please expalin UK indices in basic terms

[jonboy123]

hi,
FTSE 100, 250, 350
AIM
SMALL CAP
techmark
FLEDGLING

i dont want detailed info, as i can do my own reading elsewhere.
but....is one indice better than the other to trade?
one better than the other to make short or long term gains.?
one more volatile than the other?

im new to trading.
should i focus and learn and trade on one indice?
and stay away from some of them?
is one indice more dangerous/risky than another?

(ive noticed all my trades are with AIM companys in uk)

more value for money and better opportunity with one indice? eg small caps etc.....

are shares generally cheaper with AIM or small cap companies??

ive learned pennystocks are stocks which are under £1, regardless of which indice they belong or regardless of market cap etc....so say if i wanted to look for cheap stocks, i shouldnt just look in one indice?

do you guys concentrate on one indice only? or whatever.....

thankyou.

 

[foredog]

Concentrate on what you're comfortable with.

BUT REMEMBER

Price (kind of) reflects a companies worth. Most of these stocks on Aim are 2 or 3 p becasue they are crap and there's as much chance of them going bust as going to 10p.

£1000 invested in xyz on AIM may more quickly go to £2000 than invested i Glaxo but Glaxo probably won't half next week either.

Are you willing to LOSE all of your money invested in one stock?

If he naswer is NO, avoid Aim.

 

[jonboy123]

right, makes sense...thankyou.

Is FTSE smallcap a better calibre and higher market cap group of companies compared to AIM companys?

top AIM companies are £300m to £800 million market cap affairs.

what is ftse aim all share index? contains ALL the various AIM indices?

so once a company grows, it eventually gets promoted to a FTSE indice?
FTSE indices are for the BIGGEST companys in uk (eg even ftse smallcap and fledgling)? so FTSE is the first division......and then AIM is like the second division?

 

[OpalSky]

HI jon. If by 'better calibre' you mean 'more regulated' then yes. Remember its not so much capitalisation that determines whether a company goes from AIM to one of the other groups, but the regulatory framework its 'prepared/wants to' fit into (AIM being less regulated, freer).

Other factors then spin off that. Such as small caps trading on less volume so often having larger spreads and slippage etc.

As foredog says, do what you're comfortable with. Whats your preferred style of trading? Day trading, swing trading, do you have an interest in any of the industries/sectors? Remember volatility is a double edged sword. -OS.

 

[jonboy123]

HI jon. If by 'better calibre' you mean 'more regulated' then yes. Remember its not so much capitalisation that determines whether a company goes from AIM to one of the other groups, but the regulatory framework its 'prepared/wants to' fit into (AIM being less regulated, freer).

Other factors then spin off that. Such as small caps trading on less volume so often having larger spreads and slippage etc.

As foredog says, do what you're comfortable with. Whats your preferred style of trading? Day trading, swing trading, do you have an interest in any of the industries/sectors? Remember volatility is a double edged sword. -OS.

By better calibre i mean, more safer, more solid companies, less chance of them going bust etc, safer bet, more reliable to survive in market place, less dodgy weak companies, less maniplulation.....

Yeah i read official AIM regulations, a company can have ANY market cap fig!! and ANY amount of shares.

Man, im uncomfortbale and comfortable at the same time with all this.
The stocks ive been buying have very low liquidity, some days no shares being traded, this is very bad i think. I might have trouble selling i think....

Prefered style of trading? I cant be awake at 8am and play the markets till 4.30, i have other commitments, i think swing trading, where trades last any number of days if not weeks. I tried long term, but got bored. I want to see my money move in moving stocks daily... i have no interest in any sector/industry, but following several random companies, all UK based.

- so are FTSE small cap and FTSE indices better bread of companies compared to AIM?
- AIM is the risky risky murky area?
- what is ftse aim all share index? contains ALL the various AIM indices?

so FTSE is the first division......and then AIM is like the second division?

i read in a book, to trade stocks which are liquid and volatile.
HOW LIQUID SHOULD A STOCK BE? IN THE MILLIONS PER DAY? OR HUNDREDS OF THOUSANDS?

thankyou.

 

[OpalSky]

In *very* general terms then, yes, AIM listed companies are a more risky investment than companies in the standard 100,250 listings. But this really is a very sweeping generalisation.

I'm not sure why you appear to be fixated on AIM listed or small caps, unless theres a particular opportunity there you're following?

