Is financial spread betting gambling or investing?

[Brendan Burgess]

Re: The difference between Investing and Gambling

Harchibald

Thanks for that clear explanation, but I still don't get the purpose of it.

Would the "spreadbetting" company not be better off buying and holding the shares. Why do they take "spreadbets" at all?

Or are there sufficient people selling the index at the same time,to match those buying the index? Presumably these sellers are then gamblers?

Are people who buy the index or individual shares through a "spreadbetting" company not better off buying directly themselves with borrowed money? Are they not sharing their profits unnecessarily with the "spreadbetting" company? The "bettor" saves CGT, but surely the company must pay stamp duty and CGT and income tax on the dividends.

There is still something not fitting together here for me yet.

Brendan

 

[Duke of Marmalade]

Re: The difference between Investing and Gambling

Harchibald

The "bettor" saves CGT, but surely the company must pay stamp duty and CGT and income tax on the dividends.

There is still something not fitting together here for me yet.

Brendan

Boss, I can see you're stuggling here, and you may be right, but I don't think so. I will report back from my training session.

I will be asking those very same questions but I think I know the answers. Delta is entering futures derivatives - hence no stamp duty, it too never owns shares. Delta is taxed on profits not on capital gains + income.

 

[Duke of Marmalade]

Re: The difference between Investing and Gambling

Harchibald

Would the "spreadbetting" company not be better off buying and holding the shares. Why do they take "spreadbets" at all?


Brendan

I missed this main point. The point is that the spreadbetting company is an intermediary - it makes money on its spread. If you believe markets will in the end outperform, sure take a primary position, but you may as well ask the same question of stockbrokers.

 

[ccraig]

Re: The difference between Investing and Gambling

Some of these spread companies claim to offer a spread of just 1 pip. How can that be as it doesnt allow any margin for them. Has anyone tested the system to see that it is 1 pip?

 

[Zoran]

Re: The difference between Investing and Gambling

Spread betting is the zero sum game as it is based on futures.
Futures and options are zero sum game as they are derivatives.
Derivatives are not making money.
Stock market is not zero sum game as it is growing more then the inflation for last few hundredth of years.

Spread betting is the invention for companies to make money easily from people that are usually small non-professional investors (or better they are mostly gamblers without the edge) by charging them on transactions.
You can try it, double money easily even in 1 day and then you will think you know this and next day or year burn all that money.

You need usually to do a lot of transactions as it is leveraged and it is not the long term strategy (for me mainly due to the leverage as volatility of the underline security is making it unbearable loss, e.g. 3% down and you are 100% down, 6% down and you need x3 your deposit on spread bettors account - this example is for the crude oil with around x36 leverage)
CGT free is great but believe me you would like to be able to offset your losses from the real stock market positions as the profit from spread betting is less likely

Mark Shipman used to have the link on his trend following site with the current spread betting positions (without explaining how much money or pips is invested) but it is removed from the site. Why?
Why there is not any quantitative and descriptive strategy in the book?

Do you think you will be better in zero sum game with pros (market makers) on the other side of the bet?
Do you have the strategy that is tested and proved to work over a long time (or short if you know when to stop)?

In spread betting with such leverage if you have the winning trading method with the marker edge you must earn more % points then on the simple stock market, to say 50% or 100% per year. That will make you so wealthy in just a couple of years.
Spread betting is the hope for people to become rich or better wealthy the fast way. But common then somebody needs to loose all of that on the other side.
The only problem is that only a couple (or tiny %) of people are actually making huge money out of it and that means huge % of people are loosing money to fill their pockets.
Do you want to take your chances and face the pros (or just lucky people)?
Anyway spread betting companies are making money as they are earning money no mater are you loosing or winning.

If these people (who knows the strategy) are so wealthy why they need to earn money on cheap seminars and writing books every year (excluding academics and others who are writing mostly for glory and to earn the Nobel prize).
Common, I will be on some sun and relaxing and not traveling to Dublin to perform some seminars.
Of, I will probably not be writing this post in here

Direct stock market is not zero sum game but rather creating the value over time. Such value is eaten from us by hungry financial machine through the management fees (e.g. brokers, fund managers, fin institutions as market makers). Active funds with high management fees are usually not outperforming the average market return on the long run.

