Spreadbet for swing trading

[JJL3142]

Hi,

I'm about to plunge into swing trading and was wondering which way to go - do I buy the stock (using FTSE 250) or spreadbet

Pervaz

 

[iq200]

Pervaz,

IMHO spreadbetting intraday is a waste of time. However swinging over a few days could have potential.

Regards,

Imran

 

[John Cyprus]

Hi pervaz

Spreadbetting over a longer timeframe would be more adviseable as day trading the spreads can eat into your profits.

Good Luck

JC

 

[goldfish]

Hi pervaz

I often swing trade using spread betting - in fact i think it's really the only way you can use them and generate profits, but you still have to take care.

I'm with Imran on this one - due to the very nature of the spread, trying to intraday will get you creamed!

 

[andrewmooton]

Would anyone like to explain to a newbie what exactly swing trading is?

Cheers

 

[tomorton]

Hi Andrew - spreadbetting allows you to go short as well as long with small capital. Profits are also tax-free.

As regards learning swing trading, a good place to start would be to get 'Marc Rivalland on Swing Trading'. You have to do some work too.

Don't lose big. Use small stakes until you're consistent. You don't have to win big to be happy and stay in the game. Keep in touch.

Tom

 

[goldfish]

Hi Andrew

Swing trading simply means capturing profits - or making your trades last over a couple of days instead of hours or mins. Normally between 1 to 4 days.

 

[andrewmooton]

Is swing trading similar to whats described in champion trader?

 

[pkfryer]

Swing trading use to describe the style of trading when in a ranging price channel. The classic buy low sell high, then sell short (high) and cover (low). So you were pretty much in the game all the time... swinging from long to short with the price movements.

Its now taken on the meaning of generic short-term trading. Which isn't really swinging at all. Capturing trends, break outs, etc etc. The breakout or the trend etc, once caught would stay with until signals say its time to get out or you hit a target profit! These movements are often only a few days to a couple of weeks maximum. So they are termed: short-term trading.

But as I said Swing trading has taken on this meaning now, which is confusing!

Champion Trader is a short-term trading 'system'. Following along the lines of Dr Elder, where you only accept sell signals in down trends and only except long signals in up trends. the trend being deduced by the next time frame up, e.g. weekly charts trend, daily charts for sell/buy signals.

CT is more a trend following systems, but i wouldn't personally class it as swing trading. It also uses similar techniques as Jake Bernstein consecutive closes method. And funny enough the impulse system of Dr Elder gives signals at exactly the same time as CT but Elder uses the slope of a MACD histogram and a moving average (if i remember rightly).

Hows it going by the way andrew? You paper trading successfully yet? How much you made, or lost!?

 

[da443n]

Just started swing trading.

I've just been experimenting with ftse swing trading.

I think there are 4 key elements to the tactics I'm employing

1. Long term FTSE movement view

If you have a long (say several months) term view of where you think the index will move it makes sense to always buy (if you think it's up) or sell (if you think it's down). This means that over that period, assuming 'random walk' short-term movements and an average position held you will not lose out. E.g. 'going to grow'

2. An entry strategy

I am experimenting with the following on a 3-4 day view.

Buy at 0.1% of my overall funds per point eg £10K funds means £10 per point. At entry I go with this bet.

In terms of timing enter after a daily FTSE movement opposite to your view in 1 above

3. An exit strategy.

Set yourself a level at which you'll profit take. eg 20 points

Once you enter into a buy bet (with a buy-sell spread of y points) there are only two states for the sell to go assuming the ftse moves x points

For x = 25 , y=5

a) a sell 20 points above your buy level - sell up and you made x-y stakes i.e. £200

b) 30 points below your buy level i.e. a 'virtual loss' of £300.

4. A covering strategy.

If the sell moves to 3 a) obviously you've won hurrah! But on the random walk principle you will get to 3b) 50% of the time. However when this happens don't sell up and curse your losses, instead go in a bit deeper.

i.e. Now place another buy at 0.2% of your funds eg £20 a point. Why, well a smaller rebound on the index of about say 13 points will put you back even, but a rebound to the starting position will put you in profit (cos your 'virtual loss' is cut by £130 and you make an 8 point @ £20 = £160 profit on bet #2 to cover the rest) And any further rebound is worth £30 a point profit to you. So if the FTSE returns to the starting level you'll make another 12 point @ £30 = £360.

If it falls cover again in the same manner

Well thats the basic idea anyway....

 

[schoe]

Interesting theory da but when do you stop adding to your position, when do you know how to get out of a trade.What happens when the next Sept the 11th happens will you be able to meet the margin calls? Sounds like a quick way to get into a lot of debt !

 

[sidinuk]

da443n,

That sounds like the trading equivalent of Martingale (ie after a loser, double up until you win).

Remember the no 1 rule of trading though: Never add to a losing position.

 

[da443n]

Agreed

Interesting theory da but when do you stop adding to your position, when do you know how to get out of a trade.What happens when the next Sept the 11th happens will you be able to meet the margin calls? Sounds like a quick way to get into a lot of debt !

