Archive for the ‘General’ Category

Analysis of the IG Index – ‘better sell oil’ advert

Monday, July 13th, 2009

Here is the first in an occasional series where I’ll look at a financial advertisement and explain my opinion on what the advert is trying to achieve and how it is trying to do this.

This very green advert appeared in City A.M. recently. It is not a new advert; it is part of an existing series.

The slogan is “If you’re thinking ‘better sell oil’, contact us.”

IG Index 'better sell oil' newspaper advert

The advert is trying to say that predicting the price of oil could be as easy as spotting things such as an increase in wind farms. It is trying to suggest that if you are ‘clever enough’ to spot this link between two different events then doing business with IG could be in your interest.

Of course most people who have even the slightest in trading will spot the link. The way the advert hooks you in is by trying to make you think that because you have spotted this link you are intelligent, and could have some kind of ‘edge’ over other people.

If they can make you fell clever (as they say flattery can get you everywhere) – then they can make you feel that you could potentially make money out of trading.

The advert isn’t too explicit about the services that IG offers. This is another marketing trick. They provide enough of a ‘hook’ to arouse your interest in the company, but not enough so you can make a judgment about what they are offering there and then – i.e. not enough to judge purely by looking at the advert. The only way you will be able to get a full understanding of what they offer is by visiting their website.

Once they have got you to visit the website then the next stage of their ‘sell’ will begin.

In my opinion a good individual advert from an equally good series of adverts that no doubt gets them plenty of visitors to their website.

City A.M. London’s free business and finance newspaper

Monday, July 6th, 2009

If you want a useful source of free financial news, opinion and analysis each day then make sure you look out for City A.M. It is one of a growing number of free papers which is available in London. Others include The Metro, thelondonpaper and The London Lite.

Front page of London's City A.M. daily free newspaper

City A.M. is more specialist as it focuses on financial news. You can find it being handed out by distributers in the morning outside some underground train stations. These are the tube stations near to where people ‘in the city’ work, or stations where they commute to – such as Waterloo. It can also be found in newspaper distribution bins at various places in central London.

The paper’s slogan is ‘Business with Personality’. As well as having the standard news wire financial news they have columns, reports and interviews. An essential read is the Alistair Heath Editor’s letter on page 2 each day. He always has something insightful to say about a topical economic or business situation.

A lighter take on the business world is provided by Victoria Bates in ‘The Capitalist’ page where she provides stories about what the business world does outside of work hours. There are reports from various business function, parties, and insights into the restaurant bills that city types rack up.

There are regular articles on investment mainly written by Jessica Mead. The have features on topics such as CFDs, spread betting and commodities which might be of particular interest to readers of this blog. They include information on using technical and fundamental analysis. Analysts from a selection of brokers also write columns giving their opinions on likely market moves.

Special features on holidays, property, and going out make appearances at various days throughout the week. A short round up of sport is positioned at the back of the paper.

In a typical week the special features may be as follows:

  • Monday – spread betting, travel
  • Tuesday – contracts for difference, restaurants
  • Wednesday – foreign exchange, law, motoring
  • Thursday – careers, books, food & drink
  • Friday – property, film and theatre reviews, fashion

City A.M. is available at selected tube stations around central London. If you can’t get hold of a copy you can read the paper on the City A.M. website.

Top Trader 2009 Competition

Monday, June 29th, 2009

RBS marketindex is launching a competition to find the best CFD trader. You trade using a demo account and each week there will be prizes for whoever increases their account by the most. Registration is open from the 29th June and the competition starts on July 6th.

Prizes are £5000 cash, a Dell laptop and an iPhone 3GS 16GB.

As this is a competition the strategy you adopt for trading should be different to how you would normally trade. In the real world slow and steady is the best way to make way money from trading. This strategy won’t however win you any prizes in a competition like this!

If you want to win you will need to place high risk/high reward bets. Yes there is a good chance that you will blow your account, but as it is only a demo account it doesn’t matter. You have to make at least 20 trades in the four weeks of the competition to qualify for the prizes.

If you want to experiment with a new trading platform without risking your real money then this could be a good opportunity to do it. And unlike a standard demo account there is a very small chance that you might win something at the end.

If you enter then good luck, and let me know how you got on.

You can find the full details here.

Footnote: RBS marketindex is run by ABN Amro. This is the Dutch bank that RBS (in a consortium with a few other institutions) took over in 2007 in a deal worth 70 billion Euros. At the time RBS was lead by Fred Goodwin, and the deal is widely regarded as one of the main factors that brought RBS down.

Trader, investor, gambler – which one are you?