Please, read some academic work on this, avoid expensive mistakes and do proper investments through the stock market (or your own business or something that is making the value and where you are pro and not the sheep). The portfolio of proper passive index funds are the way to go for individual investors long term. Active managers are not outperforming their benchmark index over the long run. Just think that you need to invest at least 20-30 years till pension and that you will need something to eat then and hopefully leave something to your children.
If you do not care then go and try your luck with spread betting or similar but please do that with small money first or even so called paper trading.

If somebody has the winning method for spread betting please send me or publish it.
Joking of course, if you have it you will guard it till you are so wealthy either by using it or selling it to some big institution.
What do you think if you are making the big bucks on the market that somebody will not come to you and try to buy the secret formula or give you the job?

I will try to continue this conversation and I help only 1 of people reading this I will be very happy.
I was lucky that I have a friend, professor on one of the most prestigious university (not making him more smart in investing as you should never listen without checking it out) who dragged me out from the hole of trading/active stock picking or to say some kind of "gambling".

Please, stop pushing luck and spending money on bad books/seminars and even worse loosing money on wrong methodologies and wrong investment vehicles.
At least post pone it till you read and learn the pure facts around it.

Cheers.

 

[bankrupt]

Re: The difference between Investing and Gambling

Zoran, I suggest you re-read the thread, especially Harchibalds' comments. You seem to have misunderstood financial spread betting in the same way as Brendan. Shipman suggests using SB as an investment vehicle, holding unleveraged positions for the long term and changing these positions no more often than once per week. I have no reason to doubt that he has made a personal fortune in investment and he states himself in his book that he does not need the income from his seminars and publications. Perhaps this is not the case, however his investment strategy is so conservative that I find it unlikely he is another snake-oil merchant.

 

[Brendan Burgess]

Re: The difference between Investing and Gambling

Zoran

I think that most informed people, after reflection on the issues, realise that spread betting is gambling and not investing.

However, Harchi makes the interesting point that financial "spread betting", is not actually spread betting. Now if someone wants to rename long term buying and holding of shares as "spread betting", then that type of "spread betting" is, of course, not gambling.

I don't know if Harchi is correct or not. He was doing a course and we are awaiting his report.

Brendan

 

[Zoran]

Re: The difference between Investing and Gambling

Let me reply to both bankrupt and Brendan here.

>Zoran, I suggest you re-read the thread, especially Harchibalds' comments.

I did read the whole thread already so that is why I wanted to post something to drive people from such hard way to earn money (rather to say easy to loose money).

>You seem to have misunderstood financial spread betting in the same way as Brendan.

Sorry that I did not use financial in front of spread betting.
I was talking about financial spread betting all the time.

>Shipman suggests using SB as an investment vehicle, holding unleveraged positions for the long term and changing these positions no more often than once per week.

How are you doing unleveraged holding on GOLD?
If it is long term what is that to do with changing positions once per week?
You must be doing it daily so per week is more long to you?

The long term for me is 10, 20, 30 years to say till pension.

>I have no reason to doubt that he has made a personal fortune in investment and he states himself in his book that he does not need the income from his seminars and publications.

Why not? Did he posted any results that we can check?
Did he earned money rather on properties and horses as even stated in his book or articles? I do not know, but do you?
If he is so wealthy why would he travel around and pick cheap money from seminars?
What is the idea of writing the second book getting out soon?
Why would we believe descriptive methods from his book?

>Perhaps this is not the case, however his investment strategy is so conservative that I find it unlikely he is another snake-oil merchant.

What strategy? Did you get correctly his exit strategy and money management strategy from his book?
I have not attended the seminar and will not but read the book.

