way below your ideal stop level and being closed out with a lot more losses than you had wanted. Of course, tight stops to avoid risking a lot of margin will mean you can play cheaply but are much more likely to hit the stops and take the loss than a more sensible investor would.

    You tend to find that your minimum spreadbet positions on some well-known US stocks with IG have to be quite big. Something like Abercrombie & Fitch trades at $42.00 and as the minimum bet on it is £0.24 per point, your minimum exposure is 4200 x 0.24 = about £1000. Scale that up for Amazon's $325.00 share price, and the £0.24 per point corresponds to a virtual position of £7800, or on Google it's £0.10 a point on their $584.00 share price, corresponding to a virtual position of £5840).

    While with UK shares which are not priced in the tens or hundreds of pounds or dollars, it is more affordable: you could bet £1 per point on Tesco's or Barclays's share price of 285p or 215p and you would have the same exposure to gains and losses as buying £285 or £215 of real shares respectively. Of course the less you speculate the less you might accumulate, but also you avoid risk of total ruin when you bet/invest more within your means, which is kind of important for someone new to it.

    You will likely find some platforms out there that let you play with smaller ticket sizes which might be useful as a newbie. IG will not necessarily be the cheapest in town, in terms of spreads or margin interest, or most accessible in terms of minimum bet sizes on the particular markets you want. But they have a decent reputation, good web and smartphone/tablet apps etc and will give you a demo account to play on for a few weeks using real prices to see how easy it would be to squander a virtual £10k!
  • plunt
    plunt Posts: 525 Forumite
    Part of the Furniture Combo Breaker
    hi,

    Mentioned this in posts before but i would rule out using spreadbets or CFDs for investing so long as you are using it as an investment tool rather than a gambling platform. If at some point you start doing riskier trades purely because you have leverage then get off the platform. I myself use CMC markets as they used to have a very favourable calculation method for financing cost which subtracted your deposit when calculating the interest amount. They also used to be 2.0% above libor vs most that are 2.5%. Sadly both these factors have changed. Therefore i evaluated what platform i would be able to have the lowest deposit on (or highest leverage).

    Reason being my method is so ring fence the entire amount. Say i have £1000 exposure to "Company A". This would require roughly 5% deposit. so I input £50 and put a small buffer in place till the price stabilises. The remaining £950 i actually hold in cash in 'high' interest savings accounts which offsets the interest im paying to CMC markets and sometimes even provides me with an additional little sum! On top of this i gain the benefit of liquidty so can move money around to other accounts such as the Club lloyds 4% account or TSB 5% account.

    The other benefits of spreadbetting,

    1) dividends are paid of the ex dividend date, not the dividend payment date, meaning you get the dividends around a month earlier than everyone else (sadly there is no platform i know of that allows auto reinvestment of dividends)

    2) dividend taxation, as it is "betting" you only pay the normal dividend tax rather than any higher rate you may pay , so your tax band doesnt matter!

    3) When my positions are in profit i slowly withdraw the cash deposit (allowable on cmc markets, not sure on other platforms) So effectively my gains end up covering the full deposit. So currently i am very fortunate on my positions and have 0 Cash in my account due to all the gains. (just remember to monitor it carefully!) As dividends come in (as i use the platforms for dividend stocks) i withdraw the cash to my account right away or open more positions to ensure the cash isnt eaten up my the daily financing costs

    4) fixed vs variable costs: with spreadbetting you are essentially paying variable costs in terms of spreads and financing cost, holding equities is usually a fixed rate (~£12 to buy £12 to sell). Thus spreadbetting is very cost effective if you do not have large amount of cash (economies of scale) . Keeps in mind there is no stamp duty on spread betting but this is undoubtedly built into the margin, so i dont see this as a benefit either way.

    5) get in on stocks before they are open to normal retail investors. eg: TSB was on conditional trading for a day or two, but spread betters could get in then, where as with equities you would either have to have joined during the IPO or wait till conditional trading was over!


    Disadvantages:

    1) requires close monitoring
    2) large investments may end up being costs
    3) platform decides the price, but all the big players are typically competitive
    4) addictiveness to leverage! (dangerous if you dont have self control!)


    So to sum it up, use it as an investment tool, not a gambling platform!
  • Catapult
    Catapult Posts: 47 Forumite
    Tenth Anniversary 10 Posts Combo Breaker
    Think my sarcasm on the use of the word 'trading' was lost on Foxwales there ;-)

    Many thanks for the feedback folks - much appreciated and very useful!

    Just one question - can a DFT / DFB be opened and closed during the same session rather than hold for some days?
  • gadgetmind
    gadgetmind Posts: 11,130 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    I strongly recommend you use IG as 1) they are very good, 2) my wife owns shares in them. Her dividends come from people losing money, so knock yourself out!
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • plunt
    plunt Posts: 525 Forumite
    Part of the Furniture Combo Breaker
    Catapult wrote: »
    Think my sarcasm on the use of the word 'trading' was lost on Foxwales there ;-)

    Many thanks for the feedback folks - much appreciated and very useful!

    Just one question - can a DFT / DFB be opened and closed during the same session rather than hold for some days?


    Yep, if you use DFBs you have no restrictions. And if you close the trade in the same day ( during market hours) you won't get charged a financing fee ( as I explained in my previous post)

    Hope this helps!
  • plunt
    plunt Posts: 525 Forumite
    Part of the Furniture Combo Breaker
    edited 28 June 2014 at 4:25PM
    gadgetmind wrote: »
    I strongly recommend you use IG as 1) they are very good, 2) my wife owns shares in them. Her dividends come from people losing money, so knock yourself out!

    Gadgetmind sadly for your wife's holdings it won't make a difference as spread bet companies typically hedge all the trades. But new customers will never hurt!
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Post of the Month
    edited 29 June 2014 at 7:42AM
    plunt wrote: »
    Gadgetmind sadly for your wife's holdings it won't make a difference as spread very companies typically hedge
    No, this is exactly the point. The bets made /positions taken by customers are hedged against the market to elicit a profit per person or per bet. Clearly the more people participating, the more made by the middleman. So more IG customers equals more IG profits for Gadget's wife.
  • blinko
    blinko Posts: 2,510 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    I use IG index, capital spreads and have an account with CMC which I don't use (mainly due to my low activity and having everything covered with IG)

    I would recommend trading with real shares first and getting used to those first and then using the spread bet platforms.

    As someone mentioned above the MOST IMPORTANT thing with spread betting is to CONTROL YOUR LEVERAGE.
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