Spread Betting Money Management

[Hotch]

Apologies if there is a lot of info about on this, I havn't managed to find out any though.

After getting fustrated in programming my bot to buy stock, i thought it might be a lot easier to let it spread bet.

I know little about the money management side of this though.

Clearly the £/point value is going to be a formula which includes the signal strength.

I don't know much else though.

Any help would be much appreciated as I am a bit lost in general.

I know it's a bit of "each to his own" but any suggestions would be great.

Cheers guys!

 

[Vrothdar]

Perhaps you should determine how much of your account you're willing to risk per trade (typical suggestions for newbie traders are between 1% and 3%), define a stoploss (per trade) in terms of the price of the instrument you're betting on and then adjust your position size (£s per point) so that when your stoploss is reached you'll have lost the percentage of your account you wanted to risk.

 

[Hotch]

Cheers Vrothdar.

So i guess it's mainly just the same as stock, except instead of selling you just stop, and maybe switch.

Just wasn't sure if there were any other things.

 

[arabianights]

If the stock is UK a pound a point is equivilant to a hundred shares. So say your bot is highly intelligent and realises woolworths will shortly be five thousand pounds a share since jordan just got a breast reduction and therefore the underclasses will have to buy more editions of closer to read more details. Not the only reason woolies is the best stock in the universe of course. At present price of around seven pence a share if you would be trading an underlying value of seven pounds of woolworths shares for every pound you put on.

More relevantly remember a cash bet will introduce a financing charge based on the underlying if held overnight. This is particularly important with a cash bet on woolworths as it shall shortly be worth more than the entire GDP of France. So ensure your risk management takes this drip... drip... drip of drawdown into account. Similarly for dividends.

 

[Hotch]

So say your bot is highly intelligent and realises woolworths will shortly be five thousand pounds a share since jordan just got a breast reduction and therefore the underclasses will have to buy more editions of closer to read more details.

That was all i will ever remember of your post.

I used to live with said underclasses.

Made my day.

 

[0007]

Apologies if there is a lot of info about on this, I havn't managed to find out any though.

After getting fustrated in programming my bot to buy stock, i thought it might be a lot easier to let it spread bet.

I know little about the money management side of this though.

Clearly the £/point value is going to be a formula which includes the signal strength.

I don't know much else though.

Any help would be much appreciated as I am a bit lost in general.

I know it's a bit of "each to his own" but any suggestions would be great.

Cheers guys!

Other contributors have outlined what you need to be aware of. It's quite easy to do the calcs in your head or on the back of a fag packet but if your mentals are playing up, you can always use the attached spreadsheet.

Good luck with Woolies

 

[Omoh101]

Hello, I am a newbie on this site, I have spent a lot of time doing research (and I have been trading using this as well)on this topic, so i am comfortable sharing this with you.

Let's say my account size is £10,000. My risk per trade is 1%, that gives me an risk size of £100 per trade - this varies from trader to trader.
Trading strategies aside for now, as all i want to highlight is how i size my position. Personal I like to see a 3:1 reward to risk ratio before I trade.
Let's assume I want to take a long position on a stock at £10.1 (101 points) with a stop loss at £9.1 (91 points) and my target price is £13.9 (139 points)
My Trade risk is my Entry Price - Stop Loss = 10 points (101 - 91)
My reward is Target Price - Entry Price = 38 points(139 - 101)
REWARD /RISK ratio is 38/10 = 3.8 . All other trading strategies being considered, I will trade this stock.
Position size is my risk per trade (£100) / Entry - stop loss (10 points) = £10 / 1point.
- This means my max point per trade on this stock is £10. Ofcourse I can decide to bet less than £10 but definitely not more than £10 / per point.
I have ingrained the saying "Plan the trade and trade the Plan".