When Working Orders Eat Your Cash

Reading through my previous articles should leave you in no doubt that IG Index is one of my favourite (if not my absolute favourite) spread betting account providers. But I’ve discovered something I don’t like, which is the way that working orders eat my cash. Let me explain.

How Most Companies Calculate Your Available Cash

When you set up opening orders on most spread betting platforms, they have no impact at all on the Trading Resources figure that represents how much spare cash you have available to risk on future positions. If the order has not yet executed, you haven’t yet committed to the risk, and therefore you can do what you like with your spare cash in the meantime. The only downside is that if you deplete your trading resources , you may find that your opening orders fail to execute when the time comes to execute them – because you can no longer afford those risks that you thought you could afford when placing the orders.

How IG Index Calculates Your Available Cash

It’s all very different with IG Index. When you set up an opening order — which is one that will appear in your Working Orders list — it has an immediate impact on your Available to Deal funds, as though you have assumed the risk when placing the order rather than when it actually executes. And I can prove this is the case, but in reverse:

Freeing Up Trading Funds

In an IG Index account that I hold, I had depleted my Available to Deal funds to just £15 — or so you may have thought. So I set about deleting the fourteen Working Orders that I had put in place for future positions, and this caused my Available to Deal funds to jump immediately right up to almost £140. It’s a lot of latent purchasing power that was otherwise hidden from view.

Short-Term Pain For Long-Term Gain

I would have liked to have picked up some bargains — automatically — when those working orders eventually executed, but some of them had no hope of executing in the near future; like my order to buy Xchanging at 64 (latest price 106) or my order to buy Creston at 27 (latest price > 60). Rather than using up my trading resources on pipe-dream potential purchases, I’d be better off putting triggers on those stocks to alert me when they become attractive, and meanwhile deploying my available funds on more immediate opportunities.

In a nutshell: by placing opening / working orders with IG Index you could be taking some short-term pain (on your available balance) for some hypothetical long-term gain (if the orders ever execute). All because working orders eat your cash.

Still My Favourite?

For various reasons that I have mentioned before, including the wide range of markets and good mobile trading platform, IG Index is still my favourite spread betting company — but now by the skin of its teeth.

Tony Loton is a private trader, and author of the book “Position Trading” (Second Edition) published by LOTONtech.