With spread betting, you got £300 in your account and you put your stop at 10 PIPS, you can put £30 a pip if you are daft enough, with Forex you can’t, you are limited by your leverage/margin, you could though put £3 per pip and your stop at 100 PIP.
My broker/bookie (they do both) close your position, like a margin call I guess, when you are down to 10% of the wager size, to protect themselves from a gap I suppose. So if you have a £300 account and a position goes against you to the tune of £270 you’re stopped out.
Hello,
Well I still don’t get it. Sorry. Unless somebody like ETX is a kind of ‘hybrid’. Put another way: aside from being regulated by the FSA they are a MEMBER of the LSE. SURELY that doesn’t apply to ‘bookies’???
All I know is that OTHER than the way they handle their stops / margin requirements I don’t see any difference. The more ‘contracts’ (‘lots’ in FOREX) that you buy or sell the higher your £ per point / pip movement is all and that’s no different from a ‘normal’ broker.
Regards,
Dale.
In practice there isn’t any, you’re right.
Sorry Dale missed this one, maybe if the post updater was working
I would have noticed???
At Oanda if I want to trade at $10 per pip I need to use 100 000
units which at 50/1 leverage is equal to depositing $3 237. This is the deposit they require to trade. (Realistically I would probably need more like $5 000)****
At my spread better I only need to deposit my perceived loss multiplied
by $10, with maybe a little extra to cover the SB closing my trade early
due to margin call etc.
So for example a trade I took this morning was on the AUD/USD long
@ 1.0556 with a S/L @ 1.0496. Giving me a S/L of 60 pips.
At Oanda @ $10/pip I would need to deposit at least $4 000.
At my spread better I deposited $700.
Here I am not debating the pros & cons of Spread better versus broker,
they both have their merits.
**** before anybody becomes pedantic about these figures they are for illustration purposes only ****
But I suppose I need to put a disclaimer on the bottom of this post to
appease the pedantic.
I am not saying run out & use a SB, it requires a lot more experience
to see the pit falls in trading $10 a pip, you need to have a valid money
management strat. in place etc.
Hi daydreamer65,
Thanks for the detailed explanation.
I THINK I understand now.
Correct me if I’m wrong (in what I deduce from your post) but the difference lies in that fact that unlike with a ‘normal’ broker a Spread Betting Boker varies the amount of margin required because of the way that they handle stops (as I noted in one of my previous posts)??? In other words: ‘leverage’ (for want of a better description) is ACTUALLY adjusted ‘on the fly’ by the trader by varying their stop placement i.e. the closer the stop to the opening price the less margin is required. I an see why this would be dangerous practice for a new trader that’s for sure.
Regards,
Dale.
Dale - the other significant difference are the rollover charges. The spread betting firm I am with have a daily rollover charge of + or - 2% over and above the LIBOR rate. A Oanda forex account just applies the LIBOR. The difference may appear subtle but trust me, can make huge differences to your profits and losses. So my rule of thumb is use a spread betting firm for short term trades and a forex firm for medium to long term.
In other words: ‘leverage’ (for want of a better description) is ACTUALLY adjusted ‘on the fly’ by the trader by varying their stop placement
Yep Dale, leverage, margin etc. does not exist at a SB, you calculate your stop loss, decide price
per pip & Robert’s your uncle on the way to financial ruin. :lmao: