Optimal Trading Set Up

Hi all,

I’m new to this board and relatively new to a number of concepts on here. I’ve been trading (here in London UK) so far mainly via my personal share dealing account, paying lots of capital gains tax and on a long- only basis for a couple of years now. Madness really. That being said I have done pretty well and have enough confidence that I am starting to think about branching out in to a more professional set up.

Testing out spread betting, I have opened up a City Index account. They seem fine, though it is a shame that they do not offer tracking stops, which I think I would like (though would be interested to hear other people’s feedback on whether they find ot beneficial or a hindrance). I am playing with very small amounts on there, however now I am considering putting a significantly larger proportion of my stack purely in to spread betting or some other system that will be most effective for my trading weight. In terms of that exact weight, aside from the capital I have locked up in my flat I have about £250k in cash at my disposal. I doubt I would want to expose more than half of that to trading risk but let’s say about £100k to make it a round number. Normally I trade GBP/ USD, as well as some UK equities that I particularly like for one reason or another, such as Evraz, Man Group, Supergroup, Randgold Resources, Lloyds, Barclays. This month I’ve made most of my money by shorting and going long on Randgold and by going long on GBP at the right times, with a tendency to day trade in and out of positions and bet aggressively when the trend shows it’s on a clear direction.

So, basically, if/ when I scale up from £1/ point to £100/ point am I going to find any issues with using an account like City Index? Will my trades be harder to place or affect share price movement at all (I noticed this a lot when I was trading real shares in Supergroup)? Are there spread betting sites out there with better technology or liquidity?

Also, related, what is the benefit of joining a trading arcade? Sounds like a lot of overheads and I can’t see what the upside is. Are there any London based spread betters that all just rent a room with broadband and bloomberg tv and sit around together chatting and sharing a copy of the FT or whatever? Is there anything else an arcade can offer?

Thanks in advance for any advice or input!

(Oh and if I’ve made any mistakes then sorry, I’m writing this post from my phone!)

if you have that large of an account go with a pure ECN or large bank and get direct access. I think you can do citiFX or dukascopy and get the highest level of service with STP. Honestly, I wouldn’t even trade spot forex, I would go to something more financially secure and regulated like futures.

Thanks for the advice MeiHua. What is the real material difference that it will make to me? I presume faster trading times and narrower spreads? Can I set up direct access from home or do I need to rent desk space from somewhere in order to have it?

Also, why are futures so much more secure than forex?

Thanks!

Oh, also, what tax implications are there for a uk citizen trading futures rather than spread betting? Given spread betting is tax free I would want a really significant incentive to give that up.

Yes you can get direct access from home. The futures gains will be taxed in all likely hood, but I am not a UK tax expert. Consult one to find out exactly how this would be affected. The main thing is clearing houses, fund segregation, real market price and volume, and international best bid and offer.

I would never place 20k+ in a spread better or spot forex account for 2 reasons. 1 my money is not segregated nor guaranteed. If the company goes bankrupt you will not be able to have a claim on it either. Like the PFG scandal a few years ago, all the spot forex traders lost all their money all the futures traders got claims on theirs within 90 days. Also your money must be in an individual segregated account that can only be touched by you for trading the markets, it can not be mixed with others or used by the house in any way. Its a security thing.

It is always better to pay the taxes to avoid any implications. Yes it is true that spread betting is tax free which is why many traders are doing it :slight_smile:

I do not think there is such a thing as an optimal trading set-up in general, but you can determine what your optimal trading set-up is. Just keep in mind there is nor right or wrong approach, only a profitable and a losing approach and the markets will tell you if you are profitable or not.

Piece of advice: Ignore trading arcades.

Thanks for all of the above perspective. I checked with my spread better and it appears that the client money they look after is segregated (though I don’t know think my own individual account is segragated from other traders, just segregated from City Index itself). Perhaps this is because they are a UK firm, regulated by the FSA? Will do some research in to PFG for a comparison.

Given that, and given the fact that spread betting is free of all taxes (we consider spread betting to be gambling rather than trading, and so it is taxed differently and capital gains tax does not apply), it appears to me that for a UK resident spread betting is the most cost effective strategy, even though the spreads won’t be as good as in futures trading.

Would be interested to hear a perspective from UK citizens though as to whether I am making false assumptions.

Will almost definitely be avoiding the trading arcades… just trying to figure out if there is any kind of logic to them at all, but I really can’t fathom it. Perhaps they were more useful in the era pre-internet when you needed a lot of hardware in order to be able to trade.

Thanks!

Depending on the instrument trading arcades can give you discounted commisions vs a retail set up. They also usually have direct market access so you get faster fills, news feeds and can meet other traders. The traders that go there are usually more serious than “internet” traders because you have to rent space and usually put up a decent sum of money. But they aren’t good enough to go out on their own, unless they are managing firm money at the arcade. Also they may get liquidity rebates through the arcade as well. So there are benefits but you have to do your research, a lot of them will pump and dump. But if your actually profitable or at least break even, it wouldn’t hurt to be in an environment surrounded by traders.

Hi there, I am a UK spreadbetter as well - so take some advice from a UK based citizen!

There are quite a few spreadbetting companies that you can use. At higher values per pip you have to telephone - they limit you - I think about £300 per point is the biggest you can do on most spreadbet companies but I’m not sure. If you want to spread your account around you can go with IGIndex, CMCMarkets, Intertrader, and instead of going for £100 per point, you can go for £25 per point which will easily be taken up electronically without any telephoning.

Although Meihua is giving you advice, with all due respect he is not from the UK, and its not the same comparing a US spreadbetting firm with a UK one. UK firms that are FSA regulated keep your funds segregated and don’t trade off your account. IGindex for example is a FTSE company and you can check their profits to see they aren’t hiding anything. If FSA regulated firms have insurance that guarantee clients their money up to £50 000, so as long as you have funds under this amount per account you are pretty safe.

In terms of using a trading arcade - are you joking? The best trading arcades will give you one clip of £10 000 at the start after you have been learning for 6 months, and then will charge you a £500-800 desk fee per month, and you can only earn a % of your profits. If you do well, then they increase the number of clips you have, do badly then you are sacked. If you are trading with 100k-250k you are better off than anyone trading an arcade.