CoolerKing
Junior member
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So you think you know spread betting huh?
I suppose you probably had a bit of extra income and decided to open up an IG Index account and just trade the minimum. No big deal. The slick video on the front page made it look so easy.
Sure there is a disclaimer warning you of the pitfalls but how could you pay any attention to that whilst envisaging the buckets of money you are about to make.
Let's say you open up an account on Tue 15 May and you deposit £100 and begin to make small trades based on political developments. The indices mainly - like all good bettors you stick to what you know. 10p a point.
By the end of the day you are in profit over 34%. Well hell, this is easy! We are in a bear market, the collapse of the Eurozone is inevitable and stocks can only plunge further. Short at the right time and dip in and out collecting £10-20 a trade.
But...
If I had 10 times more money to play with I would have 10 times more profit. Not £30 but £300! £300 is like a weekly wage! And tax-free! So you increase your deposit and take some medium positions which ultimately go as you predicted and within 24 hours you have leveraged your £1000 in £2215. No problems. :cheesy: The confidence begins to grip you however and your strategy and discipline quickly erode as the possibility of profits overwhelms your rational brain.
What's that? Facebook IPO? Tomorrow. Well, that is simply muppets bait. A mugs game. Plus, no one is as smart as me. They will prob buy the stock.
For this one trade. This one, no other I am going to put it all in there. It's a no lose proposition. The stock will clearly bubble. The hype is crazy, people are going nuts for this.
The suckers.
Then I will short it on the collapse from $75 and double my profit. Actually this is a no brainer so I will prob just put the rest of my 10k savings into IG Index and use that as leverage.
Groupon - bubbled. LinkedIN - bubbled. Zynga? Well that was just an exception. This stock is going to go stratospheric.
Here we go. The stock is delayed. Market is ready to burst and we are off to the races...what...my internet connection? I don't know - broadband I think. Is it fast? Why does that matter...oh damn, it has leapt to $45 I need to get in there quick!!
£100 a point!! Denied.
OK - then £20 that will still double my 10K. Ticket Issued. Yes.
...wait.
..........what?
Why is this stock collapsing?
Why is my account turning red?
Is that my 10,000 pounds disappearing??????
I was so smart. The market was so stupid. Sh*t!! How do I stop this? You are probably so paralysed you forget to even click sell.
You probably have you iPhone set up to receive emails and now it beeps once, twice, three times....you bury your head in your hands.
It's a margin call. They will close your position down £13,000.
You feel like vomiting. It's not like you bet with your college tutition or car payments or money you could have spent on your family. Right?
Wait, the column has changed from -3k to 5k up. They scaled your bet back to £8 instead of £20 and you now have £3k to play with. You watch the shares climb to $41.8 praying for a miracle. They drop again.
At $40 dollars you have the sense to close your position completely. You have 3k of 12 originally. You short the stock and it falls another 2 dollars giving you 1.5k back.
The market closes and you realise you have blown what your father considers a year's worth of wages. You think about your gf and your daughter and what that money could have purchased.
Oh sure, you probably saw the headlines in your mind...from 10k to 100k in a weekend. Spread Betting. For smart people. Like me.
A bit of research reveals that the underwriters put an artificial ceiling at $38 and Facebook cannot go lower than that till Monday. If even then. You begin to despise the market and it's puppeteers. If they let market forces take effect then you would be black in the black.
Your gf supports you, tells you it will be OK. She asks if you are going to leave it shorted until the shares descend or risk a market revival and lose it all completely.
Well are you?
Your smart right - the same thing cannot happen twice. FB shares must be worth $20-24 at best. At best.
Leave it short and get your original stake back or cash out a loser?
Time to watch Rogue Trader again...
I suppose you probably had a bit of extra income and decided to open up an IG Index account and just trade the minimum. No big deal. The slick video on the front page made it look so easy.
Sure there is a disclaimer warning you of the pitfalls but how could you pay any attention to that whilst envisaging the buckets of money you are about to make.
Let's say you open up an account on Tue 15 May and you deposit £100 and begin to make small trades based on political developments. The indices mainly - like all good bettors you stick to what you know. 10p a point.
By the end of the day you are in profit over 34%. Well hell, this is easy! We are in a bear market, the collapse of the Eurozone is inevitable and stocks can only plunge further. Short at the right time and dip in and out collecting £10-20 a trade.
