Day trading question, also etoro

gwebstech

Hi all

Ive been watching a guy on TikTok doing some day trading, hes moving a lot of money about (supposedly). Hes trading on FTSE 100 stocks, a few people have asked him about stamp duty and he says there is none to pay. After reading up a bit i can see that stamp duty isnt payable on electronic trading, but i think SDRT is payable at 0.5%.

Is there any way to trade shares without paying the SDRT? I then came across etoro saying you can trade shares on there and they abosrb the stamp duty - how can they abosrb such a high cost? has anyone used them?

If this  guy is legit, hows he not paying it? hes not selling anything, just offering a few tips on how he does it

cheers

underground99

'Stamp duty' on a transaction for buying a house or a private sale of shares is a piece of paper getting stamped, while SDRT is the type of stamp duty applied to electronic transactions.

 eToro do say they will cover the SDRT for you, but may not be as much of a giveaway as it sounds:

- For most foreign stocks and UK AIM stocks and ETFs etc there there is no SDRT anyway.

- For FTSE100 stocks, stamp duty will generally apply unless the company doesn't have its registration or shareholder register in the UK. However, many of their customers trading will be using gearing (leverage) at e.g. x2 or x5, in which case they will not be directly buying the underlying asset (the stock) anyway but entering into a 'contract for difference' (a CFD is a contract to pay or receive a profit when you close the contract and the price of the underlying asset has gone up or down since the contract was made). There is no SDRT on such contracts whether you get it from eToro or Trading212 or IG.com etc.   Likewise if you were day trading using a spreadbet contract from a place like IG.com there would be no transaction taxes as they are outside scope of SDRT.

AFAIK, eToro won't be able to dodge SDRT if you are buying the underlying asset. However if they are buying the assets once on the public market and then when you want to buy and someone wants to sell they internally transfer some fractional amount of beneficial ownership in the assets from one internal customer account to another (running their own internal market) perhaps there is some wheeze going on where they think they can avoid stamp duty on a portion of the transactions if they don't count as an SDRT-eligible electronic securities transaction. That may be far fetched - they don't say that stamp duty is avoided, they say that they absorb it.  Effectively a giveaway, much as they 'give away' what many other platforms would ask for as dealing fees, because they are making money on CFD spreads and fx transactions etc and have 20 million customer accounts around the world, many of whom won't be using FTSE100 stocks.  If they can offer you a cheap way to buy shares in BP or Astrazeneca maybe you will be tempted to do more (and perhaps bigger) trades in other things via CFD which have no SDRT and are a moneyspinner for them.

Adyinvestment

eToro also seem to have slightly larger spreads between buy/sell than most, this will help towards this.

They are making money somewhere as they offer quite a generous tiered members club where the top tiers enjoy many benefits (no fx charges, sporting events, free Wall Street Journal & Financial Times subscriptions and more)...this will all be factored in to their pricing.

gwebstech

ahh i see, so he must be leveraging like you say. Are there only particular platforms that do this? he watches stocks live on Hargreaves and Landsdown portal. He did say the money doesnt even leave his account for 2 days so sometimes he effectively makes money without it leaving his account, as he can trade one stock several times a day. He obviously has been doing this a long time, he can make 1000s a week profit

etoro has got shockingly bad ratings on Trustpilot,

are you a trader yourself? @underground99

HansOndabush

He obviously has been doing this a long time, he can make 1000s a week profit

Can't see anything wrong with this; I don't understand why everyone isn't doing the same; sounds easy.

underground99

gwebstech said:

he watches stocks live on Hargreaves and Landsdown portal. He did say the money doesnt even leave his account for 2 days so sometimes he effectively makes money without it leaving his account, as he can trade one stock several times a day. He obviously has been doing this a long time, he can make 1000s a week profit

Someone daytrading for thousands a week in profits and has been doing it for years would surely be tracking the live prices in something better than Hargreaves Lansdown's interface which is very limited; they would subscribe to a proper data feed or use a broker with more functionality.  HL do allow you to see a live price, but they don't have decent charting and tracking features. And presumably if he's buying and selling the same stock several times in a day, he's not going to actually do the trading on HL and be paying HL trading fees at a minimum of £6 a time.

