Spread Betting and the Stock Market for a novice?
Discussion
When I was in the US, there were a lot of companies advertising user friendly ways to buy and sell in the stock market.. Just thinking out loud, would it be possible for a novice to get into trading in the markets or spread betting sort of as a hobby, and make any money in it? Or is it something that requires professional knowledge and study?
Say for example if I took £300, and had a play around on a few different companies.. Would there by much point, or would you need to be dealing with much larger sums to make any good returns?
I've registered with CMC.co.uk, where they have a demo system with a virtual £10'000. I've got the general idea of spread betting, but most of the company markets are closed at the minute. I'll continue and see how I get on, do some reading and maybe have a go in the morning when the markets open..
So is it possible to make some money, or should I quit whilst I'm ahead..
Say for example if I took £300, and had a play around on a few different companies.. Would there by much point, or would you need to be dealing with much larger sums to make any good returns?
I've registered with CMC.co.uk, where they have a demo system with a virtual £10'000. I've got the general idea of spread betting, but most of the company markets are closed at the minute. I'll continue and see how I get on, do some reading and maybe have a go in the morning when the markets open..
So is it possible to make some money, or should I quit whilst I'm ahead..
Never does a topic create such polarised views, for me it comes down to being realistic.
There is money to be made investing, if you have money to be begin with. You can built on a capital base and watch it grow but not without pain. THIS IS NOW ADVICE but opinion so DYOR
1) Look at longterm
2) Do not spreadbet, use CFD's to buy underlying share and use index (Fste, DOW) as a hedge when needed
3) Never over leverage even with a hedge in place
4) Never trade small cap on margin ( small cap long term on equity may work)
5) If a stock is weak or issues a warning review with a eye to exiting, don't fall in love with the story
6) Accept that losses do occur but manage cash ( realise gains)
Re 2012,the market is surprisingly robust given the current state of things, confused further by US data which looks good and political hope, all this creates a dangerous mix as we all want to get in but IMO, there must be a correction as Europe is unsustainable and all the press I read suggests that. Tough as it is, for me now is not the right time for a long term investor, there needs to be a clear out.
Given the above before the clearout, you can review a strategy but as I say from a personal point of view Spread betting isn't my thing, ok no CGT but ask yourself why not, its because HMRC know more people lose than win on SB's and therefore also no capital losses.
It's taken me years to learn to be patient but look at the horizon, recession in Eurozone, recession here likely, hard landing in China ( large parts of the country where property prices are collapsing), ok US looking ok but not brilliant. Until a clear out in the market I'm very cautious, I've tried in the past trading in and out and guessing timing, I won some and lost some. As Peter Lynch of Fidelity says in his book "one up on Wall Street" investing is a 5 to 15 year plan and if you are careful you can out perform. This from a man who always was employed yet has a nett worth of over 500m USD
There is money to be made investing, if you have money to be begin with. You can built on a capital base and watch it grow but not without pain. THIS IS NOW ADVICE but opinion so DYOR
1) Look at longterm
2) Do not spreadbet, use CFD's to buy underlying share and use index (Fste, DOW) as a hedge when needed
3) Never over leverage even with a hedge in place
4) Never trade small cap on margin ( small cap long term on equity may work)
5) If a stock is weak or issues a warning review with a eye to exiting, don't fall in love with the story
6) Accept that losses do occur but manage cash ( realise gains)
Re 2012,the market is surprisingly robust given the current state of things, confused further by US data which looks good and political hope, all this creates a dangerous mix as we all want to get in but IMO, there must be a correction as Europe is unsustainable and all the press I read suggests that. Tough as it is, for me now is not the right time for a long term investor, there needs to be a clear out.
Given the above before the clearout, you can review a strategy but as I say from a personal point of view Spread betting isn't my thing, ok no CGT but ask yourself why not, its because HMRC know more people lose than win on SB's and therefore also no capital losses.