I'd suggest you start off by making life simple for yourself and look in the 'main' FTSE listings. There are volatile shares there and theres no problem with liquidity. You can get a feel for the liquidity by looking at the bid/offer spread during trading hours - is it less then 1% of the price? More? Greater than 3-5%? (ouch!). Or you can look at the average daily volume - how many shares are you likely to be holding? Is it significant compared to the daily vol?

Can understand you not wanting to be tied to a screen, its not my style either (im an EOD swing trader by nature, trades lasting few days to weeks). Have you decided how much money you have available to trade? Do you intend holding actual shares, going the CFD route or spread betting?

 

[jonboy123]

In *very* general terms then, yes, AIM listed companies are a more risky investment than companies in the standard 100,250 listings. But this really is a very sweeping generalisation.

I'm not sure why you appear to be fixated on AIM listed or small caps, unless theres a particular opportunity there you're following?

I'd suggest you start off by making life simple for yourself and look in the 'main' FTSE listings. There are volatile shares there and theres no problem with liquidity. You can get a feel for the liquidity by looking at the bid/offer spread during trading hours - is it less then 1% of the price? More? Greater than 3-5%? (ouch!). Or you can look at the average daily volume - how many shares are you likely to be holding? Is it significant compared to the daily vol?

Can understand you not wanting to be tied to a screen, its not my style either (im an EOD swing trader by nature, trades lasting few days to weeks). Have you decided how much money you have available to trade? Do you intend holding actual shares, going the CFD route or spread betting?

good info, thanks.
how about ftse smallcap or ftse fledgling?

the only reason im asking all this, is because im trying to understand the basics, so i can decide on where to focus my attention....and ive noticed all my trades so far have been AIM, i did not even know this when i made the trades.
AIM and smallcap shares seem to be more affordable for my trading account size.

yeah once i get out of these risky trades im in, i will trade more informed positions.

so the smaller the spread means the more the liquidity?
and the larger the spread, the more illiquid? eg not much volume being traded...

average daily volume, yeah, but im not sure if i can get this info during the day..... or if its just posted at the end of the trading day. Yahoo finance may have updated info, ill check tmrow.

i dont mind being tied to a screen....i work in computers. But i have a regular job etc so i need to balance it all out, and i need to sleep too!

EOD?

yes i know my trading llimit, its small, but good enough to get a feel and learn with real money, but i am planning on using leverage with a cfd account once i got my skills up. i do not care about owning shares etc, cfd sounds good to me. And i hear that cfd is the best way for me to short sell uk equities also. I might even use the cfd account to buy shares the traditional way. but with the added feature of using leverage and also shorting. ..... am i talking sense? ..... and i might try to take advantage of trade settlement periods if i can....

i dont know what spreadbetting is....

 

[OpalSky]

Well spread can increase/decrease for a number of reasons, for example as the market reacts to news, but generally, under 'normal' / steady conditions, spread is indicative of liquidity.

So you've got into some trades already? (just couldn't wait huh? ;-). What platform are you using? have you actually bought shares? On your platform you should be able to compare the spreads for companies with markedly diff capitalisations (100Mill, 10Mill, 1-2Mill). Try and use shares with similarish prices.

You mention 'affordable' shares. Not sure what your criteria is, but bear in mind there are around 100 companies in the FTSE250 with prices <£2 at the mo'.

EOD = end of day. Because my preferred timescale for trades is days/weeks (i don't like being a slave to the screen and like you I've a day job), i do most of my review, analysis and order placement at the end of the day.

Don't know what spread betting is? I guess that tonights homework then. Q. Name two significant differences between CFD's and spread betting share prices? (Helpful Hints. stamp duty, margin requirements, commissions ;-) - things all good traders should keep track of).

 

[jonboy123]

Well spread can increase/decrease for a number of reasons, for example as the market reacts to news, but generally, under 'normal' / steady conditions, spread is indicative of liquidity.

So you've got into some trades already? (just couldn't wait huh? ;-). What platform are you using? have you actually bought shares? On your platform you should be able to compare the spreads for companies with markedly diff capitalisations (100Mill, 10Mill, 1-2Mill). Try and use shares with similarish prices.

You mention 'affordable' shares. Not sure what your criteria is, but bear in mind there are around 100 companies in the FTSE250 with prices <£2 at the mo'.

EOD = end of day. Because my preferred timescale for trades is days/weeks (i don't like being a slave to the screen and like you I've a day job), i do most of my review, analysis and order placement at the end of the day.

