spread betting help and advice

[iceman17]

Hi Everyone,

I have been spreadbetting since jan of this year and find myself becoming very frustrated. first off, the spread and the minimum deposit required are so high (i use i.g btw)that i find myself ignoring stocks and only betting on currencies. and then for example last night i went long on the GBP/CAD with a 30 point stop only to be stopped out and then for this pair to trade up by 40 points from my initial trade. this an ever increasing scenario now.

Any advice or help would very much be appreciated.

Iceman17

 

[Jaydee]

Hi Iceman

I have never traded this particular cross but I do have experience of the FX majors, so I will try and help.

Can I start off by asking what sort of time frame you are looking at and how many pips are you looking to make?

JD

 

[CHRISTO9HER]

This post may be a little too vague for the experienced traders on here to help you too much. But I may be able to point you in some kind of general direction.

Firstly, all trades you enter should be part of a larger strategy, whether discretionary or mechanical, and so the outcome of each trade shouldnt be a big deal. If you find yourself getting upset about a single trade, you probably either risked too much capital on it or it was not part of a repeated strategy. If you took the best strategy ever created, waited for 1 signal from it and judged it based on that then it would be no better than any other system!!

You really want to aim to get a methodology that you can be confidant will give you a positive expectancy over a large number of trades. This way, when you enter a trade, you actually aren't too bothered about what happens to it. If it goes against you, you just know that it was one of the 40% (or whatever) that doesnt go your way.

However, if you are having the problem of picking good trades but often getting stopped out before it has the chance to go your way, there are two possible things that you may wish to consider.

* Are your stops too tight for the time frame on which you are trading? If you are generating signals that you expect to come good over the next day, for example, then your 30 pip stop may be too tight.

* Is there anything you can do to time your entry a little better? It sounds from the example above that you may have seen the major move coming, but you may want to think about how you can time the entry better, maybe by dropping to a lower periodicity in the chart.

Anyway, I hope this helps in some way. Keep at it.

Chris

 

[shadowninja]

I used to use IG and had a similar thing happen to me when swing trading. It's the huge spreads that kill the fun. I decided to demo with Oanda for a bit. Am now dealing in microlots on Alpari but will go back to IG for tax reasons.

In your shoes, I would demo with Oanda to check your system is working. When you're ready, either move to Alpari to test for minimal risk or move back to IG and ask them to remove the guaranteed stop loss (which is the reason why the spreads are so huge).

 

[iceman17]

hi Jaydee,

I would like to make from 50-100 pips.

i was looking at the 1 hour time frame when i entered the trade and the stratergy was if the pair was trading above the 20 day MA then i would be long untill the pair crossed below and because of the weakness shown by the CAD against other currencies this made me quite confident about this trade.

Hi Iceman

I have never traded this particular cross but I do have experience of the FX majors, so I will try and help.

Can I start off by asking what sort of time frame you are looking at and how many pips are you looking to make?

JD

 

[iceman17]

Hi Christo9her,

thanks for the reply, as you have already seen
"i was looking at the 1 hour time frame when i entered the trade and the stratergy was if the pair was trading above the 20 day MA then i would be long untill the pair crossed below and because of the weakness shown by the CAD against other currencies this made me quite confident about this trade."

i did not actually analyse the risk reward on the trade either.

i would love to be able to find a mentor who could teach me specifically how to spread bet.

This post may be a little too vague for the experienced traders on here to help you too much. But I may be able to point you in some kind of general direction.

Firstly, all trades you enter should be part of a larger strategy, whether discretionary or mechanical, and so the outcome of each trade shouldnt be a big deal. If you find yourself getting upset about a single trade, you probably either risked too much capital on it or it was not part of a repeated strategy. If you took the best strategy ever created, waited for 1 signal from it and judged it based on that then it would be no better than any other system!!

You really want to aim to get a methodology that you can be confidant will give you a positive expectancy over a large number of trades. This way, when you enter a trade, you actually aren't too bothered about what happens to it. If it goes against you, you just know that it was one of the 40% (or whatever) that doesnt go your way.

However, if you are having the problem of picking good trades but often getting stopped out before it has the chance to go your way, there are two possible things that you may wish to consider.