>However, Harchi makes the interesting point that financial "spread betting", is not actually spread betting. Now if someone wants to rename long term buying and holding of shares as "spread betting", then that type of "spread betting" is, of course, not gambling.

financial spread betting is the zero-sum game as somebody on the other side needs to loose if you are winning.
Keeping the real stock on the stock market is not the same as being long on the same stock through spread betting company.

>I don't know if Harchi is correct or not. He was doing a course and we are awaiting his report.

If he is correct I will not post this thing here.

 

[bankrupt]

Re: The difference between Investing and Gambling

If it is long term what is that to do with changing positions once per week? You must be doing it daily so per week is more long to you?

Shipman's strategy is long term (well perhaps medium term, if you insist that positions must be 10,20 years to be long), holding positions for as long as they are rising, reviewing them once per week.
It's important to also note that he does not insist that the reader should use FSB, he discusses the various options and recommends FSB as the most efficient method to follow his investment strategy but you could just as easily trade shares through a broker.

Why not? Did he posted any results that we can check?
Did he earned money rather on properties and horses as even stated in his book or articles? I do not know, but do you?
If he is so wealthy why would he travel around and pick cheap money from seminars?
What is the idea of writing the second book getting out soon?
Why would we believe descriptive methods from his book?

Do you have reason to believe that he is lying about his net worth and investment success?

What strategy? Did you get correctly his exit strategy and money management strategy from his book?
I have not attended the seminar and will not but read the book.

His strategies for money management and exit are reasonably clear I thought, he does not pretend that they are perfect, in particular he states that using his exit strategies can often mean losing out on maximum profits (but will protect from losses). Above all, he emphasises the need for the reader to continue research and provides a hefty bibliography, he does not pretend to know everything!

Keeping the real stock on the stock market is not the same as being long on the same stock through spread betting company.

This is the nub of the question, if I have money to invest long-term, what difference does it make if I decide to use FSB rather than a broker? (there are tax implications of course but obviously I can profit using either method and both are investing).

I came across a good article here on the original topic:

 

[Zoran]

Re: The difference between Investing and Gambling

>Shipman's strategy is long term (well perhaps medium term, if you insist >that positions must be 10,20 years to be long), holding positions for as >long as they are rising, reviewing them once per week.

If you are reviewing it every week that means you may conclude to exit or entry something else. This is far cry of long term investing.
That is not even the medium term investing I believe.
He is mentioning keeping the position for a couple of months or even years.
With his strategy described in the book it looks almost impossible.
Did you try to backtest his method in any trading SW?

Did you try to keep the NASDAQ, crude oil or my god some volatile stock with the spread betting company?
I did and believe me in a split of seconds (minutes or so) it can wipe your deposit (invested money) and if you are not careful to close the position you will need a multiple of deposit required to keep up the deposit + loss.

They are all talking about GOLD as it reached its peak, but what about the crude oil, NASDAQ and other picks. The whole link from his site vanished. Why?

>It's important to also note that he does not insist that the reader should >use FSB, he discusses the various options and recommends FSB as the >most efficient method to follow his investment strategy but you could just >as easily trade shares through a broker.

FSB is the least effective method to do anything.
His book is about trading commodities and not shares. He did not touch anything around the stock market in his book.
If you do not have the full trading strategy how you are going to make it in FSB or futures or any other derivative way.
Do you have a good strategy for the direct stock market that is not zero-sum game?

I assume you consider you can beat pros in futures market (FSB is worse derivative of futures).

>Do you have reason to believe that he is lying about his net worth and investment success?

I do not believe he made the money with the FSB, at least it is never shown or posted anywhere.
In a small amount of articles about him I only concluded he made the money in properties and horses if I remember clearly.

>His strategies for money management and exit are reasonably clear I thought, he does not pretend that they are perfect, in particular he states that using his exit strategies can often mean losing out on maximum profits (but will protect from losses). Above all, he emphasises the need for the reader to continue research and provides a hefty bibliography, he does not pretend to know everything!

So, would you tell me his exit strategy clearly please?
Tell me what is his money management strategy?
How much will you invest in his picks ,what percentage of your overall portfolio? 2%? 10%? How big loss you will bear?
Did he teach you about the risk for that hefty reward?

