Never Change a Spread betting Stop Loss
Spread Betting Trading Centre: Do you follow any methods for when you are getting in or getting out of your positions?
Bob Smith: I try – and I know this goes against conventional wisdom – to buy on short term weakness within a trend of long term strength and do the reverse when I sell. I use Level2 but frankly don't think it's the magic bullet many people claim. I find the more you concentrate on getting a good short term deal, the more you're inclined to take your eye off the longer term, which the way I invest / bet is more important. Obviously you try and buy as cheaply as possible, but if it comes down to trying to save a couple of pence on entry, should you really be getting into the position in the first place
Spread Betting Trading Centre: Do you use stop-loss orders, why? Do you use any methods to place them?
Bob Smith: Almost always. I do it to limit losses which otherwise are potentially large, especially on sector positions. I have a clear method for calculating them which is
1. Take the lowest point of the trend I am buying and set the stop below that: how I choose the precise point would take too long to explain.
2. I subtract that value from the current price (total price, including spread).
3. I calculate the amount I am prepared to risk on the trade.
4. I divide 3 by 2 and that gives me the amount per 'point' to stake.
I never move a stop loss lower once I've set it.
My ideal is to move my stop loss above my buying price as the price moves up, but that’s easier said than done because the spread betting companies will only let you place a stop within a certain percentage of the current price (but their systems don’t always work, and you can sometimes get it higher than they would like!)
Spread Betting Trading Centre: What do you use spread betting for - hedging short-term deals, capital gain, etc.?
Bob Smith: Solely capital gain. I have considered using it for hedging, but for Private Investors, I don't think the figures stack up. Better to do your research and planning thoroughly and back your judgement. Of course you'll make mistakes from time to time but overall, if you're disciplined, you should make money. The important thing I think is to bench mark yourself against an index, and keep records, so you're not kidding yourself you're making money if your not.
Spread Betting Trading Centre: How important is research for you and where do you get your information from?
Bob Smith: Research is vital for all investment. I have too many sources to list but spend a lot of time researching markets and individual stocks.
Page 1 - My First Spread Bet
Page 2 - Never Change a Spread Betting Stop Loss Page 3 - My Spread Betting Gains and Losses Page 4 - Spead Betting Tips and Methods
