http://www.spreadbettingcentral.co.uk (c) Global Investor http://www.spreadbettingcentral.co.uk/feeds/docs en-gb 60 Fri, 03 Jul 2009 01:00:01 GMT http://www.spreadbettingcentral.co.uk/images/logo.jpg http://www.spreadbettingcentral.co.uk http://www.spreadbettingcentral.co.uk/strategies.htm?id=124 http://www.spreadbettingcentral.co.uk/strategies.htm?id=124
1) Powerful downtrend produces the 9 March 2009 low of 3461
2) Powerful two month rebound achieves a high of 4521 on 7 May
3) Next a 5-6 weeks consolidation in a narrow range 4295 to 4521
4) June 17th, index breaks down below the low of the narrow consolidation range
5) June 19th, one further close within the consolidation range (classic last ditch pullback?)
6) This week kicks off on Monday 22nd with a big down day back below the low of the consolidation range, opening at 4334 (near the high) and closing at the low (4234)
7) Price action for the rest of the week has been below the low of the consolidation range

No doubt the bears "won the week". For the bulls to reasser themselves we will need to see a close back in that consolidation range.]]> Fri, 26 Jun 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=123 http://www.spreadbettingcentral.co.uk/strategies.htm?id=123 We have seen the FTSE 100 in a narrow trading range, within a large trading range, since early May. The top of the narrow range is around 4521, the bottom around 4295.

Last week the index penetrated the lower barrier for a few days, but then moved back up again above 4295 on Friday on above average volume.

This could be a feint, what has been called by various analysts over the years a fake out or a spring, catching out all those traders going short on the penetration, and heralding a new move up.

But many break downs from a consolidation area see a last gasp pullback into the consolidation, before the break down starts in earnest.

The market should may tip its hand more clearly next week.

]]> Sat, 20 Jun 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=122 http://www.spreadbettingcentral.co.uk/strategies.htm?id=122
If anyone has any suggested changes for any part of the site please feel free to start a thread in the forum.]]> Tue, 16 Jun 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=120 http://www.spreadbettingcentral.co.uk/strategies.htm?id=120 Just one trader will be featured in each interview, and the interview will consist of the trader answering a number of standardised questions. The length of the answers will vary according to the interests and focus of each trader. The plan is to have 1 interview a month, occasionally 2.

The traders interviewed will come from a wide variety of trading backgrounds. Some will be authors; some will be people who used to trade frequently but now do something else; some will be current active traders; some will be relatively new to trading but with something really interesting about their trading style or performance; others will be old hands. At the end of the day the point of the interview is to give some air time to people with interesting trading backgrounds and with something to say that will provide site users with some food for thought. The standardised questions are designed to produce interesting responses, rather than a comprehensive overview of the trader's  trading style.

If you have any thoughts on any of the interviews then it would be great if you could start a thread on them in the forum.]]> Thu, 11 Jun 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=121 http://www.spreadbettingcentral.co.uk/strategies.htm?id=121

Describe your style of trading (short / medium / long term, trending / contra trend, what instruments....)

I am more technician than fundamentalist, having discovered in a study for my book Stock Fundamentals On Trial that fundamental ratios – and particularly the analysts’ estimates thereof – can be very misleading and not at all indicative of future share price performance. I would describe myself as a position trader who will place a day trade initially (and get out quick if it turns sour) but let it run potentially forever as long as it doesn’t breach my protective trailing stop.

Could your trading methodology be programmed into a computer?

As an IT consultant in a previous life, I like the idea of a fully automated trading system. My attempts have so far been unsuccessful; there seem to be some things that the human brain can do that a computer program cannot – such as pattern recognition. I regard a trading system as essential, whether fully automated or not, but I think it’s a very personal thing. My system might not work for you.What data services do you use?

What does this cost a year?

I only use the charts, news feeds, stock screeners etc. provided by my stockbrokers and spread betting providers. I don’t pay for additional information. The most important piece of information is the price.

Describe your computer set up

Currently a Samsung Q210 dual-core laptop with 3Mb RAM; a broadband connection in my home office and a 3G broadband dongle for when I’m on the road.

How many hours per week do you dedicate to trading?

