My spreadbetting adventure
 

So, I'm looking for a new junkie form of gambling, this seems perfect.

I'm not sure how much to deposit, but I think the general plan is to long/short any stocks I here are good to long/short. I will be going mainly/purely on tips and speculation.

I will aim to hold positions until I am told I should end the position.

I know this may be mad idea, however to start with I'm only going to deposit $2K.

I'm going to go long on different holdings to start with. They can be anything. From the post on favourite stock picks I will be basing my decisions.

I will be using stop losses on all the positions so that I cannot lose more than $100 per each of the holdings.

I will be using a 20% stop loss and will be leveraging at 5 times. So I am effectively buying a stock for $100, but if it goes down by 20% then I am a gonna, if it goes up by 20% then I double up.

I've always been interested in this and I think it will help me learn. If I lose the $2K, it is no bother. Money is money, and $2K, whilst enough that I will try hard not to lose it (in fact to make money from it) is enough that I won't cry if I lose it.

The long positions:

SKYW
LOW
MYL
ATW
HERO
TIE
yahoo
SBUX
WFMI
GULF ETHANOL
PACIFIC ETHANOL
POKERTEC
ADY
COP
BBBB
JNJ
edit: gold and sugar futures

I haven't included BDAY, CRY or UA as not sure if they are serious or comedy posts.

I've now got to work out how to make these bets.

Re: My spreadbetting adventure
 

[ QUOTE ]
So, I'm looking for a new junkie form of gambling, this seems perfect.....I will be going mainly/purely on tips and speculation.


[/ QUOTE ]

Mayeb x-post this to BBV?

Who are providing these tips? I hope you know you'd be better off with a dart-board. Dart boards are also cheaper than tipsters.

I think this will be an interesting thread. i suggest you use it as a trading journal.

Which broker are you using? I hope it's not Finspreads or Deal4Free.

You have a stake of 2K, yet you're risking $100 on each trade? I think 5% risk is way too high, coupled with your portfolio heat and I think you'll end up wiped out with an additional debt to your broker. Depending upon which broker you are using, you can make tiny bets such as 50p per point (Finspreads only saving grace is that they allow 1p/point for the 1st 6 weeks).

How about stop losses? Are you placing them at a sensible point in the market and positioning trades based on risk, or are you placing set trade values and placing your SL at a point you can afford?

[ QUOTE ]
I've always been interested in this and I think it will help me learn

[/ QUOTE ]

It certainly will. Even if/when you eventually bust-out, it will be an invaluable financial education. Most successful traders have paid a high price for their education.

Re: My spreadbetting adventure
 

I don't really understand what you're learning if you're basing all your bets off of tips?

Re: My spreadbetting adventure
 

john i would recommend reading reminiscences of a stock operator

Re: My spreadbetting adventure
 

[ QUOTE ]
I don't really understand what you're learning if you're basing all your bets off of tips?

[/ QUOTE ]

You'll eventually learn not to use them and do your own dd

Re: My spreadbetting adventure
 

[ QUOTE ]
[ QUOTE ]
I don't really understand what you're learning if you're basing all your bets off of tips?

[/ QUOTE ]

You'll eventually learn not to use them and do your own dd

[/ QUOTE ]

This makes no sense at all. If you want to learn how to do research for potential investments, then do it. In no way does blindly following tips prepare you for later doing your own research.

Re: My spreadbetting adventure
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
I don't really understand what you're learning if you're basing all your bets off of tips?

[/ QUOTE ]

You'll eventually learn not to use them and do your own dd

[/ QUOTE ]

This makes no sense at all. If you want to learn how to do research for potential investments, then do it. In no way does blindly following tips prepare you for later doing your own research.

[/ QUOTE ]

I doesn't make sense, but it is a pretty standard path on the road to being successful. It would make more sense to skip the 'don't follow tips' lesson, but this is how most people start off. It is often one of the first lessons learned in a very expensive education.

Many famous traders started following tips before they started working on their own rational strategies. A more sensible approach would be to paper trade tips and not kick yourself when they turn a paper profit.

It's a psychological game, and following tips is psychologically comforting for a beginner trader/investor.

Re: My spreadbetting adventure
 

thanks for all the replies. I fail to see why following tips fails. You are pooling together the research of a number of people and taking the best result (or two) of their research. why would this not work?