Believe me you have no clue in what you are going to invest as anything can happen in short future.
The only thing known is that over 100's of years the stock market is going up, the commodity prices are over long time following inflation, ....
Everything else is pure speculation on the short time and does not depend on you but rather big players, market players who has powerful systems and methods to extract money.

Do you believe you will make money over a long time (that you need if you want to leave something to your family) this way?

>This is the nub of the question, if I have money to invest long-term, what >difference does it make if I decide to use FSB rather than a broker? (there >are tax implications of course but obviously I can profit using either method and both are investing).

The FSB way is leveraged from 10-50 times. MEaning if you pick the stock and stock goes 4% down (very often can happen in 1 or 2 days dependant on particular stock volatility) you loose all your money.
Then, because you know the market will go up tomorrow you do not care, then the stock goes down again and you are in absolute loss.
When you will go out? You will believe in that stock?

So, you will profit FSB way even faster, but if things go south you are screwed as FSB broker will chase you to top-up the account with more and more money.

The difference is unbearable risk that you need to limit with the proper trading strategy that has an edge so you can consistently beat the market and make money.

In the direct stock market smart people recommend the diversified portfolio of passive indexed funds (or ETF's when funds not available). They should be with very low management fees (e.g. 0.1% up to maybe 0.5%).
Of course this is still science fiction management fee in Ireland but it will come soon.

 

[Duke of Marmalade]

Re: The difference between Investing and Gambling

Zoran

He was doing a course and we are awaiting his report.

Brendan

Sorry, Boss, I never got that course, not even a reply, I've gone off Delta Index.

I see Paddypower are in on the act which makes me real nervous that it is conventional spread betting after all. But close scrutiny suggests PP is similar to Delta. Only offers daily rollover on Irish shares but with a spread of only .25%. Also borrowing costs are only 2% over ECB, Delta is 3%. PP looks better, but anyway I would prefer quarterly futures, which PP doesn't do.

financial spread betting is the zero-sum game as somebody on the other side needs to loose if you are winning.
Keeping the real stock on the stock market is not the same as being long on the same stock through spread betting company.

Jayz, Z, you're even more of an ol' wind bag than me. But this clip suggests you ain't been paying attention. The spread betting company does hold a real economic interest in the stock on your behalf.

Bankrupt, that was a reasonably interesting link, even if it did make Z seem the model of brevity. Interesting it brings in the concept of speculation, as suggested by our leader. Anyway there was no final definitive answer. But I have come up with that answer here on AAM, in a previous post.

 

[Zoran]

>Jayz, Z, you're even more of an ol' wind bag than me. But this clip >suggests you ain't been paying attention. The spread betting company does >hold a real economic interest in the stock on your behalf.

Would you agree that spread betting is based on futures market?

If yes then it is zero-sum game or to say negative zero due to transaction cast paid to the spread bettor.
http://www.investopedia.com/terms/z/zero-sumgame.asp

Please explain where the spread betting company covers your position with the stocks and how?

What is the price of the gold or NASDAQ based on?
Is it not maybe futures market + potential spread betting company tweaking?

 

[Duke of Marmalade]

The futures market is not a zero sum game for those who are long. The futures price of a share is its current price plus the risk free rate, which is less than the expected future price. That's the paradox.

There is only one real market - the primary market - it delivers positive returns. All derivative markets have to relate back to that primary market and deliver similar returns for those who are long.

Let's try one more time (this is long folks, really only suitable for Z)

We mostly agree that, all things equal, shares grow at more than the risk free rate - because capital adds value. As time moves on the price goes up.

If you take a long position, no matter what the vehicle, you benefit from that added value drift.

The "shorter" at the other end of that position is losing that drift. She either has a "naked" short position in which case she is gambling, or it is hedged possibly against direct holdings.

Delta says they automatically hedge, PP don't mention that (they are mainly targetting Sun readers who would wonder what gardening has to do with it).