* Are your stops too tight for the time frame on which you are trading? If you are generating signals that you expect to come good over the next day, for example, then your 30 pip stop may be too tight.

* Is there anything you can do to time your entry a little better? It sounds from the example above that you may have seen the major move coming, but you may want to think about how you can time the entry better, maybe by dropping to a lower periodicity in the chart.

Anyway, I hope this helps in some way. Keep at it.

Chris

 

[Jaydee]

Hi Iceman

Right, I've run a backtest - use this code below and paste it into the IG backtest:

---------------------------
REM Buy

indicator1 = close
indicator2 = Average[20](close)
c1 = (indicator1 >= indicator2)

IF c1 THEN
BUY 1 SHARES AT MARKET
ENDIF


REM Sell

indicator3 = close
indicator4 = Average[20](close)
c2 = (indicator3 <= indicator4)

IF c2 THEN
SELL AT MARKET
ENDIF


REM Short

indicator5 = close
indicator6 = Average[20](close)
c3 = (indicator5 <= indicator6)

IF c3 THEN
SELLSHORT 1 SHARES AT MARKET
ENDIF


REM Exit short

indicator7 = close
indicator8 = Average[20](close)
c4 = (indicator7 >= indicator8)

IF c4 THEN
EXITSHORT AT MARKET
ENDIF

-------------------------
N.B. You will have to set the stop at 30 pips yourself as this can't be hard coded.

If you had 10K - you would have made just over 4.7K in 59 trades in the month of May. 40 of these trades were losers. Unfortuantely, on a 60 minute chart, you can't go over more than a month of data so the sample size isn't enough to make this a concrete system. (This is where IG lets me down).

Also, this is a cut and reverse system so you are always in the market - as soon as you close your longs you are going short and vica versa (unless stopped out).

Your stops seem ok, they're about 2/3 of the ATR20 for 60 min period.

I think you may be going wrong because this system results in so many losers (even though, for the period tested it's a winner overall if you cut and reverse) and you may well have been missing opportunities and only putting the losers on.

Let me know your thoughts.

 

[Jaydee]

... and because of the weakness shown by the CAD against other currencies this made me quite confident about this trade.

Iceman, I just wanted to add that you shouldn't be confident on one trade. I believe (very strongly in fact) that every single individual trade is luck. If it goes your way and hits your target, it's good luck. If you get stopped out, it's bad luck. You were in a situation where you have a system which is right 33% of the time. Therefore, you cannot be confident that the next trade will be a winner - you can only be confident that, if we had tested this system for a longer period, roughly 3333 out of 10000 trades you made in the past would be winners.

I reiterate, you cannot predict the market and, therefore, cannot be confident on a single trade. I think you just need to change your thinking about trading a little. Once you do that, you'll stop feeling bad when trades go against you.

Best

JD

 

[iceman17]

WOW. i got no idea how to do that and what it means.

i think your refering to indicators, probably moving average but thats all. can you explain more about this system please?

Hi Iceman

Right, I've run a backtest - use this code below and paste it into the IG backtest:

---------------------------
REM Buy

indicator1 = close
indicator2 = Average[20](close)
c1 = (indicator1 >= indicator2)

IF c1 THEN
BUY 1 SHARES AT MARKET
ENDIF


REM Sell

indicator3 = close
indicator4 = Average[20](close)
c2 = (indicator3 <= indicator4)

IF c2 THEN
SELL AT MARKET
ENDIF


REM Short

indicator5 = close
indicator6 = Average[20](close)
c3 = (indicator5 <= indicator6)

IF c3 THEN
SELLSHORT 1 SHARES AT MARKET
ENDIF


REM Exit short

indicator7 = close
indicator8 = Average[20](close)
c4 = (indicator7 >= indicator8)

IF c4 THEN
EXITSHORT AT MARKET
ENDIF

-------------------------
N.B. You will have to set the stop at 30 pips yourself as this can't be hard coded.

If you had 10K - you would have made just over 4.7K in 59 trades in the month of May. 40 of these trades were losers. Unfortuantely, on a 60 minute chart, you can't go over more than a month of data so the sample size isn't enough to make this a concrete system. (This is where IG lets me down).