It's taken me years to learn to be patient but look at the horizon, recession in Eurozone, recession here likely, hard landing in China ( large parts of the country where property prices are collapsing), ok US looking ok but not brilliant. Until a clear out in the market I'm very cautious, I've tried in the past trading in and out and guessing timing, I won some and lost some. As Peter Lynch of Fidelity says in his book "one up on Wall Street" investing is a 5 to 15 year plan and if you are careful you can out perform. This from a man who always was employed yet has a nett worth of over 500m USD
Hyper10 said:
2) Do not spreadbet, use CFD's to buy underlying share and use index (Fste, DOW) as a hedge when needed
Could you please explain the difference to me?Also, for the OP:
Check the financing costs through whichever service you use, and make sure you correctly factor this in when working out your trades.
louiebaby said:
Could you please explain the difference to me?
Also, for the OP:
Check the financing costs through whichever service you use, and make sure you correctly factor this in when working out your trades.
I should have made it clear that it is my opinion but my view and how I deal with matters is.Also, for the OP:
Check the financing costs through whichever service you use, and make sure you correctly factor this in when working out your trades.
Using a CFD broad based portfolio of say 10 positions, I leverage my underlying cash position by 3 times, so if I have 10K in cash and notional 30k position. Based on the beta of the stocks(say1.5), I to be hedged need 30 x 1.5 =45K index short, this short only goes on as the market moves against me but goes on and comes off relatively regularly( it's cheap to do as opposed to taking stocks off).
The only reason I said about SB's was that I can't get my head around the point and the whole concept of them, I will readily say others might cope better with them.
I agree on costs but the big players (IG, Cityindex) are all fairly competitive and for me as I don't trade/invest in overly volatile markets, really trading costs have not been a primary driver
ds. Then come back when youve made a mint and thank meHyper10 said:
2) Do not spreadbet, use CFD's to buy underlying share and use index (Fste, DOW) as a hedge when needed
Given the above before the clearout, you can review a strategy but as I say from a personal point of view Spread betting isn't my thing, ok no CGT but ask yourself why not, its because HMRC know more people lose than win on SB's and therefore also no capital losses.
What bizarre logic. If you carry out the exact same strategy with CFDs or spreadbetting, you will still profit by a similar amount (taking into account commissions, taxes and spread costs). Given the above before the clearout, you can review a strategy but as I say from a personal point of view Spread betting isn't my thing, ok no CGT but ask yourself why not, its because HMRC know more people lose than win on SB's and therefore also no capital losses.
Just because it has the term "betting" in it, it doesn't mean it's gambling, just as much as using the term "invest" and opting for CFDs doesn't mean an "investor" isn't a degenerate gambler thinking he can beat the market. Using the term "invest" doesn't make you any cleverer or more likely to profit than a gambler.
Bottom line: if you are risking money "investing" in shares, trading CFDs or betting via a spreadbetting vehicle, you are a gambler. The difference is merely whether you're making money or losing money.
Edit: Everything else Hyper's said is pretty much good advice, though. I would draw a novice's attention to the dangers of over-leveraging. You can and will be liable for any money above that deposited if you try to make a quick buck and it goes sour. I've heard enough stories of woe (specifically, people having to sell their family homes after a court judgement) to know that over-leveraging is dangerous.
Edited by Hoofy on Thursday 5th January 11:41
As I see it, one advantage of CFDs is being able to offset losses against profits made elsewhere especially if you buy CFDs as a limited company. Ask EricMC for details.
Spreadbetting is tax-free.
So, it could make sense to buy shares/CFDs expecting to lose and thus reduce your tax liability but once you start consistently making money, move to spreadbetting to avoid paying tax.
Spreadbetting is tax-free.
So, it could make sense to buy shares/CFDs expecting to lose and thus reduce your tax liability but once you start consistently making money, move to spreadbetting to avoid paying tax.
1) You can trade with little amount using spreadbetting without any additional costs apart from the spread, so perhaps it's a good way to start and gain some experience.
2) You can control your risk fully by how much you put in one position. With spreadbetting, this gives you ability to leverage, which you can use to increase your profits but also increase your losses. You can still open a tiny position worth £300 which would mean no leverage in your case and a much smaller deposit.
