Pros Corner: Arguments in Favour

Don’t understand that commentator’s logic re the spread bet companies overheads/profits relative to punters winnings. IG Index make money upfront on every transaction via the spread, the actual position you take up is then hedged I expect by either another punter betting the opposite way or by hedges taken up by IG to cover your position.

I have been reading your posts and have to ask why you put down spreadbetters? I don’t spread bet often but it has its uses. What makes a spreadbetter any less or more of a gambler than one who buys shares. I would say that for a swing trader, spread betting with no stamp duty, trading costs other than the spread and no capital gains tax is a more viable option than buying shares, especially those such as Lloyds that offer no dividend anyway. With the caveat that enough margin is deposited to cover the trade and a sensible risk management stop loss in place I don’t see the advantage other than being able to hold if it all goes wrong and a stop loss is not in place until things “hopefully” turn around which is a psychological “benefit” more than anything else.

Spread betting is better though if you like to build stakes in a position or exit a trade in stages as you don’t have to keep paying commission, obviously there is still the market and providers spread to think about. It is always best to always run your winning trades as far as you can to maximise your profits to help offset the inevitable losses.

The shorting ban had nothing to do with spread betting…was actually borrowing shares they did not own and selling them and then after a time having to buy them back again at hopefully a lower price.  Spread betting is entirely a different way to do that and is not shorting in the true sense of the word.

By buying or selling shares you are essentially placing a bet whether you think the shares will go up or down. How can it be fair to bet one way and not the other? What are we looking for? Shares only ever to go up?

We must remember that shorting has been around since stocks have been traded. The management of new companies to AIM and other markets are aware of this and know how the system works. They are happy to take the huge sums of cash that they would NEVER normally have access to. You can’t take the cash and then complain if you’re company under-performs and the market treats you accordingly. It’s a big boys world and there’s no point crying over it after you have been given good money by investors.

There is something puzzling me. I have read that a majority of people lose money using spread betting. If the costs of spread betting are similar or less than buying actual shares, why is this so? Or does this mean that the majority of people who buy shares also lose money? Assuming I have £60,000 in my account, if I spread bet £100 per point on WCC am I more likely to lose money than if I buy 10,000 shares? If you deposit the same as you would to buy the shares then it’s no different to buying the shares.

The majority of traders have accidents that kill their account. The minority make money but many of those haven’t the resources nor the balls to make serious money sustainably without eventually becoming one of the 80% who fail eventually!