There has been lots of discussion on social media lately about the spreads. For newer readers the “spread” is the difference between the buy price and the Instant Sell price and this does appear to be widening for many players.

This makes the market tougher for all traders as when we make a bad trade (or anytime the trade doesn’t go our way) we take a bigger hit if we want to get out of it. 

But, it particularly hits very short term traders (flippers) who want to be in and out with a quick buck. And it’s hard for traders who hold very high priced players too as the comfort blanket of being able to quickly and easily liquidate much of the large sums of money locked up in them is gradually taken away.

Many traders don’t understand why FI would do this since FI directly profit every time we sell. There is an incentive there for them to make trading as easy as possible.

However, if you listen to what Adam Cole, CEO, has said over the years, Instant Sell is also a massive downside risk and liability on FI’s balance sheet. Everytime we use Instant Sell, FI are paying back real money. That’s a burden, as is keeping that much cash on hand to pay people back.

The reason IS exists at all was to faciliate a young market. Without it, FI would probably have never really gotten going because it’s only that ability to Instant Sell easily that convinced many to part with their cash.

We must fully expect FI’s long term goal to be to ween us off Instant Sell and encourage us to sell to other traders. Eventually, Order Books may carry some of the weight here (check my Guides section if you don’t know what an Order Book is or how it might work on FI).

This may be shocking if the only market you have ever traded in is FI. But actually, well functioning markets do not over rely on a background moneyman buying up all the stocks that everyone suddenly doesn’t want at reasonable rates. Who would do that normally unless they were offering extremely punishing prices to desperate people?

If anything, it surprises me that FI are actually this generous when it comes to willingly buying up unwanted shares. Although as the market was growing, there was good reason for them to be. 

I actually find it reassuring that FI are taking sensible steps to manage their risk and get their balance sheet under control. I am confident with trading but my biggest worry about my money being in FI is that something untoward happened at FI towers one day. 

So, I expect I will always welcome it when they take sensible risk management steps as a company. That is actually good for us traders, too.

Not everyone is going to agree with me on this which is fine. If we put ourselves in FI’s shoes though, I don’t think even the biggest of social media “stop the spread!” justice campaigns will stop this. It’s a clear long term objective of FI, it makes a lot of sense from a business perspective, and I don’t see it changing. 

What we can do as traders is adapt appropriately.

My observation is that spreads typically increase when FI believe a player is high risk because of 1 or more of the following reasons:

a) They have risen sharply in value recently. This makes sense as what goes up quickly tends to come down quickly too.

b) The players prospects of potential dividend returns are not as good as many on social media seem to believe. 

c) The player is being pumped/discussed heavily on social media (surely they must monitor this).

d) The player is reaching a very high price. 

In short, FI increase spreads when they fear a player could be rapidly sold and they don’t want to take all of the hit. Use that information. If you see a big spread, think about why FI would have put it there and decide if you agree with their assessment or not.

Overall, I think good traders will have to get used to the idea that an Instant Sell is a last resort. There is such a thing as a good Instant Sell, if you judge the hit to be worth taking because you think you are reacting quickly before an inevitable drop. 

But I generally consider an Instant Sell to be a failure. It probably means I missed my chance to sell to market at the right moment. Or it could just mean that I got unlucky with an injury or similar and I lost my bet.

That’s ok and it’s not unfair. FI don’t owe me a profit. Like any market as it matures, it will toughen up over time as more users join and it gets more competitive. 

Instant Sells becoming gradually less generous is just one more reason we have to keep getting better and better at trading to keep making big profits.