1. Sept 11th = Low probability high impact event. This has to be balanced against tens of low impact high probability wins occuring the meantime. I reckon you can make 10% a week doing this with the 0.1% start point. So if you cream off the profit you'll find yourself with your starting funds in your pocket in a few weeks. and Spreadbetting is free of CGT tax innit so 60% increase is equivalent to doubling your money on regular investments

Also check out these closing positions

http://uk.table.finance.yahoo.com/d?b=9&a=8&c=2001&e=30&d=8&f=2001&g=d&s=^ftse

Knee-jerks tend to rebound to some extent within an acceptable time frame if the fundamentals of the economy are sustained

2. Stop loss orders can be used to prevent a complete meltdown when daily movements are outside a reasable 3 standard deviation (or whatever) level

3. If you start using this system on the equivalent of Sept the 10th then yes you're probably a bit screwed!!! But me show an investment not a bit like that!

4. If you bet on a tail and lose, bet double on a tail and lose etc 10 times there is no increased probability of getting a tail next time. If the ftse falls ten days in a row or 100 points in a day through standard market reasons then there IS an increased likelihood of a rise.

There's a lot of variables in my system, the 0.1%, the 25 points, the doubling of the % on a losing position. they all come together in your risk/return assessment. Looking at historic ftse moves can tell you a lot about how to set your own numbers. Plus you can simulate the system and see what you think.

5. I would never go further into a losing position on a share because the drivers are much more explicit and a share thats falling is prob doing so for good reason, but the ftse fluctuates in a far less rational manner. The whole thing relies on that lack of rationality

I'm just giving it a go on a dummy account of £10K, now at £12.5K after two weeks and the v modest sum of £1000 of real money I started today. If nothing else it's a laugh

 

[pkfryer]

Da443n, sidinuk is right that is exactly the martingale system, which if you ask most experienced traders here, is a fast track to losing! You are infact adding to a losing trade and there is no guarantee if and when the correction in the direction of your trade will happen. And if it does happen there is no guarantee of how far it will go.

Definitely test out your system, but also consider that it might actually be better to have very tight stop losses. If it goes in your favour you get at least 25 points, if it doesn't you lose a couple of points. It would then take 12 losses to only 1 win to break even! However, if you backtest your system and find you are right 1 out of 6 times and you definitely get at least 25 points whenever you are right... then you have got yourself an almost guaranteed profitable system. With the up side of it being a hell of a lot less risky to you!

In trading there is a technique when you find yourself on the right side of a strong trend called: pyramiding... the novice trader pyramids by doubling his position as the price goes up. The only problem with this is that the pyramid is top heavy and it only takes a small contrary move to wipe out your entire profit from the time you jumped on the trend. e.g if every 2p you doubled up it would only take 2 p movement against you to wipe you out no matter how many times you added to the position! (100 x 2 = 200, 200 x 2 = 400, 400 x 2 = 800). so I 2p movement against you after adding 400 shares to your position after a 4p per share profit = (100 x 2) + (200 x 0) - (400 x 2) = - 600. A 1p movement would be enough to lose all profit no matter how long you had been riding the trend (if you kept doubling every 2p!)!

You always start with your biggest position first so that subsequent movements dont effect your profit so badly. Although, there are schools of thought that you should start off with a small position first just in case you are wrong! However, you would have to leave so much space before the next addition to the trade, the movement could be over!

Anyway, relating that back to your strategy... if the price did move away from you it would accelerate your losses and you could dig yourself into a very deep hole you would never come out of! There is a rule of thumb that should never be broke: Never add to a losing trade! There are reasons for this. Also, a big part of this is the psychology! If your system had 10 losses in a row would you really be so keen on doubling up again? System testing and paper trading isn't anything like trading with your real hard earned cash!

 

[Healey]

:?: Hi !

Very interested to know what you are using to give you your "long(say several months) term of view"

Also, have you back tested your system using the Yahoo data ?

Ta in anticipation.

I've just been experimenting with ftse swing trading.

I think there are 4 key elements to the tactics I'm employing

1. Long term FTSE movement view

If you have a long (say several months) term view of where you think the index will move it makes sense to always buy (if you think it's up) or sell (if you think it's down). This means that over that period, assuming 'random walk' short-term movements and an average position held you will not lose out. E.g. 'going to grow'

2. An entry strategy

I am experimenting with the following on a 3-4 day view.

Buy at 0.1% of my overall funds per point eg £10K funds means £10 per point. At entry I go with this bet.

In terms of timing enter after a daily FTSE movement opposite to your view in 1 above

3. An exit strategy.

Set yourself a level at which you'll profit take. eg 20 points

Once you enter into a buy bet (with a buy-sell spread of y points) there are only two states for the sell to go assuming the ftse moves x points

For x = 25 , y=5

a) a sell 20 points above your buy level - sell up and you made x-y stakes i.e. £200

b) 30 points below your buy level i.e. a 'virtual loss' of £300.

4. A covering strategy.

If the sell moves to 3 a) obviously you've won hurrah! But on the random walk principle you will get to 3b) 50% of the time. However when this happens don't sell up and curse your losses, instead go in a bit deeper.

i.e. Now place another buy at 0.2% of your funds eg £20 a point. Why, well a smaller rebound on the index of about say 13 points will put you back even, but a rebound to the starting position will put you in profit (cos your 'virtual loss' is cut by £130 and you make an 8 point @ £20 = £160 profit on bet #2 to cover the rest) And any further rebound is worth £30 a point profit to you. So if the FTSE returns to the starting level you'll make another 12 point @ £30 = £360.

If it falls cover again in the same manner

Well thats the basic idea anyway....