This is completely different from a spread bet on, say, the number of US Gold Medals in this summer's Olympics. As time goes by, all things being equal, the prices will stay the same. There is no basis for expecting an added value drift because the underlying entity is not adding economic value.

When it comes to gold or commodities I think these are closer to Olympic Gold Medals than shares - no inherent reason to expect an economic added value drift (except inflation).

 

[Duke of Marmalade]

Downloaded PaddyPower T&C.

Their headline product info for Irish shares is that they charge only .25% spread and ECB+2% for the leverage.

Small print reveals this not to be the whole story.

The .25% is not a spread at all - it is a charge in addition to the quoted spread. In other words, using their example, they might quote Ryanair at 6.00/6.06. You buy at 6.06, sell at 6.00 and then get levied .25% - that's a 1.25% spread in my book. For trades with virtual value of over 30K they seem to let you settle at mid market so the spread for big bets is .75%.

However, I am p...d off at the attempt to pull the wool over my eyes (unless I have misunderstood the T&C). The Delta stuff seems much more above board in its presentation, and seems after all to be cheaper than PP, nowithstanding the leverage costs being ECB+3%.

 

[Zoran]

The futures market is not a zero sum game for those who are long. The futures price of a share is its current price plus the risk free rate, which is less than the expected future price. That's the paradox.

I will just quote Rick Ferri, one of the book authors I admire:

*****************
Commodities have an expected real return (inflation adjusted) of zero percent. Although an investment in commodities may reduce portfolio volatility, adding commodities also reduces portfolio return. And as the old Wall Street saying goes, 'You can't eat risk adjusted returns'.

Commodities are not ongoing entities and they are not securities. The do not earn money or pay interest. For example, gold and oil earn no revenue and pay no interest or dividends. They just sit there, costing you money while you hope for them to go up in value.

IMO, stick with securities that earn interest, pay dividends from earnings, or have the potential to pay dividends from earnings.

If you are an active trader, please disregard all of the above. Commodities are a trading vehicle, not an long-term investment.
**********************

I will just mention that at the moment there is the fight between academics and book writers around something called CCF that are actually fully-collaterilized commodity futures.
They are not leveraged at all so the name fully-collaterilized.

Just to mention that is nothing even near what you are investing in as your investment is in 3 commodity chosen by one of the simplest technical trading method for mid term trading (not to say short trading).

One thread about the fight of two respectful book writers on the "proper investment long-term discussion related forum" around CCF is here:



Two book writers I admire that fight in this thread and you can find it on google easy are Rick Ferri and Larry Swedroe.

If you want more academic work on the commodity futures and other topics you can find it here: http://www.ssrn.com/

Do not forget that academics are writing and working for glory and Nobel Prize while many others just for money.

If you take a long position, no matter what the vehicle, you benefit from that added value drift.

You picked 3 commodities based on the medium term simple technical trading method that can be easy backtested in almost any trading SW for validity (if we have the exit strategy clear due to Shipman's 4 methods descriptive exits).

You leverage the positions 10x.
Even without the leverage you are just market timing your entries medium term and that is trading.
You are saying I will look every week am I going to exit or not.
You probably never read books around futures from Schwager and others to see the complexity of beating the futures through the market timing and trading.

Did you calculate the costs of spread betting due to rolling the position and difference between near future contracts?

OK, let me give you one link just to point you out what computer power out there is against you. That computer power is evaluating thousands of technical trading methods non-stop to get valid academic work on the risk/returns from futures, stock market and everything known in finances.
This is just one article to point you out that they tested over 7000 technical rules on 15 commodities:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1003064

Did you try the simple moving average back tests on commodities to validate what Shipman's is proposing worked in the past?

Of course this does not mean if it works in the past will work in the future but at least if it did not work in the past will probably not in the future.

 

[Zoran]

Re: The difference between Investing and Gambling

This is the nub of the question, if I have money to invest long-term, what difference does it make if I decide to use FSB rather than a broker? (there are tax implications of course but obviously I can profit using either method and both are investing).

