Is this rediculas?

[Splitlink]

If you take an up bet for 1 pound you will have to have 200 times 1 GBP for margin = 200 (for Footsie) and you will need to meet similar margin requirements for all the bets you lay off at 20 point intervals that you have planned on the way down.

When the first bet goes down 200 points, you will need to place more margin and, if the market keeps going down you will have to place margin for all the other bets as, and when, they reach their relative entry level minus 200 points

With rolling bets, if there is insufficient margin, the trade will not be opened for you the next morning.

The more I look at this system, the more problems I find with it!

For long term trading, buying the future would be more suitable, because you will be charged interest for rolling bets but the margin could be more, on that point I do not know. I have heard that rolling bets are the more economical for 9 days. After that, futures are better.

If you use a stop loss, the margin charge will, also, come down but you can see that all this would require very careful planning, as I am only scratching the surface.

I try not to get myself into these pickles, so don't know much more than what I need to know for my "simple" style of trading.

Another, rather horrible, problem could arise if the company decided to raise the margin requirement to say, 300 times bet size. They are at liberty to do so any time that they like and, probably, would if the market continued to plunge more. As I said, a lot of these thoughts are cropping up as I go along and I am sure that there are many more.

To be crude, i would describe this as very much a s*** or bust operation and I advise you to lie under a palm tree, somewhere, until the idea goes away.

Split

 

[megamuel]

I know the figures

Then you will know the risks involved. Who's approval are you looking for? Because I don't think your going to get it your just gonna have to go for it and see how it goes...

Sam.

 

[timsk]

Hi Klastica,
It strikes me that underpinning your whole strategy is the idea that the index will only drop so far before reversing and then, bit by bit, your large loss quickly reduces. At some point or other you'll hit break even and, thereafter, you start rubbing your hands together with glee as the profits start to build as the index rises, just as the losses had mounted on the way down. You complain that none of us are giving you good reason as to why this won't work. On the contrary, many of us have. Look at the post from trade_dante that has a chart attached. No words are necessary, the chart tells you all you need to know. If you doubt that, or require additional confirmation, just do a search on here for threads on Northern Rock. Just about all the contributors to your thread will know someone who bought - or who was thinking of buying - when the stock was around the £3.00 mark. Those that did buy in at that point lost huge sums of money because they believed that the stock simply couldn't fall any lower. There is a famous quote that leaps to mind as it's so applicable to your strategy and neatly encapsulates why - sooner or later - it's doomed to failure:
"Markets can remain irrational longer than you can remain solvent"
John Maynard Keynes
If you persist with the idea, I predict that you will make good money the first few times you try it. You'll be very smug and put two fingers up to all us old lags that have advised against it. Then you'll do it for a third time and make even more money. Convinced of your own genius and the infalibility of your system, you'll go for the home run and, on your forth attempt, you'll trade large size. That's when you'll blow up spectacularly and you'll never be seen or heard of again.

Tim.

 

[klastica]

Hi Klastica,
It strikes me that underpinning your whole strategy is the idea that the index will only drop so far before reversing and then, bit by bit, your large loss quickly reduces. At some point or other you'll hit break even and, thereafter, you start rubbing your hands together with glee as the profits start to build as the index rises, just as the losses had mounted on the way down. You complain that none of us are giving you good reason as to why this won't work. On the contrary, many of us have. Look at the post from trade_dante that has a chart attached. No words are necessary, the chart tells you all you need to know. If you doubt that, or require additional confirmation, just do a search on here for threads on Northern Rock. Just about all the contributors to your thread will know someone who bought - or who was thinking of buying - when the stock was around the £3.00 mark. Those that did buy in at that point lost huge sums of money because they believed that the stock simply couldn't fall any lower. There is a famous quote that leaps to mind as it's so applicable to your strategy and neatly encapsulates why - sooner or later - it's doomed to failure:
"Markets can remain irrational longer than you can remain solvent"
John Maynard Keynes
If you persist with the idea, I predict that you will make good money the first few times you try it. You'll be very smug and put two fingers up to all us old lags that have advised against it. Then you'll do it for a third time and make even more money. Convinced of your own genius and the infalibility of your system, you'll go for the home run and, on your forth attempt, you'll trade large size. That's when you'll blow up spectacularly and you'll never be seen or heard of again.

Tim.

Hi Tim
Firstly thanks for the efforts and time u have take to put me off my crazy scheme.

I wanted to find a way to beat the markets. This was my first thought. I came on here to basically have my idea beaten down.

from the post I learned the following things

1) I didn't know how to spell ridiculous
2) My system wouldn't be the best use of £500k
3) There is a risk (as anything can happen).

I have decided to gain the skills that would allow me to trade properly. I am currently looking into Forex day trading and swing trading.

Although I don't agree with everything that has been said and I also believe in my heart of hearts that the worst case senario presented by trade_dante just wouldn't happen and even if it did it wouldn't be that bad.
Anyway - I'm gonna change my plans and start to learn how to do it properly

Mike

 

[Splitlink]

Hi Tim
Firstly thanks for the efforts and time u have take to put me off my crazy scheme.

I wanted to find a way to beat the markets. This was my first thought. I came on here to basically have my idea beaten down.

from the post I learned the following things

1) I didn't know how to spell ridiculous
2) My system wouldn't be the best use of £500k
3) There is a risk (as anything can happen).

I have decided to gain the skills that would allow me to trade properly. I am currently looking into Forex day trading and swing trading.

Although I don't agree with everything that has been said and I also believe in my heart of hearts that the worst case senario presented by trade_dante just wouldn't happen and even if it did it wouldn't be that bad.
Anyway - I'm gonna change my plans and start to learn how to do it properly

Mike

In answer to your three points.

1) We all make mistakes, but spelling is the least of our problems.

2) I am sure that we are all pleased that you have decided that.

3) Anything Will happen, especially in that time frame and most of us will be taken by surprise.

Good luck to you.

Split

 

[Hoggums]

If you had £500K then you'd make more money putting it in a savings account rather than invest in this system. Plus you then have the advantage of being able to withdraw the capital when you wanted.

Search for my "Dumb trading ideas" thread - I described this exact system in there.