A lot of what people say on youtube or tiktok vids is made up bravado especially when they say they are making thousands a week - if it's just some kid in his bedroom recording tiktok vids and thinking that HL is a good free market information service, you can probably take his 'tips on how he does it' with a pinch of salt.  

etoro has got shockingly bad ratings on Trustpilot,

Lots of financial services companies and utility companies etc get shockingly bad ratings on Trustpilot. It's not a very good review service as many people will not bother to sign up to create an account there and leave a review if things are going well (unless they work for the company) so it's just a snapshot of hundreds of grumbles from the thousands or millions of customers. People will post negative reviews on financial services firms if they lose money on investments (their own fault) or perhaps if they work for a rival and want the company's image to suffer. For other types of businesses it can be more useful. 

FWIW, I bought some shares of Trustpilot after they IPO'd recently and the price has risen nicely in the last week despite already IPOing at the very top of their expected range. The business makes money and has potential, even though some of the reviews are complete garbage.

Thrugelmir

gwebstech said:

hes not selling anything, just offering a few tips on how he does it

Tips such as what? 

HansOndabush

Thrugelmir said:

gwebstech said:

hes not selling anything, just offering a few tips on how he does it

Tips such as what? 

2:37 to 3:33 in the video below for instance:

https://www.youtube.com/watch?v=BIVqWNocWXk

LOL !

maxsteam

A couple of ways to avoid stamp duty are with CFDs or spread betting. You don't get the voting rights or an invite to the AGM but you get the financial benefits equivalent to holding the shares. If you want to day trade, the 0.5% stamp duty makes it uneconomical to hold shares for a short period of time. Similarly stocks with a large spread are not suited to day trading whereas FTSE companies, where the spread is often a small fraction of a percent, are more suitable for day trading. It is definitely not easy to make money, particularly if you are either following someone else's ideas or choosing stocks at random. It is easier to lose money than to make money. Most platforms are required to warn investors about the percentage of people (often between 70% and 80%) who lose money. I did have success trading CFDs with Degiro but they have now stopped offering CFDs so I am looking for another provider.

I am currently test driving one account (not eToro). I've not tested it enough to recommend it and I am deliberately trading ridiculously small amounts so that I can familiarise myself with the platform, assess the provider and, in a few day's time, close my positions and analyse every penny. I am more bothered about getting used to the platform than making money at this stage. They don't charge for CFD trades but they allow margin trading and this is something that you need to be particularly cautious about. They also allow short selling so there is the opportunity to make money when prices fall. But yes, it is possible to make money. For example, this was on Wednesday:

Buy 2 EasyJet 14/04/2021 12:13:34  954.20

Sell 2 EasyJet 14/04/2021 14:41:27  973.20

I bought 2 CFDs in EasyJet for £9.542 and I sold them later in the afternoon for £9.732. A profit of 38p. It was a gain of over 2% which, if I could repeat it every afternoon, would make me very rich. I have some losses too, of course.

I would recommend that anyone considering day trading starts with small amounts, chooses the platform carefully (there are some very bad providers) and does plenty of research. Because of the level of research required to be successful, I would also recommend following no more than a handful of stocks. While you should seek out and absorb as much reliable information as possible, I would definitely not recommend looking for easy profits or a tipster or guru to follow. You need to make your own decisions.

You also need to be aware how such trading plays with the mind. It is easy to spend hours staring at a screen, watching the numbers change. It is also easy to convince yourself that you can make it work when you are sitting on losses - ask any gambler.

gwebstech

Thanks for the replies, hes an old guy, he doesnt strike me as full of sht, hes not saying anything like i can make you rich etc. It seems more along the lines of follow me and watch how i do it, hes been doing it a long time, he only ever buys 10k shares at a time, just to make it easier to work out his profits.

Im aware this is where you can easily lose a ton of money, and people are just waiting to take it but as far as i know, he does use H&L as he says he pays around £5 a deal, but when hes making that kind of money its nothing.

Even if you make 1% a day that can add up to a large amount from a small investment, im just interested in finding out more to be honest.

Whats the difference between CFD and margin trading?

So what forum would you recommend @maxsteam ?

moneysavinghero

hes not selling anything, just offering a few tips on how he does it

He has made you consider day trading. If you go ahead, which it seems like you will, then you will be making the spread betting companies money (spread betting is the easiest way to avoid stamp duty). If he is genuinely good at what he does then maybe you will be making him money too - every trade needs someone at the other end, and an inexperienced trader makes making money easier.

People that show you how easy it is to make money are always selling something, even if it is not always obvious what they are selling.

He could also be trading FTSE AIM as no stamp duty on these but the spread tends to be too large to make day trading profitable.

Even if you only make 1% a day then yes that could add up to a lot. But what if you lose 1% a day then by your own admission that would add up to large losses. Can everyone make 1% a day profit?. No they cant, every winner needs a loser on the other end. Don't be that loser.