Questions from a Newbie!

[soosta]

OK, I am thinking about dabbling with spread betting over the next year or so whilst at University for a few reasons. Firstly, as it is a relatively cheap way to trade and secondly, as it will expose me to many instruments and markets. This I hope will help me learn to trade and eventually move into other areas.

I have some (lol!) questions to ask which I feel for myself, but also others would be beneficial to have answered. Here goes...

1) Is spread betting a realtively hard way to make money trading or can a newbie expect to make a profit (however large or small) over a period of say 6-12 months?

2) How much are the absolute minimum captial requirements to operate?

3) What would you suggest as an initial amount to bet per point movement?

4) How long would you advise a newbie to trade a demo account for?

5) What instruments are best suited to beginners? Indices, equities, shares, forex?

6) Where can I find trading strategies online for reference? Or which books should I read that will educate me similarly? (There are a few on amazon but any recomendations would be great!) I want to develop a strategy ideally, not just copy someone elses!

7) What company is the best for a newbie and why? Does it provide live feeds and a charting program for example?

Thanks very much for taking the time to read this. Any feedback would be much appreciated. Im sure many beginners like will find answers to these questions very useful!

 

[rossored]

1) Is spread betting a realtively hard way to make money trading or can a newbie expect to make a profit (however large or small) over a period of say 6-12 months?

Depends whether you're any good at it or not!

Seriously, some people will find trading easy and others not. Some will tell you that it will take 1 year to be profitable, others will say it takes 3 years. It depends on you.

2) How much are the absolute minimum captial requirements to operate?

Depends on which SB company you go with. Some will do it from a few hundred pounds.

3) What would you suggest as an initial amount to bet per point movement?

As little as possible. Some companies will do it for as little as 50p/point, which I would suggest is a good starting point if you don't want to blow a chunk of cash.

4) How long would you advise a newbie to trade a demo account for?

Until such time as you are consistently profitable. And bear in mind that whatever your results on paper, it is unlikely that they will be the same IRL.

5) What instruments are best suited to beginners? Indices, equities, shares, forex?

No hard and fast rules here. Trade something that's liquid - so indices, US stocks and Forex, really.

6) Where can I find trading strategies online for reference? Or which books should I read that will educate me similarly? (There are a few on amazon but any recomendations would be great!) I want to develop a strategy ideally, not just copy someone elses!

There are some strategies posted on this site - have a dig around using the 'Search' facility at the top of each page. You will also find e-book/book/website recommendations in the 'Resources' forum on this site.

7) What company is the best for a newbie and why? Does it provide live feeds and a charting program for example?

Most SB companies will provide a feed/charts of some such, but it is best asking them. Visit some of our sponsors and you ought to get most of the details from their websites.

Thanks very much for taking the time to read this. Any feedback would be much appreciated. Im sure many beginners like will find answers to these questions very useful!

You're welcome.

 

[Satori]

1) Is spread betting a realtively hard way to make money trading or can a newbie expect to make a profit (however large or small) over a period of say 6-12 months?

No harder or easier than any other way. It's just a matter of tuning in to the particular way of trading.

2) How much are the absolute minimum captial requirements to operate?

No minimum really, but you need enough funds to be able to work a system successfully without going broke.

Figure on 7 out of 10 trades losing. You can probably do better than that, but if you work on that it means you're focussed on stopping out the seven losing trades fast (within reason - see notes at the bottom) and letting the 3 winning trades run to cover the losses and make a profit.

3) What would you suggest as an initial amount to bet per point movement?

That depends upon the system you trade to and the money management techniques you use.

A simple system is to take all your funds and divide it by, say, 10 for 10 equal investments. For each investment work out where you want your stop loss and divide the 1/10th of your investment funds by the number of points between the open and the stop loss; that'll give you the £/pt bet and keep the monetary risk the same for each investment.

Now there are far more involved ways to work out position sizes (based on risk, average price movement, standard deviations etc.) that you could investigate if you wish, so take the above only as a simple example.

4) How long would you advise a newbie to trade a demo account for?

Well that's a tough one. In theory I'd say as long as possible until you're happy with your system, but it's of limited value as one simply doesn't treat it the same as when trading with real money.

5) What instruments are best suited to beginners? Indices, equities, shares, forex?

Anything will do as long as it's liquid enough to provide some decent movement.