For sure the tip will sometimes end out being wrong, but it doesnt mean it wasn't a +EV tip. If you do not put too much emphasis on a one-off tip (i.e. it is only 5% of your portfolio) then I don't see how it can go wrong long term.

So you do not think the average best share advice of a poster on this forum will outperform the market? Based on keeping each share for a set x length of time and each share is equally weighted. If not, fair enough, but I do, and although it is a very small sample, I think the unofficial portfolio helped (maybe effectively reverse implied odds in poker terms) convince me down the tips path.

Re: My spreadbetting adventure
 

as for the portfolio itself, how should i best hedge against the US market falling. would it be too marginal just to short the SP500? as in is it only worth it for a hedge fund with millions doing this, rather than a guy with $2K.

I'm thinking maybe going for 3 commodity futures, 3 non-market based (long on property fund for example), 4 stocks, 2 US, 2 non-US.

so 30% commodities, 30% others, 40% stocks (ideally the stocks section would comprise of about 20 stocks but due to minimumt trading restrictions 4 is realistic, although if this grows then ill introduce more)

Re: My spreadbetting adventure
 

also when i say 'others' ill probably do 1 currency, an interest rate, and something else

Re: My spreadbetting adventure
 

[ QUOTE ]
as for the portfolio itself, how should i best hedge against the US market falling. would it be too marginal just to short the SP500? as in is it only worth it for a hedge fund with millions doing this, rather than a guy with $2K.

I'm thinking maybe going for 3 commodity futures, 3 non-market based (long on property fund for example), 4 stocks, 2 US, 2 non-US.

so 30% commodities, 30% others, 40% stocks (ideally the stocks section would comprise of about 20 stocks but due to minimumt trading restrictions 4 is realistic, although if this grows then ill introduce more)

[/ QUOTE ]

It all sounds pretty muddled, John. Aside from following tips, can you outline your general strategy and risk/trade management?

Re: My spreadbetting adventure
 

[ QUOTE ]
thanks for all the replies. I fail to see why following tips fails. You are pooling together the research of a number of people and taking the best result (or two) of their research. why would this not work?

For sure the tip will sometimes end out being wrong, but it doesnt mean it wasn't a +EV tip. If you do not put too much emphasis on a one-off tip (i.e. it is only 5% of your portfolio) then I don't see how it can go wrong long term.

So you do not think the average best share advice of a poster on this forum will outperform the market? Based on keeping each share for a set x length of time and each share is equally weighted. If not, fair enough, but I do, and although it is a very small sample, I think the unofficial portfolio helped (maybe effectively reverse implied odds in poker terms) convince me down the tips path.

[/ QUOTE ]

Best of luck to you, but if you're after performance you can probably do better than a group of random poker players dishing about the market. If you're after a learning experience, do your own research. I don't really see what leads you to believe that your tips will outperform the market if you know nothing about the methodology the tipsters employ and are only basing your faith in them over a hypothetical portfolio (which is the equivalent of saying "look at this 10 hand sample, I'm an incredible poker player!"). Don't mean to be negative, just don't really understand what your objective is.

Re: My spreadbetting adventure
 

[ QUOTE ]
thanks for all the replies. I fail to see why following tips fails. You are pooling together the research of a number of people and taking the best result (or two) of their research. why would this not work?


[/ QUOTE ]

What makes you think tips are the best results of research? In whose best interest is it to give out tips, and for what reason?

eastbay

Re: My spreadbetting adventure
 

kimchi - having taken on board the advice, im leaning towards not doing it now. my general strategy would be to leverage as much as possible any companies i heard were going to do well. as for risk management, i'd allow for 15% drop till bust per stock, and try to diversify my holdings so, say a US market crash occurs i wouldnt be wiped out of my portfolio.

i guess the reason i am so opposed to doing my own research is that from reading around, even people who spend 30+ hours doing research get it wrong, so it is futile me spending a few hours a week trying.

i agree eastbay you have to be careful why someone is giving a tip, but i doubt anyone on here thinks by offering a tip it will affect the share price, thus people might as well hope to get braggin rights by their pick doing well.

thanks for the replies, ill def keep this updated.

Re: My spreadbetting adventure
 

Seems like you're making a smart decision John. If your rationale for not doing your own research is because research doesn't guarantee results, then blindly following tips that are the basis of that research won't be much better.

