FSB: What qualities separate winning traders from losers?
CMC: I think this is a general financial markets question, not just one specific to questions. It is a clichéd answer but true nonetheless: using stop losses, the ability to cut a trade when it does not go the way you were expecting, and having the confidence to run your winners. Also, not risking too much of your account on anyone particular trade is always an important consideration - a series of losses should not put you in the position of seriously damaging your balance.
FSB: Do you have a 'favourite' trading rule?
CMC: Trade with the trend - another cliché - but over the past few years we have seen strong trends across the boards- in stocks, FX and commodities. It would have been expensive to trade against these strong trends so I am all in favour of making life a little bit easier and going with the trend - whether it is up or down.
FSB: Would you say that the traders who are spread betting now more sophisticated than they were a few years ago?
CMC: I think there is much more awareness now of how these products work, the advantages they have over other forms of trading and how to use stops and limit orders then there was even a few years ago.
FSB: Which typically is your busiest month of the year? Tell us of some of the busiest periods you have experienced over the years (could be elections…etc) you have been in business.
CMC: Our busiest months correspond to months of high volatility in the underlying markets which do not occur at particular times of the year.
A recent example of this was at the end February when the Chinese government released a statement announcing they had approved a special task force to clamp down on illegal share offerings and other banned activities in the market. The market took this badly, fearing further tightening measures in the future causing market volatility to rise sharply.
On the back of this we executed roughly 30% more trades in March than in February.
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FSB: What is growing faster at the retail level - Spread Betting or CFDs? And why?
CMC: Spread betting in the UK is probably growing faster than CFDs due to the fact that spread betting offers all the benefits of trading CFDs plus it is free of Capital Gains Tax (tax laws can change). In most circumstances, if you are resident in the UK it makes much more sense to use a spread betting account instead of a CFD account.
FSB: Is interest paid on the balance of the accounts? Any other perks or account benefits which our readers should be aware of? For instance, is it true that you offer a real-time Dow Jones News Wire (is this offered to all clients..?)?
CMC: Interest is paid on balances in excess of £10,000. All clients get access to free real time prices; an award-winning trading platform with fully integrated charting package including 42 different indicators and back testing module, real-time financial news from Dow Jones News Wire, one-click dealing and the most extensive client education offering in the market. Subsequently, CMC Markets has been voted Best Spread Betting Firm by Investors Chronicle 04/05/06, Shares Magazine 03/05/06, Trade2Win 04/05/06 and Best CFD Provider by Investors Chronicle 04/05 and Trade2Win 04/05/06. Past performance is no guarantee of future performance.
FSB: I understand you run training workshops to help get potential customers up to speed. What goes on?
CMC: We run a wide ranging educational program. For anybody that is interested in learning about trading, we run workshops every week explaining how spread betting and CFDs work and how people can use these tools to trade financial markets. For CMC Markets' accounts holders, we run a number of more in-depth free seminars for example, Spread Betting Basics which covers the mechanics of Spread Betting (e.g. what is margin; how to use stops and limits; the different markets that can be traded etc), and an 'Introduction to Technical Analysis' which is a 3 hour workshop where I cover trading strategies such as support and resistance, Fibonacci and stochastics etc . What is proving to be our most popular seminar for clients at the moment is the Live Trading Workshop. Clients come in to our professional training suite and learn how to use our trading platform by trading on real accounts - but using CMC Markets money. This has proved an effective way for clients to find their way around the software and learn how to place trades and orders such as stop losses. Places are limited to 20 people per session so it's a great opportunity to ask questions and learn from the experts.
FSB: What happens should I have a spread bet position in a quoted company and the company went into administration (or liquidated)?
CMC: We aim to replicate the action that occurs in the underlying market.
FSB: Are there any risks in shorting shares?
CMC: The risk you have is the same risk going short any market. Your maximum profit is fixed - i.e. the most the instrument can fall to is zero. The maximum risk is in theory unlimited - the market could go up to infinity in theory. So you have unlimited risk which is why it is sensible - as with all trades - to use stop losses.
FSB: Does the CMC Markets platform work for news trading?
CMC: If you have a strategy geared around trading off news, there is no reason why you could not implement that strategy with us.
FSB: What services are you offering that others aren't? How do you compare your spreads to the competition? Why should clients choose CMC Markets as their spread betting provider of choice?
CMC: We are known for offering some of the tightest spreads in the industry. Also, our trading platform Marketmaker is one of the best in the business as not only is it fast and reliable but has superb charts, news facility and one-click dealing. The reason why we have won 'Best Spread Betting service' awards since 2004 is this combination of low cost dealing and cutting edge technology. Past performance is no guarantee of future performance.
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FSB: What does the future hold for CMC Markets - Is there anything new going on with these days? Any hint to what is going to be the next top product you'll be launching?
CMC: We do have a number of exciting developments in the pipeline which are due to be released later on in the year, but as this point in time I need to remain tight lipped….watch this space!
FSB:There are now over 14 spread betting firms in the UK, and fierce competition is driving spreads down. Do you believe that the market is growing sufficiently to support this number of providers?
CMC: Some of the larger financial institutions are realising the success of this small niche market and are looking to enter the market. Many of the Spread Betting firms are partnering up with the main high street banks and this is opening up Spread Betting to a new retail audience which can only be a good thing for the industry.
FSB: More and more retail investors are switching to spread betting. This shift away from share trading to dealing in derivatives concerns some observers as it takes liquidity out of the cash market, particularly for smaller stocks. Please comment.
CMC: This shouldn't be a concern as latest anecdotal evidence suggests that up to 30% of volume on the London Stock Exchange is driven by CFDs and spread betting - the cash market is arguably more liquid than ever and products such as these have helped that in my opinion.
FSB: What books, seminars, and/or courses would you recommend?
CMC: When it comes to seminars, I would recommend going on the free ones run by companies such as us (visit www.cmcmarkets.co.uk/seminars). There are lots of excellent books on trading out there and personally I would focus on the ones that look at trading psychology and risk management rather than those that promise to teach you how to make your fortune easily.
FSB: Have you any parting words for our readers?
CMC: It's a marathon not a sprint - don't see financial trading as a get rich quick thing and try to double your account in a month, because this would mean taking on silly levels of risk. Just focus on trading well and grinding out steady profits.
Please remember that whether Spread Betting or trading CFDs, these are derivative products and carry a high degree of risk to your capital. You may lose more than your initial stake and should only speculate with funds you can afford to lose. Therefore ensure that you understand the risks involved and seek independent advice if necessary.
FSB: Thank you for your insight and time, Mr. Jones.
CMC: It's been a pleasure - no, it really has.
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