I trade full time interspersed with writing and publishing. I have live portfolios and charts on display while I’m doing other work, and when I see an opportunity I switch into ‘trader’ mode. I nurse a trade initially and then switch back to my other work when I feel it is safe to leave the trade alone. Actually, I spend more time maintaining existing positions (by adjusting stops) than I spend placing new trades.

What sort of annualised return should a trader reasonably expect?

I don’t think that a trader can expect anything. Que sera sera (what will be will be). It depends on the state of the markets at the time, the trader’s risk tolerance, and the portfolio size /amount of leverage used. For example I have a spread betting portfolio showing an increase of 2500% (yes, really) in just 15 weeks (yes, really). But this portfolio was created specifically as an example in my forthcoming Stop Orders book, so it started with a very small seed capital of £300 and employs quite aggressive leveraging and pyramiding. Periodically I provide an update on my blog at http://lotontech-money.blogspot.com

Describe a trading strategy that you used to use (and, if you dont use it anymore, why not?)

My main strategy involves a combination buying on a massive downward correction, using a small position size initially, trailing stops manually to secure profits, and using accrued profits to pyramid additional stakes.

How do you go about creating a trading strategy? Do you back test?

I tend to trial my hypotheses in live markets rather than relying on back testing, and I tend to use back testing more as a mechanism for disproving systems. In my book Financial Trading Patterns I proved to my own satisfaction that a fully automated trading system utilising trailing stops with fixed distances will not work under all market conditions; despite the fact that it appears to work spectacularly for some time periods in some markets using some well-chosen stop distances.

If your trading strategy was a car, what model would it be?

A very fast Ferrari... with a speed limiter, numerous air bags, collision-avoidance radar etc.

Do you like volatile markets?

As with fast cars and fast women, they can be very exciting and can provide once-in-a-lifetime opportunities. But they can be very dangerous if you don’t know what you are doing.

If you had to recommend one book on trading, what would it be?

Will you allow me two books? How I Made $2 Million in the Stock Market by Nicolas Darvas and Reminiscences of a Stock Operator by Edwin Lefèvre.

If you had to make just one recommendation to spread bettors, what would it be?

DON’T LOSE MONEY! Think not only about how much you could win, but how much you could lose.

Do you agree with the saying: trading is a hard way to make an easy living?

It’s like riding a bike. You take advice from other people on how to do it, you fall off a lot and get badly hurt, and then you give up. Or you keep going until the penny drops, you develop your own style, and it becomes second nature.

Do you offer any services to traders?

I publish trading books at http://www.lotontech.com/money and I maintain a blog at http://lotontech-money.blogspot.com I have so far resisted the temptation of running seminars despite having done so in another subject area until a couple of years ago.

Any other thoughts on spread betting or trading?

If I hadn’t already accumulated ‘investments’ in tax-efficient ISA and SIPP accounts with a regular stockbroker, I would probably operate only via spread betting accounts. It’s a common misconception that spread bets are only for day traders, yet I would use rolling spread bets for longer term position trades and investments. Yes, I said ‘investments’.

]]> Thu, 11 Jun 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=119 http://www.spreadbettingcentral.co.uk/strategies.htm?id=119
More often than not such patterns are continuation patterns, the former trend continues as price breaks out of the pattern (in this case to the upside). However, beware placing too much reliance on that; the alternative scenario does also occur, and a break down out of either of the two consolidation patterns could lead to a sharp move down.]]> Sun, 07 Jun 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=118 http://www.spreadbettingcentral.co.uk/strategies.htm?id=118 There are several threads in the forum at the moment discussing problems getting stopped out of trades. One side issue that has emerged from the debates is an interesting one, to do with the size of spreads for the different instruments traded. In one case a site user had been trading a small cap stock Severfield-Rowan, ticker code SFR.

If you are going to trade SFR it is important to bear in mind the size of the spreads. One view is that stocks of this size, and with the typical spreads associated with them, are just not suitable for trades lasting a few days.

In my first book I talked about getting to base camp as a first step, before climbing the mountain called Spread Betting. Getting to base camp includes knowing your timeframe, knowing the performance characteristics of the various instruments you choose to trade, and in particular understanding the size of spreads and the way spreads impact your trading. One suggested way of comparing spreads by instrument is to divide the width of the spread (difference between bid and ask) by the instrument's price. Here are some figures:
SFR - spread in the underlying market 201.0 - 203.5 (1.23% of ask price); spread with sample spread betting firm 200.85 - 203.65 (1.37% of ask price)
BP (FTSE100 stock) - spread with sample spread betting firm 526.85 - 527.9 (0.20% of ask price)
EURUSD (the euro) - spread in underlying market and sample spread betting firm 1.4184 - 1.4186 (0.014% of ask price).