Re: My spreadbetting adventure
 

ah ha, i'm back with this idea again. as ever whenever poker doesnt go well for a few days i look elsewhere for some $$$.

I have paid £90/$180 for a year long investor chronicle subscription which gives daily tips.

My Plan:

I'll deposit probably £5,000 (!). They offer tips for buys and sells. I'll have 10 buys, 6 sells, and 4 'others' (commodities etc).

Each with £250 staked. For the buys and sells I will have a 20% leeway, so that if my buy can fall up to 20%, I lose my £250 (this is manly to protect against a market fall, however hopefully i am kinda hedging this with having a number of shorts). I will be leveraging by 5 times.

I'll do updates on here once it is up and running.

Re: My spreadbetting adventure
 

John:
take a look at www.americanbulls.com
or if you are in the UK take a look at www.Britishbulls.com

Big time chartists but they are good.

lambdb

Re: My spreadbetting adventure
 

well, ive started, just £1K till i get the £10K from selling my shares.

Currently:

Short:
BG Group
British Energy Group

I just don't like groups.

Longs:
Genentech
QXL Ricardo

3 are UK, Genentech are US.

I have no idea what any of them do, I have done no research whatsoever.

I've maxed out my £1K at leverages of around 5-8 times depending on stock.

Re: My spreadbetting adventure
 

i really would be interested in futhur views on this.

basically:

i will be using britishbulls.com. I then choose their higher rated stocks, 5 of which I short, another 5 I long, therefore, no matter where the index direction goes, I am fully hedged.

Additionally, I will be long of gold, silver, corn and oil.

I will leverage at 7 times approximately. As I am spreadbetting, all profits are tax free.

I genuinely do not see how this can go wrong and how I will not make a decent return.

Re: My spreadbetting adventure
 

[ QUOTE ]
I genuinely do not see how this can go wrong and how I will not make a decent return.

[/ QUOTE ]

I can't say that I know all that much about finance and investing, but mindsets like this just completely baffle me.

Re: My spreadbetting adventure
 

[ QUOTE ]
i will be using britishbulls.com. I then choose their higher rated stocks, 5 of which I short, another 5 I long, therefore, no matter where the index direction goes, I am fully hedged.


[/ QUOTE ]

But you're not fully hedged because I know you're not practicing position sizing. Your bets are dollar-weighted and not volatility weighted.

Your exposure will thus be squewed to the direction of whichever stock has the highest volatility.

Re: My spreadbetting adventure
 

Good point. I'll factor in the volatilty of each stock (beta?) and weight it appropriately. From my strained memory of my economics degree, if beta = 2 that is double the reaction to the market than if beta = 1, thus do i put half my position on a beta = 2 stock relative to a beta = 1 stock.

Is there anything else I should consider?

Also, I'll also be using a set % of my portfolio value for each position, thus if my value drops by 1/2, then so do all my new positions (and to an extent my present positions).

Thanks for your help.

Re: My spreadbetting adventure
 

[ QUOTE ]
Good point. I'll factor in the volatilty of each stock (beta?) and weight it appropriately. From my strained memory of my economics degree, if beta = 2 that is double the reaction to the market than if beta = 1, thus do i put half my position on a beta = 2 stock relative to a beta = 1 stock.

Is there anything else I should consider?

Also, I'll also be using a set % of my portfolio value for each position, thus if my value drops by 1/2, then so do all my new positions (and to an extent my present positions).

Thanks for your help.

[/ QUOTE ]
you would have to be careful with this since the "beta" changes all the time.

it isn't a static # for any given stock (though i doubt it moves much). the main thing you'd have to program in is a recalc of the betas (and thus yoru positions) afer large market moves, or large moves in your stock prices.

Barron

Re: My spreadbetting adventure
 

im sure this will have been mentioned before but where is thanks barron for the reply. where is the most accurate sources to find beta? i used yahoo finance last time but i remember people on here saying there were better alternatives.

ive spent the last week while stillllll waiting to get some proper funds on the site playing around and working out how best to use the functions etc.

my main problem is trying to decide which stocks to use, whether to follow say stocks and flip the positions whenever im told to, or to chop and change. im leaning towards 8 stocks so i can actually follow them properly (4 long 4 short) , then long gold, oil, corn and short the dollar.

