Well, as I write, volatility has returned big time to the markets and this volatility is actually what spread betters really need to make the quick money they are always after! And remember, spreadbetting is a cracking mechanism that gives us a good chance of making some money from a market downturn.
However, one thing about volatility to comment on is stop losses…
You simply can’t just stick a stop loss on something in a fast moving market and leave it – stops ought to be moved up or down depending on what’s happening – yes, I know that’s contrary to what many people tell you to do!
In particular, I think that it is worth looking through your stops before the markets open each day to check whether they are in the right place. For example, if you are in a short and the market is set to start the day up but you feel the move will be temporary, check you won’t be spiked out at the start of trading…
Those of you with level 2 prices can check, a few minutes before the opening, the kind of opening price that is likely.
Turning to what I’m up to during the current downtrend…
Two main tactics… quick fire FTSE shorts work very nicely, and they did for me during the last downturn. And sometimes you get lucky and you can hold onto the FTSE short if the market simply carries on falling.
For example, in the first week of August last year I put what I thought were very short term FTSE bets but the market simply kept falling and over a week or so I got 500 points my way!
Trailing stops can help with FTSE bets, though setting them too close to your entry is usually a bad move and will just spike you out on natural variability.
I used to short individual companies in downturns, but these days I find it easier to just use the FTSE.
I’m also using the current downturn to pick up spreadbets on a longer-term basis (say June/Sep expiry) in companies that look to have been oversold.
For example, picking up Costain at just over 200p looks like a bargain to me, with the aim of picking up around 30 points riding it up to 235, perhaps even more in time.
Another that appealed was Kentz in the 380s, and Fenner in the low 400s also looks appealing. After all, ot’s odd to think that when shares crash down that people often don’t buy. But it’s like the sales isn’t it?
One thing to watch during extreme volatility is to check your exposure to leverage.
At the risk of being a boring old fart, (You boring old fart! — Editor) which is quite a risk here for a magazine which enjoys a bit of risk… make sure you can afford to cover losses.
What you don’t want is a spreadbet firm calling you up demanding money. Make sure you are not in over your head.
Have a great June! At least there won’t be any more ‘Should you sell in May and come back on St Ledgers Day’ features…
Robbie
Article reproduced from the June edition of Spreadbet eMagazine
by Dave
Robbie Burns’ May Diary
May 24, 2012 at 7:35 am in Market Commentary by Dave
Well, as I write, volatility has returned big time to the markets and this volatility is actually what spread betters really need to make the quick money they are always after! And remember, spreadbetting is a cracking mechanism that gives us a good chance of making some money from a market downturn.
However, one thing about volatility to comment on is stop losses…
You simply can’t just stick a stop loss on something in a fast moving market and leave it – stops ought to be moved up or down depending on what’s happening – yes, I know that’s contrary to what many people tell you to do!
In particular, I think that it is worth looking through your stops before the markets open each day to check whether they are in the right place. For example, if you are in a short and the market is set to start the day up but you feel the move will be temporary, check you won’t be spiked out at the start of trading…
Those of you with level 2 prices can check, a few minutes before the opening, the kind of opening price that is likely.
Turning to what I’m up to during the current downtrend…
Two main tactics… quick fire FTSE shorts work very nicely, and they did for me during the last downturn. And sometimes you get lucky and you can hold onto the FTSE short if the market simply carries on falling.
For example, in the first week of August last year I put what I thought were very short term FTSE bets but the market simply kept falling and over a week or so I got 500 points my way!
Trailing stops can help with FTSE bets, though setting them too close to your entry is usually a bad move and will just spike you out on natural variability.
I used to short individual companies in downturns, but these days I find it easier to just use the FTSE.
I’m also using the current downturn to pick up spreadbets on a longer-term basis (say June/Sep expiry) in companies that look to have been oversold.
For example, picking up Costain at just over 200p looks like a bargain to me, with the aim of picking up around 30 points riding it up to 235, perhaps even more in time.
Another that appealed was Kentz in the 380s, and Fenner in the low 400s also looks appealing. After all, ot’s odd to think that when shares crash down that people often don’t buy. But it’s like the sales isn’t it?
One thing to watch during extreme volatility is to check your exposure to leverage.
At the risk of being a boring old fart, (You boring old fart! — Editor) which is quite a risk here for a magazine which enjoys a bit of risk… make sure you can afford to cover losses.
What you don’t want is a spreadbet firm calling you up demanding money. Make sure you are not in over your head.
Have a great June! At least there won’t be any more ‘Should you sell in May and come back on St Ledgers Day’ features…
Robbie
Article reproduced from the June edition of Spreadbet eMagazine