Common Spread Betting Mistakes
Spread Betting Trading Centre: What are the most common mistakes that spread betters make?
IG Index: The most common mistake we see is clients placing stops at levels determined by how much money they are prepared to risk rather than choosing the stop level considering actual market movements. In that a stop loss will close a trade, it means ‘I am wrong, I’ve changed my mind’. Stops should therefore be placed considering market volatility, historic highs/lows etc rather than purely a monetary value. If the ‘market’ level implied mean more risk than the client wants they can always reduce their stake.
Spread Betting Trading Centre: What do you think about the market’s performance this year?
IG Index: A solid, though choppy year to date! As I write the FTSE is down more than 1pc but it is still up nearly 7pc on the year. Bids and M&A have fuelled these gains whilst credit, inflation and Chinese worries have caused sharp pull-backs and higher volatility. On balance, a healthy 7pc gain seems fairly to reflect that the positive impact of M&A does currently overshadow the reach of credit/inflation fears.
Spread Betting Trading Centre: What are your predictions for the market for the next couple of months?
IG Index: So long as the US housing market/sub-prime problem does not create contagion, and barring specific shocks, I think we are on to reach all-time highs on the FTSE. The record of around 6950 is only about 5pc from here. Credit spreads have widened and this will mean that private equity’s leverage mightn’t be as cheap as it has been but that doesn’t mean it’s unprofitable and in that environment, M&A and bids will continue.
Spread Betting Trading Centre: Are there any big changes in the market you are expecting?
IG Index: On Monday, IG launches PureDeal, our brand new dealer interface. Apart from looking a lot better, it will stream real-time news from Reuters (a first for retail clients) and incorporates our price improvement technology. This means that if a market moves in a client’s favour as they deal (so long as the move is sufficient to trigger a ‘check’ which would currently see the deal rejected) the client’s deal will be accepted at the improved price. This is an industry first.
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