I met a senior broker who worked on the dealing desk of a big UK spreadbetting company last night, and quizzed him about their traders. Here were the key points:
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80% of clients regularly lose money (not 95% - I’d always wandered where this figure came from). This divides their book into A traders - the winning 20%, and B traders, the remainder
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For any single instrument, they aggregate their position and work out their overall exposure. They are allowed a certain amount of leeway, beyond which they must hedge to meet criteria which set out their maximum exposure. However, within this leeway, they can choose to hedge this or let it ride. They often turn to their A book for guidance on what’s best to do.
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Almost every losing customer has more winning trades than losing trades. Which is odd when you think of it. Only these winning trades are generally only a few pips, with the losers being 100+
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In regards to price shading and the like, they said it just wouldn’t be worth it for all the hassle of squeezing an extra pip or two from their customers. I know - he’d obviously say this, but it seemed pretty genuine. They do however make mistakes, so don’t trade with your eyes closed.
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Of their entire customer base of tens of thousands, they only personally follow a handful of individual customers.
Interesting, no?