Sorry bankrupt for coming back to your sentence.

Did you ever calculated the cost of owning the stock through the spread betting company?

So you should include the spread you are paying on, the conversion rate if it is not owned in euro back and fort, what you are paying for rolling positions, discrepancy prices between real futures price and spread betting house price and probably things I forget.

If I am keeping something really long term CGT is not kicking off till the end while I am compounding my money tax free.

Spread betting companies traded CGT rule that small number of pros in this zero-sum game are applying to attract small individuals to loose money.
I believe that spread betting is the great invention after pure gambling as it is attracting the smartest people.

It is a challenge but the wrong one and with the wrong ending in loosing hard earned money.

 

[Duke of Marmalade]

Z, most of your stuff is way over my head.

I'm a simple guy. I'll try one more tack. In financial spread betting, as with futures, you are not actually trying to guess the future price. Maybe that's the confusion. If a bookie were to lay odds on a future price - even money higher or lower, he would pick a higher price than in the spread betting and then we would of course have straight gamble.

Instead spread betting is in effect a today purchase settled in the future. So the price quoted is today's cash price plus interest, even though the market in general expects that the actual price in the future, when settlement takes place, will be higher than that.

The market expects that you will "win" on a long futures position.

That's why Delta hedges. Maybe their counterparty hedges also and so on, until ultimately someone is short, either as a gamble or as a hedge against a primary holding.

Yes, Futures/spread betting indeed any derivative market are in themselves a zero sum game (ignoring costs) but the bias is for the longs to win and the shorts to lose.

 

[Zoran]

Z, most of your stuff is way over my head.

I'm a simple guy. I'll try one more tack. In financial spread betting, as with futures, you are not actually trying to guess the future price. Maybe that's the confusion. If a bookie were to lay odds on a future price - even money higher or lower, he would pick a higher price than in the spread betting and then we would of course have straight gamble.

Sorry about the complexity.
You should be simple and invested in simple things that are making you money for a sure on the long term.
I am sure that this money is not something you will spend very soon.

Playing with futures (and options) here through spread betting is the most complex in the financial world where pros are dominating and market makers are making money while small individual investors are loosing money.

Just imagine what big banks, hedge funds and others having in their arsenal: powerful computers (some of them have 1000's of big servers to process information instantly, direct market exposure through the futures market, smart people who knows about investments, a lot of information sources we can only dream of, ...

Have you seen how a lot of hedge funds died or closed due to the fierce fighting between pros.
We are here just the collateral damage

Just simple to tell that taking the single positions in stock and commodity are very risky as you have no clue what will happen with the price.
When you add the leverage you are actually gearing your faith and taking higher risk and usually due to the weak trading strategy not lasting too long.

Smart people should not do that but rather diversified into smart passively indexed funds or ETF's dependant what is available.
Why is that is due to the facts that academics proved that active trading is worse then passive long term buy&hold.
The only thing that is for a sure over the few hundredth years history is that stock market is returning value above the inflation.
The commodity market is returning 0% after inflation (somewhere actually stating it is -1%).

What you are doing is market timing with the simplest technical method from 150 pages book with more pages about what is corn and for what is used. As I am thinking more I am seeing the book more and more funny.

You are trying your luck the hardest possible way.
In the US spread betting is prohibited by law.
Also to enter the futures or options market you will hardly be allowed without substantial experience and money behind you.

Instead spread betting is in effect a today purchase settled in the future. So the price quoted is today's cash price plus interest, even though the market in general expects that the actual price in the future, when settlement takes place, will be higher than that.

The market expects that you will "win" on a long futures position.

That's why Delta hedges. Maybe their counterparty hedges also and so on, until ultimately someone is short, either as a gamble or as a hedge against a primary holding.

Yes, Futures/spread betting indeed any derivative market are in themselves a zero sum game (ignoring costs) but the bias is for the longs to win and the shorts to lose.

The problem with taking the single positions, e.g. gold or crude oil are that nobody has a clue but more a guess where the price is heading.

