I moved to spread bets for trend following stuff rather than investing, and as an added bonus with spread betting you can take up short positions. I found the learning curve steep, especially on index spreads due to market volatility often triggering stops even when you make a good call on direction. I now tend to stick to share and commodity trends over 5-10 day periods and it is working out well now. What is important is that I enjoy this money making activity and the fact that its profitable for me as well is an added bonus (it just wasn’t initially).
Is Spread Betting just a Bet that the market will go up or down?
I am surprised at people’s ignorance to spread betting. Yes, it is essentially a ‘bet’ that the price will go up, down or sideways, essentially like any form of investment. Of course you shouldn’t over leverage yourself – use leverage sensibly unless you are very good and trading very liquid assets on very short time-frames. It still works out cheaper than share dealing as you don’t pay stamp and brokerage on trades. Spread bets are useful for short to medium term trades. I started off share dealing about 17 months ago and have done pretty well trading BARC (Barclays) and CDN (Caledon Resources) as well as a few others along the way.
What would you consider an edge on the markets?
Of course knowing what the major players are thinking would be a useful edge. Knowing tomorrow’s news would also be a wonderful edge. Having some algorithm (which doesn’t necessarily have to be complex) to exploit market mispricings and inefficiencies would be a good edge as well;) Unfortunately, for us lower mortals this kind of edge is out of our reach so we stick to trend following.
Having said that I admit that trend following is really an art in itself. Picking the correct time frame of a trend can be even harder as it may be down in the short term but generally the market moves up. As long as I can consistently call 6 out of 10 trends correctly I stand to make money, using some technical analysis and some common sense it is possible to achieve this hit rate and latch on to a trend. I have coded my own software which helps me pick and spot trends and then I try to stick to them for as long as possible. I usually limit myself to FTSE 100 companies mainly, but in these volatile times the slightest news can blow you out the water.
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