Spread Betting Tactics and Strategy

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The guy is moving from straight share trading to share spreadbetting and decides to create a spreadsheet

I had the same idea way back. If I sold my 50K of shares and put in 5K into a spread betting account then I could replicate the portfolio. Snags: the spread betters tend to be geared towards indices and the main shares - blue chips. So all of my oil minnows were not available. The cost of the spread varied… that is to say some were at 3%, some at 5% and some at 10%... so that to have £100 worth of equity for shares at 100 each some would cost you a £3 bet, others £10… and the movement could be the same. The other snag is that when a share moves because you have gearing big time then the movements are big time. For example in big shares like RIO you are betting on the penny, not the pound. Thus a £2 movement on the share at £35 a share can be 200 pence… and the bet of £5, say, has suddenly equalled £1,000 movement. VERY dangerous. To do it across a portfolio is suicidal. I found this to my cost and having put several thousand in actually got up to almost £7,000 - then a black pigeon turned the hell up just as I was tripping to Thailand and I was on my mobile phone in the middle of Gatwick desperately trying to transfer £2,000 into my Spread Betting Account to avoid a wipe out as the market plunged, and some of my shares were loosing hundreds in seconds. I got the money there in time but, within a few weeks my £7,000 was worth £450! You see I was thinking ‘investment’ not ‘gambling’. You do not bet on all the horses in the race - but the joy of spread betting is that you can switch you bets during the race! So, I then began to be very circumspect and traded only in the banks - and you know what happened there… WHO - just tell me WHO thought,ever… that the Royal Bank of Scotland’s shares would EVER EVER EVER become 10p? And I was in them, constantly betting they would GO UP. Had I shorted I would be RICH - but I did not see the catastrophe and I was not alone as those EXPERTS in ALL of the banks in ALL of the world saw multiple BILLIONS disappear into the ether. So CIRCUMSPECTION – and I am not talking about taking a knife to an infant. I met a man in a seminar at CMC markets… they used to give FREE talks to punters, I think they may still do - brilliant presentations on how to handle the system, charting, etc. That is where I heard for the first time of the bouncing dead cat and the trend being one’s friend. He was an old West Indian man, an ex teacher, and questioned me about Thailand. He said to me never put more than 5% of your SB equity into the market at any one time, and NEVER put more than 5% on any one share. This was the best advice I ever had and CONSTANTLY ignore it. So - this is what I do. I listen and watch and gather in the gossip (which everyone else is listening to) and make my own judgements against my view of the way things will go globally. I usually get it half right… enough to operate at successful survival and occasional triumph level. I have three times lost more than 60% of everything, and twice been wiped out on the market, and twice been wiped out on spread betting. GREED AND FEAR RULE. I have never lost my nerve… when I think I am on the verge of so doing I stop trading, so that I make the decision, not the market… I am not FORCED to stop trading. Now: in the tactical sense: I am only spread betting on RBS and LLOY because there is enough movement to make it interesting, and the trend is up. I also use BP - but that one is so dangerous I am not in it as I write but could be in five minutes or five weeks. I just use the two banks. Now this tactic is rather silly – betting on two horses in the same race. It might be better to just select one and concentrate on that. I was heading that way even now, as I have 100 on RBS and 30 on LLOY as I write - because RBS was doing better. The minute I took that action then LLOY began to do better. I also use stops keeping them fairly close. The danger of this is that if you get stopped out too early you simply stop the reverse rather than the loss… in fact you keep the loss. I also let the stop follow the market up if it goes that way so that my loss, if the stop loss does get fired, is already a profit if I go above my entry level. This does not always work and the stop loss is more of a stop little loss. I do keep a close eye on things, but if I go away for a day or whatever I make sure that I leave a fairly safe environment on the account with stops as close or as far away as seems proper. I am going to put this on the site. M