Spreadbetting - Beginner to pro

[Caledonianbu]

Hi guys,

So I'm a twenty something student, currently studying medicine. I have been demo trading/spread betting for around a year now and have had pretty good success. I realise that this is hard to correlate with good results in real life as it's not 'my' money. But i'm going to be starting off small - using IGindex account I set up yesterday. (Made £.50p on a test trade whoop!).

So my plan is:

• Invest only in small cap shares to minimise my exposure
• Risk only 1% of my account at any time (using stop losses)
• Invest in relatively unknown companies, I would like to build a list of around 20 companies that I know inside out and can use these to bet on!
• Paper trade any deals before I'm feeling 100% confident my 'strategy' is working

Most of my strategy is looking at the company as a whole and using some very, very basic technical analysis of the previous trends etc. My knowledge of technical analysis is pretty poor, but growing, i'm planning on looking into it more as it seems a useful tool.

My reason for spread betting is that I only want to invest £100 at the moment, I'll be looking to increase that shortly but at the moment I want to invest tiny amounts and just ascertain if I can actually do this successfully. I hope to invest a number of hours a day looking into possible bet opportunities and further research. I'm not allowed to have more than 5 positions open at any one time.

I have a poker background, so my money management is pretty solid

Any thoughts/advice would be much appreciated. I plan to start betting in the next few days!

 

[anley]

If you're only trading with £100 then 10p a point is more realistic. But even then risking 1% is probably not going to work as £1 = 10 ticks at 10p a point and a 10 tick stop will be too tight, unless of course your timing is perfect, which it won't be.

Also, I doubt you'll be able to trade in the unknown shares as they're probably not quoted, only the big well known ones.

 

[Caledonianbu]

If you're only trading with £100 then 10p a point is more realistic. But even then risking 1% is probably not going to work as £1 = 10 ticks at 10p a point and a 10 tick stop will be too tight, unless of course your timing is perfect, which it won't be.

Also, I doubt you'll be able to trade in the unknown shares as they're probably not quoted, only the big well known ones.

IG have a lot of small caps on their books/relatively unknown. Yeah, 10p a point is what I was thinking, but I agree, at the start I will have to risk more to prevent hitting my stops...
How do you tend to work out stop levels? When I was demo trading I used to use a rough ballpark of 10% and use graphs to adjust the level more finely.

 

[shadowninja]

IG won't let you do such a small amount for long unless they've changed their rules recently.

By "small cap" do you mean penny shares? Are you hoping for that big move? You're best off sticking to well-known companies like BP or Barclays and learn to trade them.

Stoploss levels: see how a stock has behaved near support levels - does it "respect" the levels or are the turning points hard to "justify" by just looking at the graph? Alternatively, if you're day trading, look at how much a stock can move the wrong way in one day before moving in the right direction.

Finally, use the term "risk" not "invest". I think the term "invest" is used to make something sound clever and it makes you think you're cleverer than you really are. Calling it a risk makes you really think about whether you're making the right decision or not. When I hear people talking about "investing" in an iPad, I want to punch them.

 

[Caledonianbu]

IG won't let you do such a small amount for long unless they've changed their rules recently.

By "small cap" do you mean penny shares? Are you hoping for that big move? You're best off sticking to well-known companies like BP or Barclays and learn to trade them.

Stoploss levels: see how a stock has behaved near support levels - does it "respect" the levels or are the turning points hard to "justify" by just looking at the graph? Alternatively, if you're day trading, look at how much a stock can move the wrong way in one day before moving in the right direction.

Finally, use the term "risk" not "invest". I think the term "invest" is used to make something sound clever and it makes you think you're cleverer than you really are. Calling it a risk makes you really think about whether you're making the right decision or not. When I hear people talking about "investing" in an iPad, I want to punch them.

Thanks, yeah, I should have said risk - I do understand the risks involved. No, not penny shares, I'm not hoping for one of them to find the new internet and make me a billionaire overnight!! Just slightly less well known companies - mainly as they seem less influenced by market/news - maybe this is the wrong approach, but it's the one I took with my demo account.

I will definitely be using bigger companies, try and get a better idea of the market and get used to their tendancies.

 

[anley]

Some of the best advice is this. Just get trading at 10p a point and make a lot of mistakes because a) they're the best way of learning and b) at 10p a point even a big mistake will be less than £10.

Trade big stocks, small stocks and everything in between, then after several months you'll have a far better idea what suits you and your style. If after those months you're still struggling then no problem, focus on what hasn't been working and what has and do more of the good and less of the bad.

 

[Caledonianbu]

Yep, agreed. I'm not worried about loosing all of my initial risked amount, but i'd rather not. Obviously I'd like to try and grow it....

I think trying lots of things is definitely a great idea.