Don't know what spread betting is? I guess that tonights homework then. Q. Name two significant differences between CFD's and spread betting share prices? (Helpful Hints. stamp duty, margin requirements, commissions ;-) - things all good traders should keep track of).

so the smaller the spread means the more the liquidity?
and the larger the spread, the more illiquid? eg not much volume being traded...

- i basically want a SMALL spread, right?

Yeah i bought shares before i knew a damn thing....lol....have learnt lots since, and its been going fairly well. Learnt an expensive lesson though. Classic case of made a profit, hastily put it back into another trade, lost the profit, finding hard to cut loss and move on.

Im using selftrade, hoodless, and soon to be TDWaterhouse.
I just have normal trading accounts. So will be opening a CFD account soon.
Yes ive bought and sold shares.
Ill compare the spreads later, cheers.
"affordable"shares, i meant rather than buying expensive shares like british american tobbaco, where i would need to invest LOTS to see a worthwhile return, trading eg 20p shares with potential can make it more worthwhile, with my relatively small trades (£500+)

I guess it doesnt really matter if a company is FTSE or AIM, as long as the reasons for going with them are valid.

EOD.... so you make a trade late afternoon? Or is that a platform?
(ive noticed good opportunites first thing when market opens)

i need to read up about spreadbetting. But i need to feel comfortable with CFD also. Takes a while for something to sink in properly.

Do you short sell? Was i right in saying CFD is best and most practical way to short sell uk equities here in uk?

 

[OpalSky]

Yip, the smaller the spread the less the price has to move to get you into profit.

Ok, so you've bought shares. Then you'll be on nodding terms with the concepts of commission and stamp duty - the 'overheads' that go with these types of trades. You'll have seen then that all these little %'s here and there start to eat into your profit. ;-(

I hear what you say re the 20p shares, but I think you're mistaking price for company size / potential for rapid growth - which you can argue is easier for a small company than large multinationals.

For my trading, i used to place orders in the evening (i was spreadbetting, and yes did go short on occasions. I've been out of the loop a while and am just coming back into trading again now, so I'm seeing the lie of the land at the moment as it were).

In terms of whether a CFD is the best method for you to go short (you could spreadbet) you need to have an idea as to the frequency, duration and value of your trades (and success rate!). Go the SB route for no (capital gains) tax and no commission (although you might argue the SB companies cover this with their (slightly larger) spreads and financing rates).

Certainly once you've been through a few trades you'll see how all these factors come into play and which are the more significant for your style. And if necessary you can move to the other way of doing things ie CFDs-->SB or vice versa... but naturally its better if you have an idea of these things beforehand. Good luck!!

 

[jonboy123]

right, but spread changes all the time and daily.
So for several day swing trading, or longer term like few weeks, the spread matters less, right?
I mean, i guess spread matters way more when day trading.
Or is spread one day indicative of the general spread generally?

so the smaller the spread means the more the liquidity?
and the larger the spread, the more illiquid? eg not much volume being traded...

Yeah as soon as you buy shares, the P&L is at a loss, as the commission etc eats you.

"I think you're mistaking price for company size / potential for rapid growth - which you can argue is easier for a small company than large multinationals." I think i get it, just because a share is cheap does not mean it will grow etc. But potential for rapid growth companies i think have cheaper shares as they are up and coming.

place orders in the evening? I cant place orders after 4.30pm.

In the USA, i think people can use regular trading accounts to go short on stocks.
But its diff here in uk.
Selftrade told me they dont do short selling AT ALL....even though they offer CFD accounts and spreadbetting accounts.... ive emailed them to confirm. ...they told me covered warrants were closest thing to shorting they did.

So spreadbetting allows shorting also i see. Ill look into it.
Yeah i wont just start CFD'ing without preparing myslef.

thankyou.

 

[OpalSky]

You're right, spreads do change daily but you'll see some stocks consistently have larger spreads than others depending on perceived uncertainty or risk in the price. And yes if you're making fewer trades but chasing longer/larger price movements then you can cope with a slightly higher spread. On the other hand the scalping daytrader who capitalises on (relatively) small price movements would be completely stymied.

When i mentioned placing orders in the evening, these were stop and limit type orders that got placed in the system, ready to be executed the following day/s, as and when the price passed the appropriate levels. You'll hear all about these when u read up on CFDs and SBing. They weren't market orders to buy and sell, there and then.