Posts from — September 2007

Continuing our series of Spread Betting Tips – a mixed bag for you:

38. There are many reasons to financial spread bet but spread betting can be problematic in slow moving markets. If a market doesn’t move around much then try to avoid it – any profit could be eaten up by the spread. That means zero upside and the potential for a loss. Likewise if you do want to spread trade on a slow moving market then you may be better off trading the longer quarterly markets. You may also want to consider share trading for slower moving markets

39. Many people recommend you keep your stakes minimal for your first year. That’s a long time and difficult to do. However the theory is that there is plenty of time to increase your stakes when you have more experience

40. Emotions. They do have a habit of getting in the way of trading. When you start trading with real money your emotions will play a part. After a few months of real money trading try to compare your real money Trading Spreadsheet with your paper trades. It’s probable that you’ve changed your thought / risk process a little. Again, try to stick to your plans and minimise the natural human emotions that will come with real money trading (being excited and/or scared rarely helps you trade!). At least if you’re spread trading with small stakes you shouldn’t lose too much.

41. When dealing over the phone check your trades online or via your contract notes. The dealer on the other end of the phone is human, they will make mistakes. It’s handy to note that the FSA requires them to record every phone trade. If you think there’s been a mistake on a particular phone trade ask the dealer to ‘check the tapes’. They will even replay the conversation down the phone if you ask! However do be polite. I’ve listened to many of these calls and dealers get bored of this. More often than not it’s you who said Sell instead of Buy, stated the wrong stake etc.

42. After every online spread trade check your online account history. Has the trade been logged? Is it correct? Have you made a mistake? Does it have the right stake size etc? If you have any queries on a trade contact the relevant Customer Service Departments as soon as possible.

Good luck

DB

Here’s a tricky area. Rumour. You want to get the value ahead of the curve but it’s often a question of whether the data’s good enough to act upon.

35) By their very nature rumours are not a sound source of investment information. Being a sad individual I like to note down rumours, the current market prices and source of the said tale. Clearly I miss out on some opportunities but having listed the rumour and checked the results / market movements over the next 1 to 90 days my (possibly questionable) analysis shows that rumours are a poor source of data…no surprise there. However the rumours often come up with big swings as many investors try to get on the same tip. That creates volatility which can be handy for spread bettors.

36) Note that the market makers will often take the newspapers and investor magazines tips into account. They will move their prices up / down before you get there. Any value in good tips is often gone

37) Try to verify all such information. If it’s accurate you can always join the trend a little later. It’s difficult to predict the start of trend therefore if you think there’s some truth then it’s worth a look trying research the company / market in question.

Have a good weekend

DB

Today we continue our series of tips by looking at Forums and Discussion Boards…

30. This may sound strange for someone handing out supposedly handy hints but ‘beware of the Tip‘.

Many users with poor spread betting positions will try to alter the valuation by creating a buzz in the forums about a particular market. Essentially the same thing that the City Slickers did in The Mirror.

During the City Slickers scam James Hipwell made £41,000 in six months by buying shares, tipping them in the paper and then selling the shares after the market had inflated the prices. Of course the City Slickers were prosecuted.

You have been warned. People in forums often try the same thing hoping that fellow users will act on that information and alter the valuation so the “tipster” can close out for a profit

31. Beware of low quality information! Some of the ‘tips’ that are posted aren’t necessarily intended to mislead like the Mirror’s City Slickers. They are just posted by poorly researched investors.

Eg someone may refer to spread betting on Alcatel Lucent shares. “the share price has halved, but they’ve cut 12,500 jobs, cut costs and are rearranging the boardroom, worth a look, I think they’re under valued”.

This sort of poorly researched tip (intentional or not) is quite misleading. At the time of writing the job cuts and boardroom changes haven’t been confirmed…and then there’s the small matter of 3 profit warnings in a year.

32. More ‘beware’ for you…there be monsters etc. but poor (poor) jokes aside beware of the stake sizes and portfolios.

Many members will post large stakes sizes. Some people will be boasting, others can afford more, some will have bitten off more than they can chew. Don’t let other people’s stakes affect you. Stick to your trading plan.

Likewise let’s say someone has a similar trading position in a given market and they post a message saying they’ve closed it. Stick to your plan. If you want to close the trade, close it, but their funding, their portfolio, etc is likely to be different to yours.

By all means research something that someone else has tipped but trade the markets that you understand and that you have researched

Time Time Time

33. If you’ve got something worthy to write eg suggesting CleanFinancial.com (this website!) to newcomers then do so.

However don’t get drawn into pointless discussions and arguments. You’re better off spending your time with your family, your friends, you’re better off working, researching etc.

Of course, the forum and messages boards can be an amusing soap opera but you won’t gain much by joining in many of the ‘discussions’ apart from lost time and high (er) blood pressure.

34. Message board benefits – are there any? Other users will often write about their own errors, greed, lack of stop losses, bad luck, numerous positions, poor data etc. ie many of the principles and ideas discussed on this website. Real life examples can help remind you of these important lessons.

Forums? pinch of salt!

DB

Hi

A couple of quick tips for you today.

26. The spreads firms are your friend! Well that may not quite be the case but they will try to ‘assist’ you. They want you to learn how to spread bet. Well you’re not much good to them if you don’t know how to spread bet. One way of learning handy spread betting tips is via their Free Seminars. Naturally this helps the spread betting companies open new accounts but in return they can give you a few pointers. It’s give and take.

27. If you’re interested in Spread Trading Courses where you are paying for the privilege of attending then ensure you check the credentials of company running the course and the trainer themselves. Before going on one of these it may be worth going to some of the free Seminars before any paid courses. If you pick up some useful tips, hints and tactics at the free seminar that should help you:

a) Get more out of the paid-for course (because you’ll have a stronger knowledge base and therefore you should pick up more detail)

b) ask more appropriate questions at the paid-for course. Questions that are more relevant to your area of trading eg Forex or FTSE 100 spread betting

Capital Spreads are currently running a couple of free courses – I don’t think you need to open an account to go on one. But that can change. See Capital Spreads for details.

Good luck

DB

Away from the World Cup and extending our series of financial tips here’s a simple list of spread trading tool tips:

23. If you’re new to spread trading have a look at taking a trading course. There are a number of introductory courses available. Eg Capital Spreads often run a one day course / evening course. With spreads you need to take your trading seriously, appreciate that you may need some education.

24. Give yourself instant access when you’re out and about or traveling. If you’re often away from the office then you may want to keep and eye on Market data via a mobile phone trading platform and/or XDA / PDA. Cantor Index sometimes offer these (terms and conditions will apply).

25. Whether you are new to spreads or a hardened trader, charts are often an irreplaceable aid. Good charts can help you improve your analysis and maintain your discipline.

If you open an account with Financial Spreads you can use their charts for free (you will need to open an account but no need to trade!).

26. Most of the Spread Betting Companies will provide some analysis software / charting packages. They will offer it for free however it’s also worth looking at some of the specialist software packages. Note that these can cost you £200-300+. So shop around for a product that suits you.

27. Similar to the above, there is also a range of semi-automatic computer trading programs you can use to help your financial spreads decision making process. However many a trader who relied solely on these programs has gotten into trouble. Having said that, they can be a useful string in your bow.

Good luck

DB
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