If you are trading with trades lasting from one day to a few days, you will need to be really good just to break even with those small cap spreads. In this example the spread on the small cap was more than 6 times the spread on the FTSE100 stock, and more than 97 times the spread on the currency.

For many traders the only reason for a spread bet on a small cap is to get a big percentage move in a trade lasting weeks rather than days.

]]> Wed, 03 Jun 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=117 http://www.spreadbettingcentral.co.uk/strategies.htm?id=117
Well, the performance of the S&P500 has been hyped up by a lot of investors recently, as they look long and hard for confirmation that the bear market has ended and a new bull market has started. The index has indeed come a long way from the March low of 666, ending the month of May at 919, up 38% from the low.

But in some ways the real work starts now. Here are a few thoughts:
1) the 10 week moving average is still below the 40 week moving average
2) price has not yet broken decisively through the 40 week moving average (which currently stands at around 944)
3) also at 944 is the resistance of the January high
4) there is more resistance between 944 and 1008, which was the November 2008 high
5) the candlestick ending 10 October was a wide range one with a very large "real body" - it opened at 1098 and closed at 899 - according to one interpretation of such candlesticks the half way point of this candle should act as resistance - that point is 998
6) close to this last resistance point is the psychologically important round number of 1000 - it would not be surprising if some investors decide to cash in at that point.

Statistically, if we have been witnessing a bear market rally then a 38% move up from the low is actually quite a good bear market rally. If we have been witnessing the birth of a new bull market, well then one confirmation of that might be the ease with which it climbs above all the resistance points discussed above.

How the S&P500 does impacts stock indices around the world.]]> Mon, 01 Jun 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=116 http://www.spreadbettingcentral.co.uk/strategies.htm?id=116 Sat, 30 May 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=115 http://www.spreadbettingcentral.co.uk/strategies.htm?id=115
One interesting question is when do these charges get applied? For someone holding a bet for a few days perhaps this doesnt matter, but for very short term traders it might do. Let us take the example of someone trading FX on an intraday basis. Their intention may well be to exit all bets by the end of the day, and start again the next day.  But how is end of day defined? FX is after all a 24 hour market.

In the FX markets one standard convention is to treat 5pm Eastern Time (USA) as the close - this equates to 10pm GMT. Another convention is to treat midnight GMT as the close (Sharescope uses this convention).

The practice amongst the spread betting firms varies. My understanding is for instance that at Capital Spreads the end of day is based on their own defined hours of business, and that in effect 9.15pm GMT is the cut off time for cost of carry purposes. On the other hand CMCMarkets uses 10pm GMT.

So if one had two FX bets, one with Capital Markets, the other with CMCMarkets, and closed both at 9.45pm, one would incur cost of carry charges with Capital Markets, but not with CMCMarkets.

As with many practical spread betting issues the important thing is to know the specific operational rules and conventions of the firm you are using.]]> Wed, 27 May 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=113 http://www.spreadbettingcentral.co.uk/strategies.htm?id=113 www.sparkdales.co.uk). The other one was last Saturday.

We had extensive discussions on the subject of exit methodologies, and one thing I have been very keen on particularly in the recent volatile conditions we have seen in the stockmarket is a break even stop.

The basic principle here is that after an instrument has moved in your favour by the same amount as your original risk (ie the distance between your entry and your initial stop) then you move your stop to break even. From that point on you have a "free" trade - all upside, and hopefully you are no longer exposed to a loss on the trade. I say hopefully because of course it is possible that price gaps past your stop and you dont exit exactly at your stop point.

As in most things in the world of trading there is always a downside to every upside, or so it would seem. The downside here is that after moving your stop to breakeven you then get stopped out, after which price moves back in the original direction of your trade, without you. That will happen sometimes, but for many traders, including me, that is a price worth paying for reducing the risk on a trade to zero, hopefully early on in the life of the trade.