2) You can control your risk fully by how much you put in one position. With spreadbetting, this gives you ability to leverage, which you can use to increase your profits but also increase your losses. You can still open a tiny position worth £300 which would mean no leverage in your case and a much smaller deposit.
Hoofy said:
What bizarre logic. If you carry out the exact same strategy with CFDs or spreadbetting, you will still profit by a similar amount (taking into account commissions, taxes and spread costs).
Just because it has the term "betting" in it, it doesn't mean it's gambling, just as much as using the term "invest" and opting for CFDs doesn't mean an "investor" isn't a degenerate gambler thinking he can beat the market. Using the term "invest" doesn't make you any cleverer or more likely to profit than a gambler.
Bottom line: if you are risking money "investing" in shares, trading CFDs or betting via a spreadbetting vehicle, you are a gambler. The difference is merely whether you're making money or losing money.
Edit: Everything else Hyper's said is pretty much good advice, though. I would draw a novice's attention to the dangers of over-leveraging. You can and will be liable for any money above that deposited if you try to make a quick buck and it goes sour. I've heard enough stories of woe (specifically, people having to sell their family homes after a court judgement) to know that over-leveraging is dangerous.
My logic albeit bizarre to you, works adequately for me, see my later post re SB's, just my way of doing things.Just because it has the term "betting" in it, it doesn't mean it's gambling, just as much as using the term "invest" and opting for CFDs doesn't mean an "investor" isn't a degenerate gambler thinking he can beat the market. Using the term "invest" doesn't make you any cleverer or more likely to profit than a gambler.
Bottom line: if you are risking money "investing" in shares, trading CFDs or betting via a spreadbetting vehicle, you are a gambler. The difference is merely whether you're making money or losing money.
Edit: Everything else Hyper's said is pretty much good advice, though. I would draw a novice's attention to the dangers of over-leveraging. You can and will be liable for any money above that deposited if you try to make a quick buck and it goes sour. I've heard enough stories of woe (specifically, people having to sell their family homes after a court judgement) to know that over-leveraging is dangerous.
Edited by Hoofy on Thursday 5th January 11:41
Re Gambling, no where did I comment on it, the matter of SB's related to there practicality from my perspective. Gambling is a personal choice and something I have done on many occasions in the past, however for ME, investing using leveraged products is fundamentally different to gambling since for ME, there is no adrenalin rush, merely a well managed not over leveraged portfolio, consisting of this strategy and BTL's and cash.
I would say the risk is of course, if you don't know yourself, then of course "chasing" can occur but for me the secret is to ensure that the act of "investing" is not the provider of Serotonin in your body, find another hobby to balance out things.
Hyper10 said:
My logic albeit bizarre to you, works adequately for me, see my later post re SB's, just my way of doing things.
Re Gambling, no where did I comment on it, the matter of SB's related to there practicality from my perspective. Gambling is a personal choice and something I have done on many occasions in the past, however for ME, investing using leveraged products is fundamentally different to gambling since for ME, there is no adrenalin rush, merely a well managed not over leveraged portfolio, consisting of this strategy and BTL's and cash.
I would say the risk is of course, if you don't know yourself, then of course "chasing" can occur but for me the secret is to ensure that the act of "investing" is not the provider of Serotonin in your body, find another hobby to balance out things.
I do not see why you cannot do what you do via spreadbetting.Re Gambling, no where did I comment on it, the matter of SB's related to there practicality from my perspective. Gambling is a personal choice and something I have done on many occasions in the past, however for ME, investing using leveraged products is fundamentally different to gambling since for ME, there is no adrenalin rush, merely a well managed not over leveraged portfolio, consisting of this strategy and BTL's and cash.
I would say the risk is of course, if you don't know yourself, then of course "chasing" can occur but for me the secret is to ensure that the act of "investing" is not the provider of Serotonin in your body, find another hobby to balance out things.
I was really talking generally about gambling as many newbies seem to think investing is not gambling whereas the reality for them is much different. Thus because you are making money, you are still gambling but doing it profitably.
