Spread Betting Beginners Views

[Parish]

Ok so here's how i got here:

I've been think of trying this spread betting for a while and even opened a "training/virtual" account with TradIndex.com. Now i had a few flukes and even made 10k in one week. Actually I went away on holiday and came back to it after a week.
But recently i took a huge gamble in itself and purchased the Principles of Profit book from spreadtradingsecrets.com. (Note: I'm not pushing this book at all). So i read through it and thought yeah i can do that.
So when i got paid this month I put about £100 into an account, this time with capitalspreads.com. The reason i changed brokers is really only because i work between opening hours and it's the only one i can get to through the works proxy!
Anyhow I watched and waited the FTSE 100 Daily for a while and even used some of the charting options included in the members area. Ok so my first trade was for the index to go down. So i sold for just £1 per point. This small amount is because I'm a beginner and didn't want to lose to much. Anyway so i literaly left the open position on the screen and went back to it whenever I had five mins. Through the day the position went right down as far as -£17. But i left it and just continued to watch in the hope that it would turn around. After lunch i had a bit of time so i checked again and it had gone to £5. Wow! I was actually in profit, making money, winning this game. So i left it a little bit more. Finally i closed the position @ £14.
Ok guys so the pros out there will think that £14 in one day is pretty pants. But if we look at this in a more financial pov we will see that my initial £30 that i had to put in to cover my margin etc. i actually closed the position with just short of 50% profit on my investment. Which for me, as a beginner is pretty darn good. IMHO.
So i thought two thing. First I'll let my friends on trade2win.co.uk know how i finally got on after my first trade and second I'll help other beginners with the main points from my story.
The spreadtradingsecrets.com book is an excellent staring point. It was a big step for me to buy it at £137. As this is a lot of money for a newbie. But after searching amazon and trade2win review section there seemed no other choice.
Firstly guys, as you can see from my story, you need to be patient. I had faith in the system i was using (you would too if you paid £100 for it, ha ha). You had to have faith in your system to open the trade anyway so see it through, may as well - it's gambling!!!
Secondly, you don't need a large amount of money to get started. I only used enough for each trade. Virtual accounts are a great way to get started. Because you get a load of cash to play with. However even when using the fake money i tried to make realistic trades by going with just £1 or £2 per point.
So from here i will continue with my small bets until i make £100 then i'm gonna go to £2 per point. Then on to £5 per point etc. Too many bad trades and i'll go back down again until io get it right. This is my plan and i'm sticking to it.
Hope this helps some new starters get over their fears at the start.

And finally my thanks go out to AussiTrader

 

[barjon]

parish

Your £30 "investment" was just to get you in the game. You actually risked £17 (more if you were prepared to let it run into loss even further) to make £14. You'll need a very high percentage win rate to make money over time with that sort of risk:reward ratio. I trust your book covers money managment.

good luck and good trading.

jon

 

[newboy]

Well done Parish
Was your entry & exit as per the method you are following,and was your 17 points draw down within the parameters of the system.Once again well done.
newboy

 

[ben_catt]

Well done for making some money on your first trade but beware.....

Betting £1 a point means you are 3-4% down on your total capital as soon as you place your trade (taking into account the spreads).

I really think you had the right idea in the first place by using your virtual account. Carry on using this and in the meantime build up some capital to use for real trading.

At the end of the day, you may get lucky but I feel you will be wiped out very quickly betting £1 a point with only £114 in your account balance.

Best of luck,

Ben

 

[Parish]

Thank you for all your best wishes.

In regards to the risk. I am a new spread better with limited capital, so risking £1 per point is really my only option as it's the lowest i can do with capitalspreads. Also i am only using the lowest possible to build up capital as suggested then i will move to higher amounts per point.

Yes the Principles of Profit worbook does contain a chapter on Money Management.

#PJ#

 

[Roberto]

Good wishes to you indeed. The only thing I'd say (and I'm sure AussieTrader would say the same either by PM or in his book) is: don't try to go up too quickly from £1 to £2 per point! At the moment, as suggested above, there's a _great_ disparity between your capital and your position-sizing (albeit that you have a reason for that, of course). I think from your post here that I trade much the same way as you, with something very simple and effective for indices, but I have £1,000 of capital for every £1-unit staked on the FTSE.

 

[Parish]

Unfortunately i cannot talk about how i trade as it will give away the Principles Of Profit and my buddy Aussie will fly to the UK and kick my novice ass

I just like to be as safe as possible.

Also as my capital grows the risk will be reduced as i'm not using as high a percentage of my capital.

Thanks for your comments though, much appreciated.

#PJ#

 

[Parish]

parish

Your £30 "investment" was just to get you in the game. You actually risked £17 (more if you were prepared to let it run into loss even further) to make £14. You'll need a very high percentage win rate to make money over time with that sort of risk:reward ratio. I trust your book covers money managment.

good luck and good trading.

jon

Barjon, to be honest i simple made the trade and believed in it enough to just leave it.
Keep things simple
As i'm sure things will get harder by themselves as time goes on.

#PJ#

 

[Volatile]

Parish, I believe if you ask Capital Spreads nicely they'll let you spreadbet using $ currency instead of GBP - this works out more like 60p per point I expect. Worth a try if you want to keep your bet size down!

