Technical Analysis 2 – Spread Betting demo account
Today we’re going to look at opening a spread betting demo account.
Spread Betting demo account
As part of our experiment in learning technical analysis (TA), we’re going to need a spread betting account. And because we’re starting our education from the beginning, things are unlikely to go smoothly right from the start.
That means we need a demo account, where we can lose play money before we start risking the real thing.
Before we look for a demo account, lets look at some of the key features of spread betting:
- wide range of instruments traded (stocks, indices, stock sectors, FX, commodities, interest rates) – this is a key attraction for us in the context of TA
- ability to go short easily – another key feature for us
- no stamp duty
- no commissions – charges are the spread and the overnight interest charge
- no tax on profits – but losses can’t be offset against other capital gains
- no betting tax on financial spread bets
- leverage / margin / gearing – a double-edged sword that will need to be taken into account when looking at trade sizes and risk management; the key thing to remember is that you can lose more than the initial money that you bet
- stop losses and guaranteed stop losses to deal with price ‘gapping’ – essential if I don’t want to be glued to a trading screen all day; automatic trailing stops would be ideal
- costs for keeping bets open overnight – not as large as in the past, due to the current low interest rate environment
- expiry dates for bets, from daily upwards to several months – longer expiry times have wider spreads
- rollovers from expiring bets into the next period
- no dividends or investor rights when betting on shares
I would ideally like to use one of the existing brokers I use for stock ISAs and SIPPs, but I have a feeling that might not be possible.
Spread betting attracts a different crowd and these may not be the people who stock and fund trading platforms are after.
For what it’s worth, the four platforms I use at the moment are:1
- AJ Bell YouInvest
- no sign of a spread betting account here
- nothing on the Fidelity site
- nothing here either
- Hargreaves Lansdown
- HL do offer spread bets and CFDs at HL Markets, but this is just a re-badged version of IG, and I can’t see any advantage of not going directly to the provider
So it appears that the spread betting account will be with a new provider.
Finding objective comparisons of UK spread betting firms is not easy. Most of the results returned by Google look “sponsored” to some extent, and it doesn’t seem to be a thing that the UK financial blogs cover.
Money Week has a table which compares the features of 20 spread betting companies. Fourteen of these have demo accounts, so we need to do some more filtering.
Sadly, IG index – the market leader, and the winner of the 2015 MoneyWeek reader’s choice award – is listed as one of the companies that doesn’t offer a demo account.
- But the MoneyWeek table is wrong – it turns out that IG does offer a demo account (see below)
Unfortunately the MoneyWeek table doesn’t make filtering easy. It lists the following attributes:
- minimum account size – all are £1,000 or less, so this is no help
- whether the firm offers binary betting – not something that we are interested in
- two don’t offer 24-hour trading, so now we are down to 12 firms
- minimum trade size – all are between 10p and £3, so this doesn’t seem to help
- minimum spread size – obviously smaller is better, but all are 1 pip or less
- margin percentage, which seems to vary widely, both between and within firms
One feature that I would like is a mobile app, but the table doesn’t mention this.
All-in-all, it’s not much use to the novice trader trying to choose.
So to shorten the list a little, I’ll just take forward the firms that I’ve heard of. In order of attraction these are:
- City Index
- Interactive Investor
So the next step is to try to open demo accounts with these (I’ll probably need two, so that I can compare features).
The IG index demo account is located quite a way down their homepage (I’ve edited out the stuff in-between).
The demo account features look good, particularly the mobile app.
Unfortunately, opening a demo account requires providing a phone number, as well as permission for IG to contact you by phone.
I don’t want to be hassled about opening a real betting account before I’m ready to trade with a fake one, so I’ll wait until I’m closer to betting to open the demo account.
Maybe one of the other firms won’t require a phone number, though for all I know it’s a legal requirement.
The City Index home page features the demo account prominently (on the right, in green). Less re-assuring are the focus on trading aspirations and the awards won for CFDs, but conspicuously not for spread bets.
The first snag is that the demo account is time limited. We only have access for 2 weeks, and we won’t have got very far with our TA training by then.
I also question how much use a 2-week account would be to anyone. Fine for comparing features between betting platforms, but not long enough to learn much about betting.
To me it’s another indicator that the betting companies focus on day trading rather than the longer-term strategies we will be looking at.
But if all that we needed to provide for a demo account was an email address, it would be possible to have multiple demos one after the other, and we could live with this.
Unfortunately, a mobile phone number is once again essential, along with the worrying notice that they plan to contact me by phone, presumably to give me the hard sell.
The Interactive Investor demo account is less prominent. You have to navigate to the site’s spread betting page, and even then it’s just a button on the bottom right (second one down in orange).
Sadly, this practice account also requires a phone number and my consent to be contacted by phone. I’m getting the impression that demo accounts are just tools to acquire potential mug punters.
On the plus side, there’s no indication on the sign up screen that the account is time-limited. So it could be useful when we are ready to bet.
Less happily, the service is provided on behalf of Interactive Investor by GAIN Capital – FOREX.com UK Ltd, who I definitely haven’t heard of.
I don’t think I’ll be taking this one forward.
The Barclays spread betting demo is hidden away on the Barclays Trading Hub website, which you access from the Barclays Stockbrokers site. You have to confirm you are an experienced trader before you can get to the page.
The Barclays service is – like the Interactive Investor one – provided by GAIN Capital UK Ltd, so I don’t think I’ll be using this one either.
As with all the others, a phone number is required.
The CMC demo account is hard to find. There is no visible link on the home page, and I only found the right page through manually searching the site.
As before I need to provide a phone number and give permission for this to be used to market to me.
- After looking briefly at 20 providers, and at 5 in more detail, we haven’t opened a demo spread betting account today
- This is to avoid being cold-called before we have learned enough about TA to start betting
- In the meantime, it may be possible to use the IG platform preview to identify which instruments and TA indicators we will focus on
- Barclays and Interactive Investors are re-badged 3rd-party products (actually the same product) so we won’t be using them
- The City Index demo is limited to two weeks, which won’t be long enough for us
- When we are ready to start betting with fake money, we’ll open demo accounts with IG and CMC
Until next time.
- I have another couple of accounts, but they are small and aren’t actively used at the moment [↩]