As per Wikipedia: gambling is the wagering of money or something of material value (referred to as "the stakes") on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods. That is trading... or buying property... or going to university.
Contrast this with degenerate gambling which is what the novice will claim he is not doing by using such terms as "investing" then promptly averaging down into the pit of hell in a puddle of sweat and regret.
Take your £300 and buy premium bonds.
Then open a paper trading account - or just keep a spreadsheet - to keep a record of what you would have done (traded/invested/gambled) with your own money. See how you get on. Whether you make a profit or a loss, understand what happened, and aim to make consistent profits.
This is less likely to end in tears than potentially losing your entire pot on your first trade.
If you make consistent, high profits, over a meaningful period, then take out a loan / take a job with a hedge fund / family and friends cash and trade a meaningful amount to make it worthwhile!
Then open a paper trading account - or just keep a spreadsheet - to keep a record of what you would have done (traded/invested/gambled) with your own money. See how you get on. Whether you make a profit or a loss, understand what happened, and aim to make consistent profits.
This is less likely to end in tears than potentially losing your entire pot on your first trade.
If you make consistent, high profits, over a meaningful period, then take out a loan / take a job with a hedge fund / family and friends cash and trade a meaningful amount to make it worthwhile!
La Liga said:
... And get a massive shock when you realise paper-trading is nothing like doing it with real money. By all means paper-trade but realise that the psychology of trading - the most important part - doesn't exist when you're not playing with real money. That's why paper-trading is very limited. A lot of experts recommend not even touching it beyond getting used to the basic mechanics of how things work.
That is exactly right. Paper trading can give a false sense of confidence, since you are free to go for the long shot trades, safe in the knowledge that it won't cost anything when it fails. You need to experience the pain of losing money before you can begin to assess whether trading suits you. Even trading very small real amounts (relative to your net worth) doesn't give you the full experience as losses and profits have to matter to you in order to know how you would perform when you do it for real.I believe a significant majority lose money when spreadbetting.
Steven Quas
Hamburg
Hoofy said:
I do not see why you cannot do what you do via spreadbetting.
I was really talking generally about gambling as many newbies seem to think investing is not gambling whereas the reality for them is much different. Thus because you are making money, you are still gambling but doing it profitably.
As per Wikipedia: gambling is the wagering of money or something of material value (referred to as "the stakes") on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods. That is trading... or buying property... or going to university.
Contrast this with degenerate gambling which is what the novice will claim he is not doing by using such terms as "investing" then promptly averaging down into the pit of hell in a puddle of sweat and regret.
That's not proper punting, a proper punt is. Bank Holiday Weekend, warm weather, Lunch, Sandown Park, snack, evening meeting Windsor, Dinner, Casino, Casino, Casino, big win, "don't give it back", oh s**t I just did. Off to bed and start all over tomorrow, that is real pyscho punting and use the Monday to come down or perk up. Gambling most pernicious thing but no one see's it before it's too late except those close to it.I was really talking generally about gambling as many newbies seem to think investing is not gambling whereas the reality for them is much different. Thus because you are making money, you are still gambling but doing it profitably.
As per Wikipedia: gambling is the wagering of money or something of material value (referred to as "the stakes") on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods. That is trading... or buying property... or going to university.
Contrast this with degenerate gambling which is what the novice will claim he is not doing by using such terms as "investing" then promptly averaging down into the pit of hell in a puddle of sweat and regret.
Hyper10 said:
That's not proper punting, a proper punt is. Bank Holiday Weekend, warm weather, Lunch, Sandown Park, snack, evening meeting Windsor, Dinner, Casino, Casino, Casino, big win, "don't give it back", oh s**t I just did. Off to bed and start all over tomorrow, that is real pyscho punting and use the Monday to come down or perk up. Gambling most pernicious thing but no one see's it before it's too late except those close to it.
Haha. That's the really obvious one but I've spoken to (wannabe) traders who've done crazy similar things on the markets both trading futures and spreadbetting. I call it "the devil takes thee".Gassing Station | Finance | Top of Page | What's New | My Stuff