You said the long term it should go up.
OK, lets say you are correct and I am confident that gold will be up in 50 years and probably cover only for the inflation.
If you say to me gold or anything else will be up next 2 years then you know something nobody on this world probably know.
Imagine how much money hedge funds will make from such knowledge.

It is said that all available information is already calculated into the market price and that is called Efficient Market Theory.

You should be aware that if there are not people who goes short then you will not be able to go long. You need to have the counterpart.

Spread betting companies will make the difference in these taking short and long and see do they have the knowledge (again powerful computers, smart people and other things we do not have) and hedge it in the futures market or just do nothing as they know people are wrong.
They will even offset the difference from other things. E.g. they know S&P 500 is highly correlated to NASDAQ so if they have more shorting in NASDAQ and more long on S&P 500 they may do nothing.
They will always earn on the spread, monetary conversion, rolling, ....

Take your profit out or limit the profit with the stop losses and continue your positions to maybe earn more.

But my advice is that you entered no-winning game taking your luck. Luck is usually not lasting long.

Wish you all the best.

 

[Zoran]

Whether or not spread betting is gambling or not is probably a philosophical question with a philosphical answer.

Also Brendan says "Short term holding of shares is gambling."
However, afaik from the point of view of tax and law etc., they are taxed differently.

Brendan is totally correct as academic work and proper book writers proved time over time.

Let's be pragmatic and say it this way:

Gambling is everything that is loosing your money over the time period you want your money to grow.

It does not mater how it is called at all from my perspective.

The main issue is to make the money over the long period of time to have it for pension and hopefully to help your children out.
Or to have money for the house deposit or to buy MAn U yearly ticket.

Spread betting is gambling for me as I cannot make the money over the period of time I want with certainty.
Do you?

Do not forget that in spread betting (like in futures and options trading) small number of people are taking excessive amount of money while majority of people are loosing money. And to say in 99% of cases these people are pros and not you.

If you cannot at least preserve your hardly earned money then it is gambling for me.
OK, somebody may say we had periods in our history when you could not preserve the money (e.g. big recessions).
But that is why the long term investment is the only way you are very certain (low risk) you will earn money and not loose it.

Short term trading is speculating and money can be earned with the proper trading strategy.
The problem is that the odds are not in your favor against all that computer and intelectual power pros posses (big banks, hedge funds, ...).
They are fighting against each other so just listen how big names like Merril or City hedge funds get bust.
And hey they have Nobel Prize winners in this field and all information available, 1000's of servers.

What do you have on the other side?
We read a few books or a lot of books, maybe attend some investment course and hey we can fight these pros.

Why the hell these stockbrokers or spread betting companies are not compiling the result available for public how we are doing there?

 

[Duke of Marmalade]

Z, let's try and agree a few points.

FSB, CFDs, Futures, Geared Direct Trading (GDT) are all the same economic transaction, they only differ in their costs and tax. The first three, because they are derivatives (not sure what CFDs are), are cheaper than GDT in the short term (esp. because no stamp) but because they have to be constantly rolled over GDT will be cheaper in the long run. Delta suggests 4 years as the equilibrium point between FSB and GDT.

We agree (I think) that short positions in the stockmarket are gambling whilst long term holds are investment. What is the cut off point?

You make a big play about the pros having huge computer power and wall to wall Nobel Prize winners. The fact is that FSB prices are determined absolutely from the current cash market - there is no fancy computation or projection to come up with a FSB price - it is the current price plus interest.

The Nobel Prize winners have as much of a clue about whether the current price is right or wrong as the average chimpanzee.

Possibly the computer power and advantages of scale allow them to spot very short term anomalies and exploit them - but I would say in relative terms that is small, maybe 10bp per quarter. But the "positive drift" I referred to earlier for long equity positions is possibly 100 bp per quarter.

I repeat, long FSB equity positions are biased in favour of the punter even after allowing for spread costs. But the volatility of actual outcomes swamps this small bias and makes short term FSB (CFD, Futures, GDT) positions gambling IMHO.