Archive for June, 2009

It is! and this is what my friend has just did. And this is how he did it with 3 trade only:

Bought a PUT option 4700 on the DAX for at 7, £10 a point. A day after the Dax lost 3% and the option was 40. 33 points = £330.

Last Friday he open a short position (£4 a point) on the Dow with 100 points stop loss and 50 points profit target. The Dow almost touched his stop but changed direction and he got the 50 points or £200 profit.

Yesterday again on the Dow he went short with £5 per point and got 120 points or £600 profit.

All together £1030 profit and with the £70 the balance is £1100.1471% profit in 10 days. Amazing but…

I don’t think this is the right way to trade. In fact I think my friend did all the mistake he could… but he has a lot of luck. The way he trade is more like gambling when you may have a good strike but in the end the Casino most of the time wins.

Mistake number 1:

Trade on all the money in the account. It is ok when you have only £70 in your account to trade on all. But when you account is more than £1000 it is not wise. One bad trade and you are out.

Mistake number 2:

Thinking that only the £70 is his money. He always says I don’t mind losing – it is only £70. What I try to explain him is that was £70. Now it is £1100 and it is belong to him. He can take it and put it in his bank account.

Mistake number 3:

No strategy. He opens positions according to guts feelings. He follow the market quite long and he has the experience, but he is not using technical analysis to back up his instincts.

Today he opened a new position on the Dow. This time it is £15 a point with 75 stop loss and 100 points profit target. Again this is a mistake because the ratio between potential loss and profit is to low. You should always aim for 2:1 at least.

I do hope for him that it will go well for him but I don’t recommend you to follow this method. Although with 1471% profit some will be tempted

Hi all,

I compared the spread between Paddy Power & IG Index and Paddy Power are winning by far.

S&P 500: Paddy: 0.5 IG: 0.7

Dax: Paddy 1 point IG: 2 points

Most of the shares are half price with Paddy Power. The only place that IG are winning is on the Dow. Paddy charges 5 points spread while IG only 4.

Shop around before you put a trade!

Hi all,

I am toying with the idea to go short on the FTSE since beginning of this week. I was waiting to see if it will break the support at 4290 and it did. All the technical analysis indicators show that the trend is going to change. I even read some articles about it.

It is all nice but sometimes the market has its own way. Yes the FTSE 100 has lost some points this week but today with some good news from the State it bounced back a bit and it looks more positive.

So is it the time to go short? I think that we soon will see the FTSE 100 at 4000 again and even below but I stay prefer to stay out at the moment. If it will go under 4200 I am in…

This is really tough call and it may change from trade to trade. For example lets say you want to buy Tesco and the bid /ask is 360 / 360.2. If you using spread betting the spread betting company will put the spread a bit wider, lets say 359 / 361.

For this example lets say you want to buy 2000 shares using CFD or 19.95 per point using spread betting. And your exit point is 380 with CFD or 379 using the spread. You will hold the position for 20 days.

So for CFD you will pay this:

commission £20

Daily intrest (Libor + 2.5% at the moment the Libor is 1.73%): 7200*0.011%*20 = 15.84

your profit is £399 – £35.84 commision = £363.5

Now with spread betting things are much simpler to calculate. Your profit is 19.95*18= £359.1

So in this case it is a bit cheaper using CFD. But as I said it may change from trade to trade. But what I like about the CFD is that the cost is in your face and you think about them all the time and take them into account. While on spread betting it is hidden in the spread and it is so easy not to calculate them. I have a friend that still don’t get it that spread betting cost him money every time he opens a trade.

Another thing that I like about CFD is that it is transparent. What you see is what you get. The price of the market is the price that you buy or sell. While on spread betting it can be manipulated a bit by the companies and sometime it is so obviouse that they push the spread a bit more so it breaks a support or resistance level.

H oi

I was looking for a CFD calculator because sometime it is a bit confusing to calculate how much shares to buy or to sell. I opened a short position today on HSBC at 552 and I wasn’t sure how much share I should put. This can have a huge impact on your profit / loss balance…

I have a friend who once thought he is opening a position of £5 per point while in fact he opened a position of £500 per point…!

So I fount this free CFD Guide. Enjoy!