How many spread betting accounts do you need?

For professional purposes (i.e. writing about them) I have at one time or another held spread betting accounts with most of the spread betting companies and their “white label partners”. By “white label partners” I mean companies like Barclays Stockbrokers who sit on the City Index spread betting platform and Tradefair who sit on the London Capital Group (i.e. Capital Spreads) platform. Actually, I was generally attracted to the “white label” variants rather than the spread betting companies home brands, usually because the white labels offered essentially the same platform but with some added incentive like a sign-up bonus.

Now that I’ve tried all the platforms over the course of a few years, and deduced which ones suit me best, is time for me to rationalise by ditching the ones that no longer suit my purposes. I’ll tell you how I’m going to set about cutting out the ‘dead wood’ accounts, but not until I’ve told you why I (and you) still need more than one spread betting account.

Why you need more than one spread betting account

You’ve been using the same spread betting account for a long time, but how do you know it’s the best one for your needs? I thought that the first spread betting account I ever used was great, as compared with the regular stockbroker share dealing account I had been used to. But now I wouldn’t touch it with a barge pole. Some people are wed to their spread betting provider without having first played the field. While I’m not proposing that you get too promiscuous and try every one of them, like I have, you might like to try one or two different accounts on different platforms. No divorce or formal separation from your existing account provider is required, and your new provider could sign you up in a matter of minutes. To help guide your search, you might consider my Long-Term SpreadBettor’s Wish List and my reviews of the (Android) mobile trading apps provided by IG Index, Capital Spreads and City Index.

Not all spread betting accounts are created equal, and you might find that the one which offers the best mobile trading app is not the one that offers the specific market that you wish to trade. Or the one that offers the market you wish to trade mandates a minimum stake size that is beyond your budget. Or the one that offers both has a trading web site that is always crashing or losing its connection. If you practice more than one trading style, you might find that the best account for your longer-term position trading is not the best account for your short term day trading. You might simply wish to split your money three ways so as to reduce the counter-party risk of your spread betting company going the way of MF Global.

These are the reasons why I, and maybe you too, need three spread betting accounts.

The chosen two

If you’ve read my other articles, you will already know that my chosen three are IG Index and Capital Spreads. Note that they’re all platform providers rather than white label partners, and on this basis I might (only might) retain the services of City Index as another major platform provider.

Rationalistion

I’ve already rationalised my choices of spread betting providers, and why I need more than one of them. Now it’s time for me to rationalise my superfluous accounts, each of which is holding at least a few hundred pounds of my money.

Since I tend to practice longer-term position trading, some of the money in some of these accounts is tied up in positions that are either profitable (so I want to continue running the profit) or showing a ‘paper loss’ that will “surely” turn to profit just after I have cut the loss. The second point is meant to be a little tongue-in-cheek, but it’s how many spread bettors feel about their losing positions.

So the plan is to phase out these accounts gradually by establishing no new positions while banking the proceeds from existing positions when they “stop out” of their own accord. Some of the accounts will be net losers — I will get less back than I paid in — but there is no point trying to “get even” with them by trading them to death. They may well have earned their keep in another way, by informing me where not to trade. It’s just another set of course fees at the “Trading School of Hard Knocks”. Some of the accounts will be net winners, and I’m pleased about that.

Winding down the superfluous accounts should take very little effort, because there’s nothing really to do except wait for all the open positions to turn themselves into cash. I’m might even apply some trailing stop orders (where possible) to eke out a little more last minute profit from each open position before it stops out… without me having to lift a finger. It’s good thing that the winding down will require little effort, because it will help me to…

Keep and eye on the main prize

As a trading writer I face a continual trade-off between keeping an eye on the main prize (trading success) and documenting my trades, strategies and the offerings of the various spread betting providers — both good and bad.

Some investment experts suggest that you should hold no more than twenty positions, because any more would be impossible to manage. This advice may have been applicable in the 1950s — when much of it was written, or from when much of it is regurgitated — but in these modern technological days I see no problem in maintaining a much larger list of positions. Providing they are not distributed across ten or more separate accounts!

While I think that more than one spread betting account is desirable, if not essential, for me the magic number is now “3” (or maybe “4”). Reducing my accounts to this number should help me to keep an eye on the main prize.

Tony Loton is a private trader, and author of the book “Stop Orders” published by Harriman House.