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I’ve tried quite a few SB companies in UK and one was really bad. I closed that account. Some others are ok - not perfect, but nothing very bad.
I was looking for something better and must say I was a bit misled by some other traders’ claims about direct access brokers imo. Maybe it’s my mistake (misunderstanding), but somehow I thought if I chose a decent direct access broker I would all of a sudden improve my profitability (no spreads - buying bid and selling offer, no intervention in between etc.)
It seems as if some of them are not direct access brokers. Some of them are, but try to catch you with all sort of different charges ( commissions, software charges, currency conversions, funds withdrawals, fund deposits etc.) Some of them have big slips for whatever reasons. If I understood correctly, most of them have clause where they can change margin requirements at will (of course finding some excuse - like market is falling too much or whatever). I wouldn’t be very happy being stopped out of my position for a loss (and also charged for it) because of a sudden changes in margin requirements.
There are some that make funds withdrawals difficult and slow. With some of them I don’t feel comfortable transferring any money to them really (in UK it is different - there is consumer protection with regulated companies)
Quite a few of them have poor customer service.
Because of all this, I find it difficult to justify opening an account with them in order to reduce my spread from 1 point to 0.5 (it’s even questionable if they can execute it fast enough to take advantage of it). So in order to get a questionable 0.5 point reduction I need to have more than 11,000 euros on my account instead of 500 pounds to trade only one contract without ability to scale down, transfer a big amount of money abroad thus suffering all sort of different charges (exchange rate, bank charges etc.) and also risking it (no protection from UK)
On top of this I need to pay for data feed, charting software, platform , commissions, cancelled orders, brokers exchange rates when profit is in different currency, withdrawals, put up with poor customer service etc.
I know SB companies are not perfect, but the alternative looks really bad from what I’ve researched so far
Last edited by DAX trader; January 13th, 2014 at 05:50 PM.
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The spreads and the given price at time is ONLY showed by the sb company.
If you are playing at the real markets - pricing can be followed on every data-feed live or historically.
Looking only at your sb provider - things may be distorted. In this case having a spread of 1 or 0.5
is NOT evident here.
That's what I fail to understand GFIs1 - maybe I need to study some more?
The way I see it - if I wanted to buy up to 8 contracts (based on attached order book), I can only do so at 9444.50 (using market order). If I wanted to sell up to 3 contracts, I can only sell at 9443.50 at that moment.
So difference is 1 point (same as SB prices). How can I buy/sell at different price at that moment
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Last edited by DAX trader; January 13th, 2014 at 05:13 PM.
To make it more precise
About spreads: SB companies are widening spreads around 15 minutes before and 15 minutes after a major event.
These spreads can go up 5 to 15 points in the Dax. So if you are in a position and want to get out ahead this event you
need to be very cautious to do it early enough to not lose many points of your trade.
Not so if you trade the future - you might get out seconds before the event and spreads are then still 0,5 to 1 point.
About margins: We should not compare apples with pears here. You are showing a 8 Dax future trade in the order book
which means given today's margin one initial margin of 11'143 for the first car (with Interactive Brokers) plus 7 cars
at 8'915. Totally we need a margin of 73'548 for this intended trade. Given a max of 1% putting at risk means a
base of funds of 7,3 million for this deal. I am not (yet) trading in this category.
Another question about the margins and possibility in a SB company if you would try to invest the same 73'500 in one trade with them... I need some more input here from your part.
I have found that trading the daily Dax cash market quotes (Germany 30 on IG, Germany 30 DFT on Finspreads) gives a one point spread throughout the day with no noticeable manipulation and fast fills. I stay away from major events or overnight holds in the futures.
There will always be some rotten companies but many of the good ones get a bad reputation simply because we are bad traders in need of an excuse (works for me.)
SB companies I use have 1 point fixed spread on DAX irrelevant of major events, news etc. The biggest stake I used was £50 per point which is a bit bigger than 2 contracts. I haven’t experienced problems with the entries.
The minimum stake starts from £1 per point with most of them. One of them offers 0.20% margin for DAX for stake up to £914 per point. 0.20% is roughly less than £400 margin required for one contract. Smaller companies limit the max stake up to £300 per point. Even with that limit one can trade 9 contracts.
You always buy at Ask and sell at Bid. That’s the only charge you are supposed to pay for.
Last edited by DAX trader; January 15th, 2014 at 08:36 AM.
Looking at a initial margin of £400 and a gain/loss of £914 per point - this leverage looks interstellar
Then you say you can trade a maximum of 9 contracts. With your given margin this would be 9x£400 or
a maximum investment of £3600 with that broker. (My attempt was what do you do with a total investment
of €73'000?)
Finally if you can get with a SB investment of £3'600 a gain of 9x£914 = £8226 per point the BIG question is:
WHY are you searching for a broker that handles futures and gives you only €25 per point?
You may have misunderstood me GFIs1 and jumped to all sort of different conclusions in no time
Maybe I didn’t explain properly - I trade it every day, so wrongly assume that people know about it.
I’ll try to explain calculations step by step:
0.2 % margin requirement is valid for the stake of up to 914 pounds per point (that is 1099 euros per point or roughly 44 FDAX contracts)
So if you trade with them anything up to 44 FDAX contracts (equivalent), margin requirement is 0.2% of the value traded (the way they calculate it).
For example if you trade 1 DAX contract you have to have on your account 403.27 pounds based on the current DAX value of 9700.
Explanation:
Eurex: 1 point change in 1 FDAX contract = 25 euros ( 20.75 pounds)
SB company:
1 pound per point = 9700 pounds (if DAX is 9700)
Margin requirement for 1 pound per point = 0.2% of 9700 pounds = 19.4 pounds
Margin requirement for 20.75 pounds per point = 20.75 x 19.4 = 402.55 pounds
So in order to trade equivalent of 1 FDAX contract, you need 402.55 pounds on your account.
The above example is if you traded 20.75 pounds per point.
Maximum you can trade and have 0.2% margin requirement is 914 pounds per point (with that particular SB company). That is roughly equivalent to 44 contracts.
If you traded equivalent of 44 contracts, you would need to have more than 17,712 pounds on your account.
I hope this would help you when comparing to other brokers (if you are after a good margin rate)
Last edited by DAX trader; January 15th, 2014 at 11:52 AM.
1 DAX contract with some futures' brokers = more than 11000 euros
equivalent from SB company = 400 pounds ( 482 euros)
22 x 482 = 10604
So you can trade equivalent of more than 22 contracts with SB company if you have 11000 euros on your account.
With futures' broker you can trade only 1 if you have more than 11000 euros. Also if it moves a bit like today (assuming you were trying to catch the top) and you don't have enough money and still hoping it may come back from all time high, they will stop you from that single contract as soon as it goes 1 cent above the requested level and charge you for that
PS Don't forget charges for changing euros into dollars. Also withdrawal, deposit, data, charts and platform fees. There are commissions to pay as well. There are probably some other regular charges like maintenance etc.
Last edited by DAX trader; January 15th, 2014 at 01:06 PM.
Reason: error
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At least that’s my impression (I’ve never used any other broker apart from SBs and may be wrong about it). Maybe they try to help their clients and let them stay in trades, or call them and ask for some extra funds and wait for few days for the money to arrive
