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Hedging strategy with free money


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Hedging strategy with free money

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  #1 (permalink)
Cardiff, South Wales
 
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I've had this idea for a while and wanted to see if anyone else had tried it or has some ideas on how I can improve it.

The idea is to use the forex deposit bonus as free money and to try to trade that money into a legitimate account.

So setup one spreadbet account with 30,000
Setup another with 1000 with a 650% bonus (these bonuses are available) - it now has 7500

Now trade and hedge every bet using the 'bonus' money. You effectively have risk free trades since you're only losing 'bonus' money. Trade until the 7500 has moved to the 30,000 account, then start again.

Am I missing something? What would be the most efficient way to 'move' the money?

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  #2 (permalink)
Legendary Capt. Johnny Jameson
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rossco View Post
I've had this idea for a while and wanted to see if anyone else had tried it or has some ideas on how I can improve it.

The idea is to use the forex deposit bonus as free money and to try to trade that money into a legitimate account.

So setup one spreadbet account with 30,000
Setup another with 1000 with a 650% bonus (these bonuses are available) - it now has 7500

Now trade and hedge every bet using the 'bonus' money. You effectively have risk free trades since you're only losing 'bonus' money. Trade until the 7500 has moved to the 30,000 account, then start again.

Am I missing something? What would be the most efficient way to 'move' the money?

@rosscoe your idea and intentions sound legit however, you have to ask yourself if you are profitable in trading?...and if so can you sustain drawdowns for such a small account? I am not judging nor criticizing but I have to ask about your experience level since you refer to trading as 'bets.' I am not qualified as a money manager or intend to give advice but if it was my money, I would look at other investment options for your risk off cash.

I wish you nothing but the best in your endeavor!...and please just sayin'...I always listen to everyone, but just don't necessarily take their advice.

cheers!

Johnny

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  #3 (permalink)
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rossco View Post
The idea is to use the forex deposit bonus as free money and to try to trade that money into a legitimate account.


The theory is good.

In practice, unfortunately, there are several reasons why it's likely to be impracticable.

The smallprint terms and conditions of those "bonuses" makes it close to impossible ever actually to withdraw them, i.e. to make a profit from it: the kind of turnover parameters one typically needs to fulfil for fund-withdrawal from the bonus money (with the "broker" making a profit from every trade undertaken) hugely increase the time taken and reduce the profit potential to the extent that they can offer this, knowing they'll almost never (or maybe just "never") actually have to pay out.

For this and other reasons, I think it's likely to boil down to a very high workload for a very small return, to the extent that you might manage to make it work at all. So it tends to be a really poor use of time and effort.

Whether spreadbetting or not, I think it's a good idea, in principle, to stay away from "brokers" (they're always counterparty marketmakers, really, aren't they?) who are specifically trying to attract customers they know - from their longstanding marketing experience and research - they can attract by bonus offers of the kind you mention. Collectively, those customers have something approximating a gambling mentality and the "brokers" know - because they're actually counterparties - that they're very profitable ones to attract.

Please appreciate that I'm not suggesting that you're in that group, yourself: my point is simply that "brokers" aiming specifically to attract that group of customers might actually be the ones for you to avoid, because of what their marketing tells you about their own business model, and the resultant longer-term inferences regarding "what type of broker they are".

For me, anyway, whenever I've been looking at opening an account anywhere, "eye-catching bonus offers" have always been a pretty big red flag: if those are the customers they want, I'm giving them a wide berth.

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  #4 (permalink)
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Tymbeline View Post
The theory is good.

In practice, unfortunately, there are several reasons why it's likely to be impracticable.

The smallprint terms and conditions of those "bonuses" makes it close to impossible ever actually to withdraw them, i.e. to make a profit from it: the kind of turnover parameters one typically needs to fulfil for fund-withdrawal from the bonus money (with the "broker" making a profit from every trade undertaken) hugely increase the time taken and reduce the profit potential to the extent that they can offer this, knowing they'll almost never (or maybe just "never") actually have to pay out.