 

[Roberto]

Also as my capital grows the risk will be reduced as i'm not using as high a percentage of my capital.

Yes, clearly the risk will be reduced as your capital grows. But at the moment you're using a very high percentage of your capital, so it needs to! It seems to me, as I read and chat more and more on this subject, that the more experienced a trader is, the smaller is the proportion of his capital that he risks on any one trade.

Dr. Alexander Elder (whose books are wonderful) urges people never to expose more than 2% of their capital in any one trade. I believe that most serious spread-betters are much closer to 1%. With capital of £1,000 and a stop-loss of (for example) 20 points on a FTSE spreadbet, risking 1% would make your stake 50p per point and 2% would make it £1 per point.

 

[stevespray]

Parish.....sorry to bring you back down to earth with a bump but.......You can be sure that, if you carry on trading the size that you are, then you will lose your capital. Put simply, your risk is far too high. The most experienced traders would only normally risk around 1% - 2% of their risk capital on a trade of this type. At one point during your trade you were suffering a 17% draw down in your risk capital. This is not acceptable if you are to survive in the longer term. "I just watched it in the hope that it would turn around"....classic phrase from someone who will not admit that it was a bad trade.

Your trade is drawing down your capital by 17% and you are sat there in hope......

My advice is to carry on betting using £1 per point until your capital is gone. When this has happened you will need to review your failure. This will help you understand the maths surrounding money management. After that you will be one small step closer to success.

Good luck,
Steve.

 

[sidinuk]

Why do the Gods of gambling always give you a winning bet to start you off? Is it like a drug dealer giving you your first hit for free?

 

[Parish]

That's fair.

 

[donaldduke]

And when you trade small to try out a new system you win on most trades, but you when increase to full
size your system immediately enters a long drawdown and losing streak.

Anyway back to orginal point,

Parish, you are not really trading but gambling. A trader is always in control of this trades, has a stop
loss (either real or mental) in place. Trades are not just left to eventually come good! Thats what
a gambler does. Lets say if there was a strong rumour that Bin Laden had been caught, the
market could have rallied 50+ points in minutes and your account would have been wiped out.
Now that doest really matter for a 100 quid account but I doubt you would take such a risk on a 10000
account.

 

[stevespray]

No Probs Parish, look upon early losses as education. Of course they are only an education if you choose to review these losses. If you keep stakes small then it is a cheap education. As stakes grow psychology also becomes a much bigger factor. You will find it harder to detatch yourselve from the general value of money at a grass roots level.

In my opinion you can not start spreadbetting with £100 if your mininmum bet size is £1 per point. The laws of larger numbers are stacked so far against you. The chances of you winning over a stretch of even 20 bets is very small.

Another thing you need to consider is how much of an advantage any given system provides for you. THERE ARE NO HOLY GRAILS. All systems can do is install good habits and use laws of larger numbers to their advantage. I can asure you that you are not following the system as it is laid out. You simply can not be. You are ignoring the simple factors of money management. The spreadbet company is waiting to take your money just like a casino.

Steve.

 

[Parish]

I've read, read, and re-read the book i bought many times and i am not ignoring the "rules" of the system.

I made another ten points again today using the system and i'll try again tomorow and monday and tuesday and i log all my trades and then i can find where i'm goign wrong. The amount of money i lose will spur me to get it right next time.

That said i do appreciate all your guidance and insights.

Thank you

#JayWalker Jim#

 

[donaldduke]

Parish,

You are breaking every rule in the book. But atleast you are only trading £1 a point, which is really
good.

Your trading will improve over time. However you will need to keep refilling your account
up and meeting margin calls many times before you do.

Better to start with a few thousand pounds, bet a £1 a point and use a real stop loss rather
than playing games and thinking you are smart because you are getting a 50% return on
each trade.

 

[stevespray]

Parish.....A couple of points....

It's my understanding that Cory's system is a daily trend following system ? You seem to be trading it intra-day. I'm not sure how this works. Secondly, Cory advocates never risking more that 2% of your account balance on a single trade. You seem to ignore this rule completely.

Steve.

 

[DaveJB]

Just to add my 2p, the point is that with only £100 in his account every point (at the minimum £1/point that Capsreads requires... ignoring the $ possibility for a moment) will cause a 1% change in his account. Given that the FTSE etc move much further than this in an eyeblink he has no chance of being remotely close to the PoP (etc) suggested 2% risk except for brief moments as the price whizzes past.

To comply with the trading rules and money management side of things requires far less volatile trades to be made, low volatility UK shares perhaps, in the hope of winding the risk down to a much lower level. It's just about impossible, surely (I stand ready to be corrected <g>) to spread bet an index from a £100 account without going way over the 2% rule?

It's not really fair to PoP - you are ignoring a lot of what is in that book, the signals are only a small part of the system.... I can understand why you are happy so far, but you might consider trading something with a smaller risk and following the money management side of PoP as well? You'll be in the game longer if nothing else!

(Good luck anyhow)
Dave

 

[Parish]

Note to self:

Don't post here again, everyone bursts your bubble.

#PJ#