Re: My spreadbetting adventure
 

[ QUOTE ]
ive spent the last week while stillllll waiting to get some proper funds on the site playing around and working out how best to use the functions etc.


[/ QUOTE ]

This might be a blessing. I think the recent market volatility may have been a baptism of fire. I know you were considering long and short positions so maybe you may have made a killing had you started - who knows.

Anyway. Keep us posted on how this all pans out.

Re: My spreadbetting adventure
 

definitely a blessing. ive only had £1K to play with and am down to about £850. ill be depositing about £12K i think, working at 12 holdings of average £1K, beta weighted accordingly, 1 currency, 3 commodities and 8 stocks (4 short 4 long)

ive definitely learnt a fair bit this last week in terms of how best to structure it.

for example, the most annoying part is when confirming the switching of positions is wise, becuase it can switch a few times during the day, and with the spreads it can make it costly to keep switching.

thus i am trying to find a solution as to how best to solve this. my general plan is to search for the stocks which have the least switching of positions and go with them. i know one company ill use, but still trying to decide on the other 7.

fwiw, my activity so far has been mainly longs becuase of my 4 holdings i had the 2 shorts switched to longs. the worst performer has been qxl. ive never heard of them or what they do, but they were on a hold, but they were already up 9% in the signal to signal period, so maybe i was coming in at the end of the run up, as they have dropped about 6%.

anyways, this is definitely something i want to pursue, still got to tinker about, but i think it should work.

Re: My spreadbetting adventure
 

looking more deeply this will take a fair bit of balls tbh.

but that will not stop me....currently trying to find the best way to go about this, basically i'm looking for stocks which are large enough that the spreads will be as small as possible, combined with little switching of position (which obv is bad when spread is concerned).

basically i want a list of about 12 stocks which i am willing to use, and hopefully at least 4 will be long/short so i can have 4 each.

i think to begin with ill start with 7 times leveraging at stop losses around 20% (tbh no real need for a stop loss given the position always reverses within 10% or so, but need it to have enough money to do this).

so if i have 2% swing against me i lose £1.4K from my £10K....ouch!!!....so in that case ill leverage 5 times, makes it a bit more user friendly.

anyways, whilst posting this ive been coming up with my list:

Anglo American (AAL)
Barclays (BARC)
British American Tobacco (BATS)
British Airways (BAY)
BT Group (BT_A)
Man Group (EMG)
GlaxoSmithKline (GSK)
HBOS (HBOS)
HSBC (HSBA)
Invesco (IVZ)
Marks & Spencer (MKS)
National Grid (NG)
SAB Miller (SAB)

those are my 13 stocks ill be using.

tomorrow ill work out the % spread on each one and work out the best 8. ill also look up the betas and not pick any which are really wild.

ill probably rank them in order, then on day 1 ill pick the 4 best shorts and the 4 best longs. if any switch, ill close the position and look to see which is the best short/long to replace it with (may be the same stock itself).

Re: My spreadbetting adventure
 

first a quick apology to mods, sorry if it isn't appropriate that i update this whenever something changes, but i feel it helps me to jot down how im progressing and maybe in the future for others looking into trading systems they'll see how a noobie tried (and may well failed) and what steps he took.

anyways, basically the site im using tells you when to buy and when to sell. i'm going for the more aggressive approach of long and shorting the stocks whilst leveraging 5 times.

i've now worked out the spreads ill be paying and from what ive calculated the 13 stocks range between 0.58% to 0.66% i lose in the spread everytime i trade.

do you think such a spread is beatable?

also from the data they provide i have calculated the % rise in the stocks had you of bought and held for the past 2 years and if you had bought when the said to buy and sold when they said to sell and wait for a price drop. here are the results:

the average return of the 13 stocks from buying and holding has been 42%

the candlestick method has returned 158%

now, the obvious problem with this is that i am picking 13 of their better performing stocks.

they rank stocks on a 5 star rating based on how well they have previous done. all of these stocks are 3* with a couple of 4*. almost all the 5 star ones are very unknown stocks which have ended out producing them incredible returns.

therefore i have looked into some well known companies and less well known companies with no stars to 2 stars to see how they have performed. in general almost every stock i look at has outperformed under the candlestick method.