For this and other reasons, I think it's likely to boil down to a very high workload for a very small return, to the extent that you might manage to make it work at all. So it tends to be a really poor use of time and effort.

Whether spreadbetting or not, I think it's a good idea, in principle, to stay away from "brokers" (they're always counterparty marketmakers, really, aren't they?) who are specifically trying to attract customers they know - from their longstanding marketing experience and research - they can attract by bonus offers of the kind you mention. Collectively, those customers have something approximating a gambling mentality and the "brokers" know - because they're actually counterparties - that they're very profitable ones to attract.

Please appreciate that I'm not suggesting that you're in that group, yourself: my point is simply that "brokers" aiming specifically to attract that group of customers might actually be the ones for you to avoid, because of what their marketing tells you about their own business model, and the resultant longer-term inferences regarding "what type of broker they are".

For me, anyway, whenever I've been looking at opening an account anywhere, "eye-catching bonus offers" have always been a pretty big red flag: if those are the customers they want, I'm giving them a wide berth.

Well-said.

Another way to put this is there is no actual free money being given away, anywhere. Why would anyone do that?

It doesn't matter what it may look like. No one is going to give anything of value away. I would simply assume that they know very well that they will not lose, which pretty much means that you will, and be guided accordingly.

Bob.

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  #5 (permalink)
Legendary Pratik_4Clover
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In 2017, my broker told me it was okay to sell one more lot of CE to eat premium using my portfolio as a "leverage" since I didn't have that much free cash lying around in the account to do the "Extra-leg" (I had already shorted 1 PE and 1 CE with cash lying around)

That ended in my loss of 70% of account, including portfolio (which was not supposed to happen)

In your case I don't know enough details to be on point and critical, but I can surely echo above 3 very experienced and intelligent people in their opinion. They are trying to say something, but are being nice.

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  #6 (permalink)
Kiev, Ukraine
 
 
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Quoting 
a 650% bonus


Quoting 
Am I missing something?

You are not missing something if you trying to build your "trade" career with some sort of gambling and scam games. There is no a legit broker that will give you a 650% bonus.

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  #7 (permalink)
Cardiff, South Wales
 
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Thank you very much for your replies and especially your genuine concern for me/my account and the risks to do with my plan and dealing with these 'brokers'. I completely share your opinion about the brokers themselves, the gambling mentality and that they would not hand over any winnings gained from the bonus. My plan though is to actually lose the bonus (thereby allowing them to keep my deposit) and hedge it into a legitimate brokers account.

I've been trading for some time but only up to around break-even. I run a small business and have a young family so struggled to find the time to dedicate through the losing years. I stumbled across matched-betting on horses, football etc, where you take both sides of the bet and profit a small amount on the difference.

These profits were tiny (2% perhaps) and were risky, if one broker pulled the bet you were stuck with one side. The profitable part is when a broker gives you a welcome bonus of say 300 which you could lose but not withdraw.

You would then take both sides of that bet with a 2nd broker until you 'lost' the bet with the bonus provider but won it with the 2nd broker, making it legitimate so that you could withdraw it.

I thought then about all the forex brokers who provide a bonus - I found one recently who give a 650% tradable bonus.

I've read the full T&Cs - there is basically no way you can withdraw any of the bonus money, or even profits from the bonus mostly, and you have a month before the bonus is withdrawn. But you can lose the whole bonus in that time, and trade with it - why wouldn't you be allowed to do this? It's in the brokers interest, they get to keep your cash. You can do this as many times as you like. There are even bigger bonuses available the more money you deposit (surprise, surprise).

So the idea is to hedge my trades using the 'bonus' account. I'll put $1000 into it, now making it $7500 and I want to 'lose' this money into a reputable spread betting account. It doesn't even matter if I lose the money 3 to 1 (lose $300 for every $100 I make) - I'll still make money.

My question then becomes what is the easiest way to do this? If I take random trades I'll lose a huge proportion to the spread. At the same time I don't want to win money into the bonus account.

This is where I'm a bit stuck - if there's anything you can think of I would appreciate it.

It's probably still a bad idea

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