6) Where can I find trading strategies online for reference? Or which books should I read that will educate me similarly? (There are a few on amazon but any recomendations would be great!) I want to develop a strategy ideally, not just copy someone elses!

Good idea to develop your own that suits a style you're happy to trade too, but it's a good idea also to refer to existing successful strategies to build your system upon. If you do some research and reading to get an idea of how some strategies might work, you'll soon find out that there are no 'golden' strategies and that money management rather than entry signals is the key to better investing.

7) What company is the best for a newbie and why? Does it provide live feeds and a charting program for example?

Look for a company that will let you bet small to start with. 50p/pt for the first few investments just to get used to it.

Thanks very much for taking the time to read this. Any feedback would be much appreciated. Im sure many beginners like will find answers to these questions very useful!

The spreads make short term trading difficult through an SB company, so look to trade over days at least (preferably weeks).

Make sure you leave enough room with your stops for a security to move, yet keep them within your portfolio limits. It's better to have a lower £/pt bet and hold your defined stop loss rather than moving the stop too close and getting stopped out. You do, however, want effective stops, so they can't be at a ridiculous distance.

Rememeber that SB companies would sooner take your money than not so you may see 'strange' slippage on your deals or what look like 'unfair' prices. Also, if they make a mistake with a price and you profit they'll take the money back; if they make a mistake with a price and you lose, you're unlikely to see a penny of it. Unless it's really serious (enough to involve the FSA) you may as well get used to it and treat it as 'part of the system' you're working within. In return you get leverage and a tax-free way to invest in the stock market.

 

[PitBull]

Soosta

I can give you some honest answers that should be a bit more helpful.

1) Dont expect to make a profit in six months, however, if you are a quick learner and already understand Technical Analysis pretty well, then you might break even. More importantly, you can have the best method in the world and understand TA inside out, but if you cant pull the trigger due to psychological aspects of greed of banking every small profit and fear of losing, then you will not succeed. This aspect to trading is the hardest to master. You must constantly evaluate yourself and the trades you make, i.e. complete a trade journal with reasons why you entered and exited trade.

2) Again, SB companies can let you open an account with £200, but I would suggest a minimum of £1000. This will then enable you absorb more losses than with 200 or 500, if you keep your bet size to a small fraction, 2% max risk is ideal but with a small account I would use 5%. Look at it this way, 5% MAX risk gives you 20 goes from a pot of £1000, 2% (£20) gives you 50 goes, etc. This leads us onto your next question.

3) Your bet size depends on what broker you go with. Finspreads do £0.5p but platform and charting not too good. My recommendation would be to use Deal4Free, but their minimum bet size is £1, but they have real time charting and a good platform (MarketMaker) which you can personalise on your desktop. I would not recommend increasing your bet size until you have AT LEAST doubled your money.

4) If you have a trading strategy written up, no, not in your head, but written down, then start with a demo account. However, paper trading is futile. It will not test the demons in your head like trading with real money, so try out your strategy, get some confidence with it and move on. I would suggest 4 weeks as a minimum to paper trade.

5) Instruments for a newbie. Start with slow paced UK FTSE 100 stocks, preferably expensive blue chip stocks that are very liquid. Indices are too random for newbies to guess, US stocks (most) are too volatile and will wipe you out in no time, and also Forex is too volatile for a newbie.

6) You can find trading strategies here on T2W, I dont think you'll find them anywhere else. See FTSE Beaters Basics of Trading thread. I would start with a basic support and resistance strategy. Buy at support and sell at resistance, in a nutshell! Then you can move onto identify set ups through chart patterns, indicators, moving averages etc.

7) My three recommended SB companies are: Finsppreads, Deal4Free and CapitalSpreads, but I am currently using Deal4Free.

I hope you find this useful. Please feel free to PM me for further advice.
Pitbull

 

[soosta]

Thanks for the replies guys!! I must say this board is very useful

As I'll be at uni I am thinking about trading for a max of say an hour in a day for say 3/4 days out of a week. Is this wise or not? How would my trading be effected by this ie what could and what couldn't I trade?

No more questions after this I promise!

 

[SOCRATES]

Landings

It depends upon the "landing". It has to "land" before it is of any use. It may or my not have landed at all.

Now think of this also......

You are giving yourself a window of one hour a day.

An hour a day can be a very long time, or very short, it very much depends.

