Spread Blogging – Spread betting tips

For me this was the most difficult question. Many time I opened a trade with a stop loss too tight only for the stop order to trigger and then bounce again leaving myself upset!

The idea is to setup a stop loss not too close but not too far either. So how do you set your stop?

I take this idea from ‘Come into my trading room‘ by Alexander Elder. It calls ‘The chandelier exit’ and it helps you to setup a stop loss out from the market noise.

The formula is very easy:

(Highest value of the last 22 bars-3)*ATR(22)

for shorting is the same but with the lowest value of the last 22 bars.

The idea is to move your stop loss forward as long the trade goes in your direction. But Never move it down!

The code that I use to add it to IG index chart packaging is this:

RETURN highest[22](High)-3*AverageTrueRange[22](close)

and for short:

RETURN lowest[22](Low)+3*AverageTrueRange[22](close)

this really works well for me and saved me many time from being stopped out!

Lets say you lose 3 times in a row – what do you do? keep going? and if it is 5 times? 10 times?
My system is to have many small losses but one or two big profits that cover all the losses and adds value. This can be very hard on you mind. Sometime you can wait 6-7 trades before you have one good trade. Then you start to think maybe your system is wrong maybe you need to change something or to leave the system all alone.

It is good to tweak the system and learn from mistakes but don’t be tempted to leave your system just because you have a bad strike! Use stop-loss to limit you losses and keep them small. Very small. This can help! And don’t forget to move your stop loss to a profit zone once your trade goes in your direction.

Hi all,

I bought last Thursday BA @ 132.1 and today I’ve sold it at 148.1 for quick 12% return. I am quiet please but of course it could be better. The share price closed today at 150 so I could do better. But I wanted to sell on the upper channel of the EMA 22 and yesterday it was 148 and this is where I placed my limit order.

And because I wasn’t in front the computer all the day I couldn’t see that the EMA has move up and so the channel to 152. In that case I would have change the limit order to 152 to follow the trend. But if it is a beginning of a trend I would buy it back when it touches the top EMA again.

The only problem is that my when I opened the trade my stop was at 120 and my first target was 144. Meaning 12 points risk and 12 points profit target or in other words 1:1 balance which is not good. 1:2 is much better. On the positive side I move the stop loss very quickly to a profit zone once the share went up so for most of the time it was risk free trade.

It is strange that on the day Share magazine quote this blog about BAE (without giving a link, shame!) I suffered a heavy loss with this stock.

I had an opened position at 332 with stop loss at 310. But yesterday report was bad and the share went all the way to 306 tirgered my stop loss and then jump a bit to 312. Today BAE trades on the upper side 315 at 9:00am.

This is so annoying when it happens because stop loss should protect you from heavy loss but in fact there are sometimes that it protects you from profits…

But still it was mis-judgment by me. I thought that BAE is on the way up, but my calculations were wrong. This is part of them game and it is a risk that every trader takes.

I decided to go short against the DAX. But here is my mistake. I did it not because any of my indicators sent me a short signal but because I felt it has already jump to much and correction should come.

So yesterday evening I opened a short position on the DAX at 4941 with stop loss at 5001. By 7:30am I was 35 points in profit so I moved my stop loss to 4940 and went to eat breakfast and drink coffee. By the time I was in front of the screen again I was out. The DAX jumped to 4961 triggered my stop loss and through me out. Then it went down again to 4920.

Here is my my second mistake. I was upset that maybe I am going to miss a big down trend only because I moved my stop loss. So just from pure emotions I placed an order to sell the DAX again this time at 4960 with stop loss at 5021. Needless to say that by 11:00am the order was executed when the DAX jumped to 5000. So now I was -40 points… but it went down again and by the time the Dow opened I was break even. Around 16:00 the DAX was still around 4960 and I felt confidence that it will go to my direction. It closed at 4957 so I even had little profit.

But then the Dow moved up strongly and took the DAX up to 5023. I was out by 20:30 and this time really upset. Then of course it went down and while I am writing these lines it is around 5000. And tomorrow it can still go down, but I am already out.

And here is my mistakes:
1) Because my decision to open the short position wasn’t based on indicators I was nervous
2) Because I was nervous I opened a position after the first one has been closed. This was a mistake.

Good thing that I did:
1) Moved the stop loss to a profit zone on the first trade. If you can do it, then your money is protected.
2) At 21:00 told to myself that it wasn’t my day and my timing was really bad. I learn from it and move on.

Hello all,

It is summer, holidays and so on… so this blog took things light lately. I felt that before I trade I need to learn more. As I said before I read a great book by Dr. Alexander Elder – ‘Come into my trading room’

It is a great book with many tools and advices. It is really good for beginners as it will save you lots of mistakes. I am trading for a while now and I love it, but reading this book I recognised all the mistakes I did. I wasn’t alone…

In the past I read that stop loss can kill you. Dr. Elder says the opposite. Not using stop loss will kill you. And I think he is right. My point was that no mater which level you enter and no mater which side you choose (buy or sell) the market sooner or later will come back to you.

Dr. Elder says that maybe I am right, but by the time the market comes back you, you account has been wiped completely. It happened to me with RBS that wiped my account and I had to start again after a break thinking what went wrong. This is even more important when using spread betting because you leveraged product so you may loss more than you account.

The system that Dr. Elder offers make a lot of sense. In fact I’ve read it in other places as well. It is quite simple but will protect your account from disasters. Never trade more than 2% of your account and never be exposed more than 6% of your account.

And be strict with yourself. Never say this time is different so I will raise my stake. It is not easy but this will give you the edge.

Hi all,

I am afraid that my plan to take a month off job and focus only on dealing will not go ahead. I am so busy with clients, projects and running a business that i just can’t take one month off. Nice plan though.

I don’t even have much time to check the market on a daily basis. So I have to change my strategy.  So this is what I am going to do for the next trades: Support & Resistance with tight stop loss. The idea is to go with the market. Buy when the FTSE 100 hit a support with 25 points stop loss and sell when the FTSE 100 hit resistance with the same stop loss.

I know that I have said that I don’t like stop loss. And I don’t. But if you don’t have time to follow each tick of the index then you better use them. My plan is quite simple: I will have some losses no doubt, but one winning strike should cover them and create a nice profit.

So here is my order booking:

I will let you know what happen next…

Hi all,

I am not a big fan of stop loss. I think they make you lose money. So I don’t use them. But today I had sometime and I decided to use Worldspread offer of £250 cash back.

I saw the Dax up strongly today and I know that the 4950-4975 is the upper resistance at the moment. So I opened a position to sell the Dax on 4946 with 25 points stop loss – £10 a point.

At one point I was £150 up, but my target was £1000 or 100 points. But an hour later the Dax was strong again and peaked 4978. I was out. 2 hours later it was 4900… and the again it was up to 4975 and down again.

25 points stop loss is a joke. If you really serious about trading and you still want to use stop loss then use 200 points on Index like the Dax. Otherwise you will be out before you know it.

Hi all

I hate stop losses. I had one on Rentokil at 39p the share went down to 37 triggered my stop loss and went all the way up to 44. Dam!

You can see it quite well on the graph. I should stop using stop loss tool. The way I see it, it is most of the time play into the spread betting firms than it really helps you.

From now on if I want to stop, I will do it by clicking on the ’sell’ button. This wasn’t a good week for me. Sometimes I feel very confident that I can beat the market and sometimes not. This week I felt clueless. It is good indicator to stay out.

I thought to but the Dow today at 7350, but I wasn’t sure it is clever move so I didn’t. By the end of the day I will know if it was a smart move…