Simon Smith started spread betting on property prices in the summer of 2002 when stock markets were heading south and doom-mongers were suggesting the possibility of heavy house price falls.
"Some people reacted to the prospect of a falling property market by simply selling while property prices were high and going into rented accommodation in the hope that they could buy again when the market hit rock bottom," he says.
"I decided to take the other option and gamble on the newly-created house price indices," says Mr Smith, who lives and works in Leeds.
"That's the best bit about spread betting on property prices - that you can make just as much money from a falling property market as a rising one."
At that time the spread betting firm City Index had launched the first service for trading property futures, followed soon afterwards by its competitor, IG Index.
After an initial bet of £500, he had, by the end of his first month's trading, increased his gamble to £10,000.
After an initial bet of £500, he had, by the end of his first month's trading, increased his gamble to £10,000
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This allowed Mr Smith to bet that house prices would rise, although investors can also "hedge" agaisnt future losses by betting that house prices will fall.
"When everyone was predicting falls I spoke to a lot of different people," he says.
"I looked at the house price indices and thought about where the markets were going to go. My gut feeling was that the market was not going to crash and that the economy was strong enough to continue to support a rise in the markets."
He decided to trust his instincts and went to IG Index, a spread betting company that takes bets on property based on the Halifax House Price Survey.
After making an initial bet of £500, he had, by the end of his first month's trading, increased his gamble to £10,000.
Fortunately for him his instinct was right and a month later his investment returned £10,000 profit.
This was because prices in London rose when they had been expected to fall and those in the north of England soared when they had been expected to edge up. But while his predictions have - for the most part - been right, he says he cannot afford to be complacent.
"Spread betting is a very volatile game because 'future' property prices can go up and down rapidly," he says.
"During the Iraq war, property prices online came down very quickly because people did not know what was happening. But in reality property prices remained steady."
Fred Crosby (not his real name) has been gambling for three years but did not go full-time until May 2005.
He is reluctant to call himself "a professional gambler" but thinks he will stick with it as a career option.
"A friend convinced me that you could make money out of spread betting. I gave it a go with small stakes. I never thought that I would make a living from it."
Now in his 40s, Mr Crosby says he has five A-levels and three university degrees, while his professional background is in computing.
He is enthusiastic about spread betting, using exchanges such as Betfair. These exchanges pit gamblers against each other rather than the house, although the spread betting company can put up its own money to inject liquidity into a market.
Mr Crosby is less complementary about conventional spread betting, where, he says, the company will refuse to take your bet if you have proved you are any good.
"They don't want your money if they think you know what you are doing," he says. "If you make money, they restrict your bets and in the end they close you down."
"The exchanges won't close you down. I could not have given up my job but for the exchanges."
'I am active 40 to 50 hours a week in the football season, watching three screens. I bet on results, total number of goals, corners, bookings'
Mr Crosby prefers sports betting to the financial area. "The trouble with financial betting is that there is always someone who knows more than you.
"With sport it is harder to manage the market and influence the outcome. I don't think sports betters are as sophisticated as financial betters."
His favourite sport for spread betting is football, although he will also take a punt on Formula One car racing and rugby.
"I am active 40 to 50 hours a week in the football season, watching three screens. I bet on results, total number of goals, corners, bookings.
"Some people add up the shirt numbers of all the goal scorers and bet on that. There was a Villareal striker who had a 99 shirt. He was a good one to have if you were 'buying' shirts."
He sees little point in betting on events that do not attract much interest.
"If it is on TV, people will bet on it, even if it is a match in the Conference League. It is not worth betting on a second division match if it's not on TV."
Mr Crosby says he has good runs and bad. Once, he made a six-figure sum in a day while on two other occasions he lost that amount.
He accepts there is no guarantee he will make money, so he invests in property and foreign exchange funds so that some money will be available if spread betting lets him down.
He is hoping to apply computer technology to improving his performance. "I am looking at software to automate my trading so I can grab money faster when I see it."
Mark Shipman compares spread betting with the futures trading he did when working in the banking sector. "The risks are the same," he says. "You get tremendous exposure for a small amount of money."
Now that he is investing his own funds, Mr Shipman, 43, takes a relatively long-term view of the market.
"I realised I was a poor day trader. It is easier to make a decision on what the FTSE will be like in a year's time than on what it will be doing in 10 minutes.
"But people get seduced by the adrenaline rush, going in and out of the market on a daily basis. I take a step back. I don't have a live [data] feed at home and I do my analysis once a week."
Mr Shipman left school with one O-level and started in the City in the post room of an Australian bank. From there he moved to the bank's accounts department, training to become a branch accountant.
"But the dealers seemed to be having a tremendous amount of fun and they were getting well paid. I put myself forward for a junior position and it went from there."
'In a sense, I am still trading futures, only now it's tax-free'
He left the banking sector to set up his own investment company, Silver Knight Investment Management in the early 1990s.
"They weren't known as hedge funds then," he says, "but if you looked at our business, that was what we were doing.
"I ran that for five or six years and then I 'retired' and moved into the spread betting arena. In a sense, I am still trading futures, only now it's tax-free."
Mr Shipman says he takes a view on a particular asset and then confirms his impressions by inspecting the charts of its performance. Chartists see patterns in price movements that prompt them to buy or sell.
"I'm bullish on commodities. I bought oil when it broke through its multi-month range two to three years ago. I will continue to do so until I see that the trend has ended. I see charts as a discipline."
He thinks many people set unrealistic targets for returns from their investing. "If you could make 300 per cent in a year, you would be beating Warren Buffett," he says. "People have £500 to invest but expect to retire on their winnings in three years.
"I look to make a return of 10 to15 per cent with leverage. I don't expect to make 25 per cent. And there will be times when you only make 5 per cent."
He has written a guide for investors - The Next Big Investment Boom - which, he says knocked The Da Vinci Code off the Amazon best-seller list for a few days recently. He also provides investment advice online on his www.trend-follower.com website.
In his spare time Mr Shipman plays tournament poker and owns and breeds racehorses.
Originally published in the Financial Times, June 2006
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