 

[SanMiguel]

If you're only trading with £100 then 10p a point is more realistic. But even then risking 1% is probably not going to work as £1 = 10 ticks at 10p a point and a 10 tick stop will be too tight, unless of course your timing is perfect, which it won't be.

Also, I doubt you'll be able to trade in the unknown shares as they're probably not quoted, only the big well known ones.

Margin is more like 25% for the small caps on IG.

 

[Caledonianbu]

Yes, i believe that is correct..

Just watching the video on IG introducing concepts of Technical Analysis. Got my notebook ready!
Any other articles/videos anyone can suggest?

 

[Caledonianbu]

short on old mutual PLC. Seems to be a strong downward trend... .10 a point... probably going to leave it over night, Their price always seems to crash at around 9am - or at least it has for the last 8 days of trading. Just trying a few things out, got 5 paper trades running too, will be interesting to see how they turn out

 

[Mata Nui]

Make sure you keep a journal and detail all your reasons for entering each trade (include fundemental analysis if that forms part of your reasons and charts). That way you will eventually be able to focus on the processes that lead to you making correct trades and work on fixing the reasons you make the losses.

 

[Caledonianbu]

That is definitely a good idea - thank you. I have a notebook that i hand write things in, this one i'm currently in is just a test of using purely Technical analysis at a very very basic level to see if i've got it right!! I'm sure it's going to need a lot more work. I'll try and update this as I'm thinking through my bets - providing fundamentals, TA and general reasoning as to why I'm thinking of making such a bet.

 

[dan1986ccfc]

short on old mutual PLC. Seems to be a strong downward trend... .10 a point... probably going to leave it over night, Their price always seems to crash at around 9am - or at least it has for the last 8 days of trading. Just trying a few things out, got 5 paper trades running too, will be interesting to see how they turn out

Hi Caledonianbu,

This is my first post, despite checking in on the forums for a while now. I'm in a similar position to yourself.

I was curious so checked the charts for Old Mutual and am struggling to understand how you can call it a strong downward trend?

I think it would help us both if you specified exactly what brought you to this conclusion

 

[Caledonianbu]

Hi Caledonianbu,

This is my first post, despite checking in on the forums for a while now. I'm in a similar position to yourself.

I was curious so checked the charts for Old Mutual and am struggling to understand how you can call it a strong downward trend?

I think it would help us both if you specified exactly what brought you to this conclusion

Hi mate,
Firstly, please remember that I'm using this trade to a)get used to software/stop losses etc b) get used to using some form of technical analysis.

so my thoughts were as follows:

On initially looking, it seems a relatively fluid stock with a value I like (I'm trying to keep them within the 100-500 range, purely because I feel it minimizes my exposure for the time being). I then looked into the graph. Firstly, a two hour graph. since the eigth there has been a pronounced downward trend (with a small peak towards the end of play on the 13th). I then looked back at daily and found that it had fallen to ~126 a number of times and then come back up. Given the combination of a downward trend and this support point, I thought it seem logical that it could fall again, especially as looking at the company fundamental points, there doesn't seem to be much on the horizon...
Add to this the fact that it has a pattern of up, down down, up down down and it's just had an up.... I felt this was an okay short.
It has reached this support point ~3 times since feb..

As i say, i'm very new to this type of analysis and this bet is more for fun/interest than serious money making.

Ps. I'm not sure how to include graphs, sorry..

What are your thoughts on that?

 

[anley]

Also, watch costs and they're often the difference between making and losing in this game. Start to trade short term with big spreads and it won't take long for your money to be gently transferred to your broker's account (assuming he's making the market).

Summary: Buying and selling at the right time is only part of successful trading, although it often happens to be the most important

 

[Caledonianbu]

Also, watch costs and they're often the difference between making and losing in this game. Start to trade short term with big spreads and it won't take long for your money to be gently transferred to your broker's account (assuming he's making the market).

Summary: Buying and selling at the right time is only part of successful trading, although it often happens to be the most important

Thanks, yeah I'm keeping an eye on that. This is part of the reason i'm involved in spread betting as opposed to trading 'proper'.

 

[Caledonianbu]

Bearing in mind i'm using ING, if I was doing a bet of say, a week, is it cheaper to use DFB or take the extra spread of a quarterly? Can't quite work it out! If I'm using a 10 pence a point spread? Is there a point at which one becomes beneficial rather than others?

 

[Caledonianbu]

As predicted it dropped this morning! Solid for just over 1pip. Not great, but I'm just getting used to all this stuff..
Now just have 5 paper trades going, one of which i'm sure i've made the wrong deduction, but i will update in a few days when they come to a close...

 

[anley]

Less than a week DFB, more than a week the quarterly, as a rule of thumb.

 

[Caledonianbu]

Less than a week DFB, more than a week the quarterly, as a rule of thumb.

Thanks