taking the beverages sector, every stock has outperformed by using the candlestick method.

i see a number of mid-tier firms which have done especially well, take Admiral, a UK car insurer which is mainly web-based, they have over doubled their share price in the last 2 years yet via the candlestick method they have over quadrupled.

one example which has given me confidence is jessops, the company which deals mainly in photography. they are a well known (ish) high street chain). 2 years ago their price was 80p, 9 months ago they had risen 80% (using candlestick method up 160%).

then what i find remarkable is by only buying (they never short, only sell and buy back in) that in the fall from 140p to 16p they managed to profit 58%, by only having a long position at set times.

anyways, i am confident with this system.

they also have an identical service for US, commodities (although in general the candlestick method has performed pretty poorly with commodities), chinese, and about 6 or 7 other stock markets.

i still need to look into this furthur, and try to develop a portfolio of stocks which i am confident can beat the spread. i believe the higher cap firms should be more consistent and less risky in that market news will not be so important. however, i think with the candlestick method it filters in this news by seeing when investors are becoming bearish.

however, it is still important i think that i know roughly what is happening which each stock. for example they were 'buy' signal when the US banned online poker, and if you asked anyone on here who knew about the friday bush signing you'd of been mad to of been long the days before. (i still wish i had set up this account then, would of made so much).

anyways, thats the update, the funds should be in my account tomorrow. ill dout ill start it then as i still want to build up a large enough portfolio of companies i have confidence in.

also i want to become confident with how i will deal with the intraday decisions of when to reverse my position, becuase each mistake costs me around 0.6%.

Re: My spreadbetting adventure
 

[ QUOTE ]
first a quick apology to mods, sorry if it isn't appropriate that i update this whenever something changes, but i feel it helps me to jot down how im progressing and maybe in the future for others looking into trading systems they'll see how a noobie tried (and may well failed) and what steps he took.


[/ QUOTE ]

You're starting a trading journal, which is what probably 90% of traders don't do. 90% of traders also fail. Any reasonable mod shouldn't have a problem. It's vital you keep a journal.

[ QUOTE ]
i've now worked out the spreads ill be paying and from what ive calculated the 13 stocks range between 0.58% to 0.66% i lose in the spread everytime i trade.


[/ QUOTE ]

I know you're not paying tax or commissions so the 'trading charge' is factored into the wider spread.

Which broker are you using?

I've seen brokers with spreads a maximum of 0.25% for the FTSE350. Maybe things have changed.

Whether or not that spread is beatable depends largely on how often you trade. I read somewhere you will be switching positoins daily. That spread will theredore be unbeatable, IMO.

It's still not clear what strategy the signals that you are following use. Since you're following a 'black box' system, I feel at some point it will become very difficult to trade as you can't relate to the rationale behind each ide/position.

Re: My spreadbetting adventure
 

thanks for the reply kimchi and apologies for my delay in replying.

im with ig index who seem a solid and safe company. given no tax and commissions, i think the wider spread is definitely better (for example on tdwaterhouse i was paying £12.50 per trade, if i was investing £1K per stock, as i am here, then im paying 1.25% to buy and again to sell).

the spread is 0.35% but as ive gone for the guarenteed stop loss account it means i have an extra .30% spread or so. this is well worth it imo, as say a stock plummets overnight. normal stop losses means you would just get the best price when trading opens. this guarentee means no matter what you are getting that price. if you have a stop loss at 5%, and it drops 20% on opening, you only loss the 5%. i thinks it worth the 0.3% extra for the peace of mind, as well as helping to lower variance.

plus if there is a big flip decision on a stock with will affect it by + or - 50% on the next day, with a guarenteed stop loss you can make that -10% or +49.4% [img]/images/graemlins/smile.gif[/img]

The hardest part is definitely find stocks and a strategy which prevents regular (as in no more than every few days, preferable a couple of weeks) changing position.

my dilemma right now is that my money has hit my current account. part of me wants to put it into my savings account, but then i cant withdraw it till the end of the month.

i think ill leave it in my current account.

also im erring on to begin with just going long on stocks, but then with the market not set to do too well (maybe pretty badly) over the coming x months (maybe x year(s) then maybe doing both long and short is wiser.

definitely some thoughts to mull over.

thanks again for reply, really does help.