After a slow end to the Christmas week and a slight year end rally equities took to the sideline after the Christmas festivities. The year opened in a similar fashion to the close of last year with markets running scared. The Dow Jones closed down -220 points in yesterday’s trading session and the FTSE had a lesser drop of around -30 points. These moves were primarily attributed to weaker than expected manufacturing data which strengthened the outlook of a recession.

Today equities rallied in morning trade but slowly sunk back after retailers reported a cautious outlook for the New Year. CRH meanwhile reported in line with expectations but are cautious for 2008 (aren’t we all). Oil also touched the $100 mark in trading yesterday and gold rallied to $860.60.

Friday sees employment figures in the US being released which could shake the markets given a lower that expected number. The Fed minutes also came out yesterday indicating more cuts are on the way but the cavalry failed to motivate the markets.

As I noted before my account hit the 1200 euro mark which wasn’t the highlight of last year. Today I got what I can only say was an unexpected email in the form of a margin call for 700 Euro. I have two positions shorting the FTSE and both needed margins of 600 which eat’s up my 1200. So I guess in hindsight I should have expected the call. I have had these positions for more that two weeks and both are March futures which are coming around to being winners again after a short spell as loosing trades.

This is part of my new trading strategy this year which will be to trade a lot less and wait for the key entry point. I am also going to be taking a longer term view of the markets and betting more on the longer term futures which have a larger spread but more room to move. Unless great opportunities arise I will be trying to stay away from the day trading. Last year the cardinal sin was over trading nut I think you have to get that out of your system in order to mature as a trader.

Since last posting I have been relatively quite on the trading front. The big hit I took on PLS.IR pushed my account down by 45% which I never recovered. I took a sideline for a few weeks and then came back with a new plan of attack, which in essence involved buying the rallies and selling the shorts. This was working until I made some pivotal mistakes, the first being too confident which made me money but then when I lost some I placed an irrational comeback trade which I still have open (yeah I know cut your losses run your profits). This is now down 250 or so. Another position I had open was a short on the FTSE March futures at 6430. This had made me 430 but I didn’t close and then the Christmas rally kicked in taking it all back.

So that concluded 2007, it didn’t break me and I am still trading but I had hoped to break even at the very least. Another year and a whole new round of trading, here’s to a new and prosperous new year.

Blogged with Flock

My trading has been at best erratic over the last two weeks. I have gone from nice gains to heavy losses. The main catalyst behind this is a position I took out on PLS.IR which I had been monitoring for some time. The share dived and I saw it as an opportunity to buy. Unfortunately it hadn’t completed its swan dive and at 8 euros a cent it cost me dearly. As a small stock the spread was quite large and to begin with I was down 250. By the end the trade cost me 550 and left my account in bad shape. I still firmly believe my trade was right and thanks to a good stop I was out before the share dived 12%. I am still looking to buy once the dust settles but over a longer duration.

Since then I have completed a number of erratic trades losing me another 200 euros. This is a clear sign I am overtrading and hence this post to confirm that and remedy it. I have done well in the only trading method I seem to have which is to wait for a down trend and ride it lower. This hasn’t worked for the up trends as the markets have been in a state of disarray. The FTSE is just above 6000 and the Dow Jones has gone under 13,000 for the first time since August.

My trades from now on will consist of waiting for the right moment to pile into a down trend with tight stop losses. My only saving grace is that I only lost 550 and didn’t wipe the account out which could have easily have happened.

Spread betting comes with many highs and lows. This week I built up my balance to 2300 and between last night and today I have managed to push that back down to 1950. This is the result of moving my stop (previous post) and placing my stops too close.

US inflation report came out today and is relatively tame. I took out a buy position on the FTSE at 6414 and it looks promising but we shall wait and see. US markets have just opened and after a rally of 330 points there seems to be a lack of direction. Hopefully the inflation results prove the stimulus they need to continue the rally thus pushing the FTSE higher too. At the moment the Dow is up 42 points lets see if it has legs.

I knew it, I had practiced it before but on this occasion I ignored it. Trailing your stop loss behind your winnings is the only time you should ever move your stop. Over the past few days in search of my trading Zen I have been waiting for the FTSE to rise to a resistance level and then shorting it. This has worked quite well gaining me 300 euros.

Then the rebound came. This was due to Wal-Mart who had good earnings and then comments from Goldman Sachs, Morgan Stanley, JP Morgan and other big banks speaking at a Merrill Lynch-organized financial conference. All of them had optimistic and good news which caused the Dow Jones to rally 320 points. I was short and bam 160 losses so I moved my stop loss. In the light of day I moved it back and took the hit because it looks like another strong rally is on the books for today.

In the denial I also took out a buy on Wall Street and set the stop loss to close stopping me out for another 60 euros. Wall Street went on to rally another 40 points which I missed. Not a good trading day. The lesson is never, never move your stop.

Over the past few weeks I have been playing around with the new trading platform and trying to develop a new trading system. Working during the day I don’t have the flexibility to keep track of my trades and make decisions when necessary. Whilst I can keep an eye on the markets I can’t devote time to managing trades. Too many occasions have arisen where trades have been stopped out because I had to leave my desk for twenty minutes.

IG Index has a beginner’s offer that allows me to trade at .30 cent for the first few weeks. The result of this is that I have lost only a few euros instead of a few hundred euros while learning the ins and outs of their package. No matter how good a trader you are each trading platform is different and each company has individual ways of operating. Learning these differences can cost you allot of money which is why I always like to use either a demo account or trade in small amounts to start with.

Initially I tried to manage trades during the day but quickly realised this was a losing battle. Since then I have been looking for my trading Zen. Most trading packages allow you to trade futures after the markets close (most trade futures anyway and not the markets). So when I go home in the evenings I have been trying to establish trends and find some type of system that suits my style. Whilst this may seem like an easy enough task, it has proven quite the opposite.

I finally signed up to IG Index and my account is now up and running. The good thing with this account is that it allows me to sign up to a training session (as they don’t offer a demo account). The benefits of this are that I can trade as little as .15 cent for the first two weeks as I learn the ropes. Thinking I knew the ropes has unfortunately made me more arrogant than I have right to be. This has cost me a few pounds.

When you open a new account with a spread betting company make sure they offer some kind of trial. This can be a demo account or an ease in introduction as IG Index offer. Before this I have been using various other accounts which operate in very different ways. A simple example of this is a stop loss. IG Index ask you to place the number of points away you want the stop to go (i.e. 20 points) where as other accounts make you place the exact market number (i.e. 6520). You can see how this could easily land you in hot water. Other differences are in the way daily bets are settled, placing orders, amending orders etc. These can differ substantially from firm to firm so make sure you try before you buy.

The great thing about spread betting is that you never stop learning. This is a case in point. Markets routinely like to shake things up. These shakes are created by the infamous “Market Makers” whose job it is to keep things interesting. A market maker is actually a firm who quotes both a buy and a sell price in a financial instrument or commodity, hoping to make a profit on the turn or the bid/offer spread. Now and then during the trading day but more generally at the open and close you will see dips above or below resistance points. These are anomalies when looked at in the content of the general emerging trend. The purpose of these spikes is to catch traders out and who have positioned their stop losses at a key resistance points or close to them. In general these spikes are only going to be a rise or fall of 10 points or so below or above a resistance point.

Say for example you buy the FTSE at 6523 and the FTSE shows a resistance point of 6500. Well the key place to position your stop loss is a few points below that at a non rounded number for example 6487. This allows you extra breathing space when the markets get the odd shake.