I would be interested in any views or comments on this subject - I suggest if you have any, start a new thread in the forum.]]> Tue, 26 May 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=114 http://www.spreadbettingcentral.co.uk/strategies.htm?id=114 There is an interesting thread on the forum at the moment about ADX. A number of people are using their spread betting platform to try to get some nice ADX charts, and are asking which ones are the best. Others are using Sharescope, as per my books. If you have some views on this and would like to contribute that would be great, or you might just like to read the thread so far.

]]> Tue, 26 May 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=112 http://www.spreadbettingcentral.co.uk/strategies.htm?id=112
He describes the new facility in the forum - go to the thread called "Any experts in ShareScope Data Mining able to help?"

Thanks Phil, and the team!]]> Thu, 21 May 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=111 http://www.spreadbettingcentral.co.uk/strategies.htm?id=111 Sun, 10 May 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=110 http://www.spreadbettingcentral.co.uk/strategies.htm?id=110
You can see this, and reply to the post, and of course all the other posts in the public area of the forum, simply click on forum and if you have yet to sign uup for the forum follow the simple instructions there.]]> Mon, 04 May 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=109 http://www.spreadbettingcentral.co.uk/strategies.htm?id=109 Mon, 27 Apr 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=108 http://www.spreadbettingcentral.co.uk/strategies.htm?id=108
Next speaking engagement is this Friday, 24 April, in the Excel centre - at the IX Conference.

My slot is in the main auditorium late afternoon, if any site users are attending I look forward to the opportunity for a chat at some point during the day.]]> Sun, 19 Apr 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=106 http://www.spreadbettingcentral.co.uk/strategies.htm?id=106
Just to summarise the details.

Thursday April 16th, London, evening. I am the main speaker at this conference and will be discussing various trading concepts from my new book. I am a guest of Digital Look, the conference is being organised by them, and is only available to their customers.

Friday April 24th, Excel Centre London, IX Expo 2009. I have a 45 minute slot in the main auditorium at this conference for traders. My slot is currently scheduled for 4.45pm to 5.30 pm

Saturday May 23. I am running a whole day seminar on spread betting in London, attendance capped at 12 to maximise attendee participation, details at www.sparkdales.co.uk

Friday May May 29th. I am running a whole day seminar on spread betting in London, attendance capped at 12 to maximise attendee participation, details at www.sparkdales.co.uk. Note, no further seminars are planned until the autumn.

]]> Sun, 12 Apr 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=107 http://www.spreadbettingcentral.co.uk/strategies.htm?id=107
The answer will vary from time to time, will vary according to which criteria are most important to the user, and will vary by financial instrument.

I have put a few thoughts together on this, in response to this question in the forum. My focus is on the general principles of how to get a workable solution to this issue, rather than just making favourable or unfavourable comments about individual firms.]]> Sun, 12 Apr 2009 23:00:00 GMT http://www.spreadbettingcentral.co.uk/strategies.htm?id=104 http://www.spreadbettingcentral.co.uk/strategies.htm?id=104 In volatile times it is sometimes useful to be able to step back and get a little perspective. The Japanese technique of Kagi charts is not dissimilar to the century old Western technique of point and figure. If your charting package has these Kagi charts I would recommend trying them out. The main variable for the user to input is the percentage of price movement required to get a line on the Kagi chart to change direction. For indices 1% gives a good view of the short to intermediate term, and for a longer perspective I use 3%, for a very long perspective 5%.

The Kagi charts are very good at showing major support and resistance levels, also significant consolidation areas.

The 1% Kagi charts of the FTSE100 show clearly that most of the price action since October 2008 has been in a wide range running from 3850 to 4400,  with two excursions above the range and two below (one in November and once just recently). Every excursion above and below this range has ended up with price eventually being pulled back into the range, almost like a magnet. Other charts show that both the excursions and the returns to the range tend to be volatile as both the bulls and the bears start to form strong and differing views on where price is ultimately heading.

The FTSE250 is range bound (again a wide and volatile range) with most of the price action since October falling between 5680 and 6780.

The S&P is now back in its former range of 800 to 940, after a violent luch down below this range and a fast and furious move back up into it. Many eyes are on this chart. On the Kagi chart there is now an important support level created in this most recent move up, around 768, and optimistic bulls will want to see that support level kept in tact.

]]> Sat, 28 Mar 2009 00:00:00 GMT