 

[Anonymous]

an hour in a day for say 3/4 days out of a week

In summary, there are 2 ridiculous methods to trade: 1) the busy way and 2) the lazy way

1) actively look for (what wise guys refer to as) arbitrage opportunities, sit in front of the screen, stare at it for hours to look for things like divergence, and act and react, which can sometimes be very hair-raising, eg. the computer breaks down at a critical moment.
2) place your order and go away, something easier termed as cut-loss-ride-those-profits, which has less certainty of profits, but save on operating expenses.

what could and what couldn't I trade?

Depends on the amount of your risk capital and the method you are using.

 

[Satori]

As I'll be at uni I am thinking about trading for a max of say an hour in a day for say 3/4 days out of a week. Is this wise or not? How would my trading be effected by this ie what could and what couldn't I trade?

Well, with my spread betting accounts I rarely ever close a trade. I set the trade up, set the stop and let it run. What I do do is check my stops every day and adjust them appropriately and that takes about 10 minutes a day, so yes I think it's just about workable although it would be better if you could at least look in on every trading day.

 

[SOCRATES]

Well, I am gobsmacked, I really am !

 

[wwatson1]

Hit the road

soosta, It's a long slow degrading journey, Hope you stick it out and good luck to you.

 

[SOCRATES]

Yes, good luck, but never overlook the significance of the obvious, it has a habit of staring you right in the face.

 

[wwatson1]

Socrates you are like the riddler off batman, looking at your avatar I see you are also shaped like an Egyptian pyramid. You are an interesting member :idea:

 

[Anonymous]

Looking at the avatar, it gives the impression either he is a one eye genius or a one eye pirate, hiding in caves or religiously meditating in prayer rooms, and it also gives another clue, he may be an ardent collector of Uncles Sam's notes, which can be a very profitable hobby if anyone knows what they are, like one small circular item can sell in the amount of US$1,000,000 or thereabouts.

 

[wwatson1]

 

[soosta]

Why are there share listings on capital spreads for different months!?

 

[Anonymous]

Tesco, the retail superstore sells a diverse range of products including groceries, books, CDs, electronics, and wine, every little helps not just the consumers but also Tesco itself (known as the bottom line).

Some like it hot, some like it cold, some like it in the pot, so and so.

 

[SOCRATES]

I am going to try with this one last time.

Supposing you visit an art gallery, and supposing you are shown a very large and complex painting.

Suppose you walk right up to it and put your nose 3 inches away from the canvas.

What do you see ?

Not very much.

Now suppose you now take several steps back and look at it again.

What do you see ?

You are able to see all of it , and are able to look at it properly.

The conclusions you may now derive could be competely different.

 

[Anonymous]

If I put my nose 3 inches away from the canvas, I can see many details of the very large and complex painting , and possibly the artist's pencilling before he added the colours, with the aid of a loupe I should be able to see better, the texture of the paper, the hidden signature, whether it's a masterpiece or a cheap reproduction.

If I take several steps back and look at it again, with my near-sightedness and astigmatism, if I try to understand what it is I will probably faint.

 

[SOCRATES]

Quite so.

 

[jsd]

OK, I am thinking about dabbling with spread betting over the next year or so whilst at University for a few reasons. Firstly, as it is a relatively cheap way to trade and secondly, as it will expose me to many instruments and markets. This I hope will help me learn to trade and eventually move into other areas.

How do you visualise yourself with trading ? I mean whats your ultimate ambition with it ? do you know that yet ? 1 hour a day and I assume thats just the trading opportunity window (your window of availabilty /opportunity may well be going against the grain of Market opportunity, ie dont expect the market to be moving (volatile) just because you are in your allocated time slot they become volatile at price/activity points not just because its something o'clock etc.)

What timeframe do you need to be working in ? some of the spreads with Spreadbet firms will be too wide as a percentage of (likely perceived ) market range if you are considering very short term trades within the hour. If its a fixed hour then I would suggest you look at trading the open for movement as the best senario for your position can you be available for an open ?

That 1 hour a day is it a fixed time ? what time is it ? what markets are you looking at ?

Study psychology get to know about ego's and how we form our belief systems.

If you want to treat it as a hobby....... then it doesn't matter if you dont make any money right ?people pay money to enjoy their hobbies ,just enjoy.

There is a lot to learn ,unlearn and experience probably equivalant and beyond studying for a degree, are you giving that 1 Hour a day ? what would "most likely" happen if you did 3 years of just 1 Hour A Day at Uni Pass or fail ? No shame in it just most likely outcome.



jd