Also, this is a cut and reverse system so you are always in the market - as soon as you close your longs you are going short and vica versa (unless stopped out).

Your stops seem ok, they're about 2/3 of the ATR20 for 60 min period.

I think you may be going wrong because this system results in so many losers (even though, for the period tested it's a winner overall if you cut and reverse) and you may well have been missing opportunities and only putting the losers on.

Let me know your thoughts.

 

[iceman17]

actually i was wondering if my stops weren't wide enough as i ussually use the minimum required to enter the trade with a guaranteed stop as opposed to the daily trading range.

what do you think?

Iceman, I just wanted to add that you shouldn't be confident on one trade. I believe (very strongly in fact) that every single individual trade is luck. If it goes your way and hits your target, it's good luck. If you get stopped out, it's bad luck. You were in a situation where you have a system which is right 33% of the time. Therefore, you cannot be confident that the next trade will be a winner - you can only be confident that, if we had tested this system for a longer period, roughly 3333 out of 10000 trades you made in the past would be winners.

I reiterate, you cannot predict the market and, therefore, cannot be confident on a single trade. I think you just need to change your thinking about trading a little. Once you do that, you'll stop feeling bad when trades go against you.

Best

JD

 

[Jaydee]

actually i was wondering if my stops weren't wide enough as i ussually use the minimum required to enter the trade with a guaranteed stop as opposed to the daily trading range.

Sorry Ice, I was worried you may be making the mistake I always used to make - the one where you expect a winner. It causes a lot of self doubt and destroys confidence.

Anyway, no your stops seem fine but you may have to expect a lot of whipsaws stopping at 2/3 of the ATR. If you can get back in as soon as you are resignalled to just after you have been stopped out, then it is right for you. If you find you can't handle this, then may be widen it up a little.

I don't know much about IGs guaranteed stop policy as I have never used it - Shadow is your man for that

Regarding the system, it's the system you told me you were using:

It goes long when a 60 min candle crosses up over the simple MA 20 and exits when the candle recrosses in the other direction. It also initiates a short at this long exit and closes the short on the buy signal. Stops are 30 pips as you use.

IG has a backtesting package on their L2 platform. You would need to speak to them about using this. It's not great as you are restricted as to how much data that you can back test but, hey, it's free!

Hope that's ok and good luck.

JD

P.S. Please remember, I only tested this system for May which doesn't mean it will perform at a 40% return in the future.

P.P.S. Don't ask why I'm up so late...

 

[Lee Shepherd]

Hey Jaydee,

Why you up so late?

 

[Jaydee]

Hey Jaydee,

Why you up so late?

I just got back from a late poker game with 50 runners. Got 4th place - yay! :clap:

But, god, was I tired at 7 this morning...

 

[iceman17]

actually dude, i was only using a 20 day ma and the rsi, the the stock is above the ma and the rsi is above the 50 i go long and when vice versa i go short. i works well in tranding stocks.

do you have any suggestions for which currencies trend well and what i should be looking for whether fundemental or technical to identify these and how to find these stocks?

Iceman

Sorry Ice, I was worried you may be making the mistake I always used to make - the one where you expect a winner. It causes a lot of self doubt and destroys confidence.

Anyway, no your stops seem fine but you may have to expect a lot of whipsaws stopping at 2/3 of the ATR. If you can get back in as soon as you are resignalled to just after you have been stopped out, then it is right for you. If you find you can't handle this, then may be widen it up a little.

I don't know much about IGs guaranteed stop policy as I have never used it - Shadow is your man for that

Regarding the system, it's the system you told me you were using:

It goes long when a 60 min candle crosses up over the simple MA 20 and exits when the candle recrosses in the other direction. It also initiates a short at this long exit and closes the short on the buy signal. Stops are 30 pips as you use.

IG has a backtesting package on their L2 platform. You would need to speak to them about using this. It's not great as you are restricted as to how much data that you can back test but, hey, it's free!

Hope that's ok and good luck.

JD

P.S. Please remember, I only tested this system for May which doesn't mean it will perform at a 40% return in the future.