Monday, June 29th, 2009

If you have any sort of involvement in shares, commodities, currency, or derivatives of these, then you will probably fit into one or more of the ‘investor’, ‘gambler’ or ‘trader’ categories. What is the difference between them and where do you fit into these categorisations?

Investor

An investor is someone who buys something in the belief that the value will rise over time. Unlike gambling and trading where bets can be on movements in either direction, an investor will always be betting on the price rising. In the case of buying shares in a company the investor is helping the company out by buying part of the company and hoping to benefit from the company’s success. This is in the form of both the rise in the share price and in the receiving of dividends.

In the case of investing in commodities the investor is buying in the belief that the value will increase in the long term.

Investors will buy the product whole – so if the shares cost £4000 they will pay £4000.

Investing is therefore buying something ‘real’ (i.e. not a derivative), in the belief that in a period of many months to many years the value will rise.

Trader

A trader has a much wider scope in what they do than an investor. They buy or sell (go long or short) in order to profit from the change in value. The trader will have an opinion on the direction that the price will move and will then place a trade based on their opinion.

The trader isn’t restricted to buying or selling shares or commodities. They can also trade in derivatives of these, and in a whole host of other financial products such as foreign exchange (forex), futures and even on thing such as interest rates.

The trader can do business on multiple timeframes. They may be willing to wait many months or years, but they can also have much shorter timeframes. Even down to minutes or seconds.

Unlike the investor who buys shares, the trader isn’t trading for the benefit of the company, the trader does what he/she does purely for his/her benefit.

Whereas the investor will generally pay in full the trader can use leverage to take advantage of movements of much greater value than the trader has. E.g. for share prices a trader may well be borrowing 20 to 50 times the value of the money that is being paid upfront. For foreign currency trading the amount being borrowed can be as high as 1:100 or 1:200.

Gambler

The gambler could be adopting any kind of tactics. The gambler could be buying or selling shares, derivatives or in fact anything he/she can think of.

What sets the gambler apart is the lack of real justification for the decisions that are made. Unlike the trader and investor who should be maintaining a cool head, the gambler is likely to get a big adrenaline rush out of each bet. The gambler is also likely to find it hard to control risk, and find it hard to control how many bets are being placed. Even when confronted with mounting loses, the gambler will still continue.

Which one are you?

Which of these characters best describes you? I hope you are either an investor or a trader. Unfortunately if you are a gambler you may still believe you are one of the other two. In this case I hope you discover the truth before it is too late.

FTSE 100 CFD Trading: 2nd June 2009

Tuesday, June 2nd, 2009

The day started well with me spotting several trends and managing my risk well. By 2pm I was up 22 points.

Things went wrong after this when the market got more choppy. My biggest loss was in the afternoon around the time that the US housing data was released. The index started moving fast and I tried to profit from the surge upwards. I was too late and bought at the top, it went quickly down losing me 11 points.

The general ‘choppiness’ of the FTSE caught me out several more times in the afternoon. By 3:30pm I was down 10 points.

FTSE 100

Time Price Time Price Profit Running Profit
1 10:56 Buy 4467 11:04 Sell 4468 +1 +1
2 11:09 Buy 4472 12:11 Sell 4479 +7 +8
3 12:44 Sell 4472 12:56 Buy 4475 -3 +5
4 13:19 Sell 4459 13:43 Buy 4442 +17 +22
5 14:42 Buy 4462 14:46 Sell 4453 -9 +13
6 15:00 Buy 4486 15:02 Sell 4475 -11 +2
7 15:05 Buy 4479 15:15 Sell 4469 -10 -8
8 15:25 Buy 4468 15:52 Sell 4466 -2 -10

Lessons learnt.

  1. Trying to join sudden trends is very risky. Slow steady trends are definitely safer.
  2. Trading using a 1 minute chart gives a big risk of false signals. Perhaps I should stick to longer time frames.
  3. Overtrading is expensive as you are paying the spread for each trade – the FTSE spread with the company I use is 2 points. Looking at the overall picture of the day there were two big movements upwards and one large movement downwards. The optimum number of trades for the day would have probably been 3 rather than 8. These things are always easy to say with hindsight!

Due to not having much ‘free’ time the next trading diary entry will probably be in 2-3 weeks.



Aims of this trading blog

Tuesday, June 2nd, 2009

The aim of this blog is to allow me to track my thoughts and ideas relating to trading CFDs on the UK FTSE100 index and possibly other UK shares. I might also be trading other global indicies and Forex.

Topics may include:

  • Details of actual trades.
  • Statistics and data analysis.
  • Lessons that I’ve learnt.
  • Risk management.
  • Reviews of relevant books that I’ve read.
  • Information about trading platforms I’m using.

I hope that writing about my experiences will help to make me a better trader and I hope that anything I post might help you too.