But...
If I had 10 times more money to play with I would have 10 times more profit. Not £30 but £300! £300 is like a weekly wage! And tax-free! So you increase your deposit and take some medium positions which ultimately go as you predicted and within 24 hours you have leveraged your £1000 in £2215. No problems. :cheesy: The confidence begins to grip you however and your strategy and discipline quickly erode as the possibility of profits overwhelms your rational brain.
What's that? Facebook IPO? Tomorrow. Well, that is simply muppets bait. A mugs game. Plus, no one is as smart as me. They will prob buy the stock.
For this one trade. This one, no other I am going to put it all in there. It's a no lose proposition. The stock will clearly bubble. The hype is crazy, people are going nuts for this.
The suckers.
Then I will short it on the collapse from $75 and double my profit. Actually this is a no brainer so I will prob just put the rest of my 10k savings into IG Index and use that as leverage.
Groupon - bubbled. LinkedIN - bubbled. Zynga? Well that was just an exception. This stock is going to go stratospheric.
Here we go. The stock is delayed. Market is ready to burst and we are off to the races...what...my internet connection? I don't know - broadband I think. Is it fast? Why does that matter...oh damn, it has leapt to $45 I need to get in there quick!!
£100 a point!! Denied.
OK - then £20 that will still double my 10K. Ticket Issued. Yes.
...wait.
..........what?
Why is this stock collapsing?
Why is my account turning red?
Is that my 10,000 pounds disappearing??????
I was so smart. The market was so stupid. Sh*t!! How do I stop this? You are probably so paralysed you forget to even click sell.
You probably have you iPhone set up to receive emails and now it beeps once, twice, three times....you bury your head in your hands.
It's a margin call. They will close your position down £13,000.
You feel like vomiting. It's not like you bet with your college tutition or car payments or money you could have spent on your family. Right?
Wait, the column has changed from -3k to 5k up. They scaled your bet back to £8 instead of £20 and you now have £3k to play with. You watch the shares climb to $41.8 praying for a miracle. They drop again.
At $40 dollars you have the sense to close your position completely. You have 3k of 12 originally. You short the stock and it falls another 2 dollars giving you 1.5k back.
The market closes and you realise you have blown what your father considers a year's worth of wages. You think about your gf and your daughter and what that money could have purchased.
Oh sure, you probably saw the headlines in your mind...from 10k to 100k in a weekend. Spread Betting. For smart people. Like me.
A bit of research reveals that the underwriters put an artificial ceiling at $38 and Facebook cannot go lower than that till Monday. If even then. You begin to despise the market and it's puppeteers. If they let market forces take effect then you would be black in the black.
Your gf supports you, tells you it will be OK. She asks if you are going to leave it shorted until the shares descend or risk a market revival and lose it all completely.
Well are you?
Your smart right - the same thing cannot happen twice. FB shares must be worth $20-24 at best. At best.
Leave it short and get your original stake back or cash out a loser?
Time to watch Rogue Trader again...
This is a true story. I posted it to show how despite all of the advice and literature regarding spread betting the process can quickly overwhelm someone new. The excitement and the possibility of quick profits can easily override the sanest of individuals.
Have I learned my lesson? I would love to say yes. That I plan to use my 3k to place small <5% trades and rebuild my capital base. Unfortunately I have bills to pay. I am prob going to leave my 4.5k on a position of £12 SELL of FB shares hoping they break the $38 ceiling over the next 7 days. At present I would be happy just to regain 75% of my capital and close out.
Will I still Spread Bet? Yes. I will stick to what I know and have experience in - the impact of political statements on financial markets (FX, Indices and Bonds).
Here's hoping.
Steve
Have I learned my lesson? I would love to say yes. That I plan to use my 3k to place small <5% trades and rebuild my capital base. Unfortunately I have bills to pay. I am prob going to leave my 4.5k on a position of £12 SELL of FB shares hoping they break the $38 ceiling over the next 7 days. At present I would be happy just to regain 75% of my capital and close out.
Will I still Spread Bet? Yes. I will stick to what I know and have experience in - the impact of political statements on financial markets (FX, Indices and Bonds).
Here's hoping.
Steve
