Don’t Trade the FTSE (Or any other indicies or currency pairs) for at least a YEAR!


This is a spread betting rule which I myself have broken many times and have paid the price for it. If like me you are trying to learn the ropes of spread betting with a small amount of funds then I would highly recommend you do not trade the FTSE for at least the first year. The FTSE can easily move 100+ points in a day. So even trading at the low price of £1 per point this could still mean £100+ move aginst you in one day. If you are only trading with around £1000 it will only take 10 bad trades like this to wipe your account out and probably put you off spread betting forever. This is not what you want is it?


I try to stick to a rule of only risking 1% of my trading capital on any one trade. This is another rule which I will cover in another post. Again I have broken this rule which is how I have ended up with a current £500+ loss. If you stick to this rule then you can make 100 trades with your £1000. Law of averages says that you should win at least 50% of the time so if you stick to 1% risk then you should always live to trade another day.


I have tried to trade the FTSE with only 1% risk but this is a very difficult thing to do. The FTSE can move 10 points in a matter of seconds so you can be very qucikly stopped out of a trade. When I have tried to trade the FTSE I have tried to identify support or resistance lines(which I will cover in another post soon) and place my trade based on these. Identifying support and resistance is a bit of a skill which I have yet to master. Hence the reason for mostly losing money on FTSE trades.


Therefore I have decided that the FTSE can wait until I have more confidence in my ability to trade. I am (for the time being) a position trader. I am buying and holding. As the great Warren Buffet said “Our favourite holding period is forever”. This is going to be me from now on. I am going to buy and hold and move up my stop order as the position moves in my favor.


Todays Spread Betting Action:


Earlier today I placed a buy order for Mitchel & Butler. There are two reasons for this trade.
1. The stock is down from a high or around 900 back in 2007.
2. There has been a recent resistance level around 290.


I placed my buy order at 295 with a stop at 285. The buy was placed as this is above the recent resistance level of 290 and should signal a break of this resistance level and should now turn into a possible support level.


ADX = 23 with DI+ above DI-, the 20, 50 and 200 day moving averages are all indicating up trend as 20 > 50 and 50 > 200 and they are all increasing. This position will need monitoring quite carefully as there is another potential resistance level around the 300 mark. The average true range (ATR) is currently 7.7. This puts my stop at 1.3* ATR. I have just recently been initially trailing my stops at 2*ATR up to break even then 3*ATR allowing the position to breath a bit. I have not statistics as to how this is performing as I have only just started to adopt this strategy.


Disclaimer: Don’t take my posting of these trades as a recommendation that you should make the same trades!

That’s about all for today. I probably will not get time to post anything tomorrow as I am moving house and have to move all of our things.

February 19, 2010 by Harry
Category: blog