P.P.S. Don't ask why I'm up so late...

 

[Lee Shepherd]

I just got back from a late poker game with 50 runners. Got 4th place - yay! :clap:

But, god, was I tired at 7 this morning...

Did you win much or was it a friendly? I'm bit fan of the game myself but only play with small bets and pot limits, i'm not a great winner.

 

[Jaydee]

actually dude, i was only using a 20 day ma and the rsi, the the stock is above the ma and the rsi is above the 50 i go long and when vice versa i go short. i works well in tranding stocks.

do you have any suggestions for which currencies trend well and what i should be looking for whether fundemental or technical to identify these and how to find these stocks?

Iceman

If you're looking for good trends, you'll proabably want a security/currency which is the least noisy. I find Eurodollar is the least noisy of the currencies I've had experience in and Cable is worst - some love cable for precisely that reason though.

In terms of Fundamental and Technical, I would always advise that you get a good grip on the macro economics of currencies - they are some of the most fundamentally driven instruments you can trade (just ask George Soros). There is a good site Forex Forum, Forex Calendar, Forex News @ Forex Factory which gives you all the economic figures for the day and gives an indication on how much they will affect the markets.

I use technicals to try and guage the volatility of the market. From this I know my stop and how far my target will be. I also use it for the obvious reason of entries, where I just use support and resistance.

These days I try not to use too much analysis, though, as I found that when I lost money I would blame my analysis which would cause me to lack confidence. Not only that, with too much analysis you get so many conflicting signals, you just end up going round the bend.

To find markets that suit, you could use some filters but I find that I just try a market and, if I like it, I stick with it. Most of the markets I trade were found by accident.

 

[Jaydee]

Did you win much or was it a friendly? I'm bit fan of the game myself but only play with small bets and pot limits, i'm not a great winner.

Sadly, it was only the top 3 which got money - first prize was £85. It's only pub poker, nothing serious (Buy in was £5).

I was happy to get 4th - even though a bit of cash would have been nice. I've been about 5 times and made the final table on 3 occasions now. 4th is my best.

 

[iceman17]

what about looking at such things as the price of gold or oil to predict movement in specific currencies?

If you're looking for good trends, you'll proabably want a security/currency which is the least noisy. I find Eurodollar is the least noisy of the currencies I've had experience in and Cable is worst - some love cable for precisely that reason though.

In terms of Fundamental and Technical, I would always advise that you get a good grip on the macro economics of currencies - they are some of the most fundamentally driven instruments you can trade (just ask George Soros). There is a good site Forex Forum, Forex Calendar, Forex News @ Forex Factory which gives you all the economic figures for the day and gives an indication on how much they will affect the markets.

I use technicals to try and guage the volatility of the market. From this I know my stop and how far my target will be. I also use it for the obvious reason of entries, where I just use support and resistance.

These days I try not to use too much analysis, though, as I found that when I lost money I would blame my analysis which would cause me to lack confidence. Not only that, with too much analysis you get so many conflicting signals, you just end up going round the bend.

To find markets that suit, you could use some filters but I find that I just try a market and, if I like it, I stick with it. Most of the markets I trade were found by accident.

 

[Jaydee]

what about looking at such things as the price of gold or oil to predict movement in specific currencies?

It's certainly an idea. It's not something I have ever done for currencies but I did use to use the FTSE and S&P Futures to gain a bit of an edge when trading correlated equities in the very short term (we're talking minutes).

You may be able to figure if Gold/Oil is over priced or underpriced relative to the dollar which could give you a small edge. I'm not sure if it would work in the long term though as the prices would generally converge to a more sustainable level in the long run.

 

[iceman17]

so which currencies do you trade? and whats make you decide the direction of your trade and do have an entry and exit before your trade?

It's certainly an idea. It's not something I have ever done for currencies but I did use to use the FTSE and S&P Futures to gain a bit of an edge when trading correlated equities in the very short term (we're talking minutes).

You may be able to figure if Gold/Oil is over priced or underpriced relative to the dollar which could give you a small edge. I'm not sure if it would work in the long term though as the prices would generally converge to a more sustainable level in the long run.