Quick Spread Trading Q

Hanley

Say gold is at 903.46 dollars per ounce and one was to put a spread bet on it increasing. Stake’s €1 per point for simplicity.

Gold rises to 905.46 say. The “points” increase is 200 points, or 20 points? That is, for spread betting purposes, do you calculate the rise in cents, or tens of cents?

soddy1979

Cents so 200 points

silverharp

betting €100 per $1 move is quite a big bet , gold can easily trade in a $20 /$30 range in a given day , so even if you're right you can be stoped out very easily

Hanley

Thanks Sodddy.

silverharp wrote: »

betting €100 per $1 move is quite a big bet , gold can easily trade in a $20 /$30 range in a given day , so even if you're right you can be stoped out very easily

Oh yeah I know... but as far as I'm aware, you can't really go any lower with spreads?

I'd quite happily go to 10c if I could. I haven't even opened account like but I've been watching the price of gold over the past couple of days and it seems to trade in very clearly defined ranges. Like it'll hit resistance, drop back down to support... rinse and repeat. Every now and then when it breaks those levels it seems to run for $3-4 dollars.

Over the last two days it's been relatively easy to predict. By my calcs, if I had 10c a point I'd be looking at an average gain of €275 per day trading it, using a 5% stop based off 1,000 capital. Seems a bit TOO easy like.

The above figures don't take into account the actual spread price or the price I'd get it at, just what's on the charts so I assume actual taking would be lower, but the movement's would be similar?

silverharp

Hanley wrote: »

Thanks Sodddy.



Oh yeah I know... but as far as I'm aware, you can't really go any lower with spreads?

I'd quite happily go to 10c if I could. I haven't even opened account like but I've been watching the price of gold over the past couple of days and it seems to trade in very clearly defined ranges. Like it'll hit resistance, drop back down to support... rinse and repeat. Every now and then when it breaks those levels it seems to run for $3-4 dollars.

Over the last two days it's been relatively easy to predict. By my calcs, if I had 10c a point I'd be looking at an average gain of €275 per day trading it, using a 5% stop based off 1,000 capital. Seems a bit TOO easy like.

The above figures don't take into account the actual spread price or the price I'd get it at, just what's on the charts so I assume actual taking would be lower, but the movement's would be similar?

I'm sure the bigger spread betting companies have smaller position trades, I'm sure there are ones that do 10/ 15€ per $gold or S&P point

ixus

Hanley, gold looks like it's on the sell side at the moment.

From various goldbug and other discussion sources I see they're expecting a sell off and then yesterday, Gordon Brown mentioned the IMF selling gold to fund bailouts. This saw a sharpish sell off around 4PM yesterday.

I believe there is a short-medium term expectation of gold hitting 700's with a longterm expectation of it skyrocketing.

Hanley

ixus wrote: »

Hanley, gold looks like it's on the sell side at the moment.

From various goldbug and other discussion sources I see they're expecting a sell off and then yesterday, Gordon Brown mentioned the IMF selling gold to fund bailouts. This saw a sharpish sell off around 4PM yesterday.

I believe there is a short-medium term expectation of gold hitting 700's with a longterm expectation of it skyrocketing.

I see.... thanks for the info. Would these two statements be correct;

IMF sells gold, supply goes up, price goes down.
IMF sells gold, money supply goes up, people are attracted to gold as a hedge against the inflation usually associated with an increased money supply.

Presumably if they are, the first overpowers the second, and price is driven down.

Hanley

Below's an extract from a spread sheet that I kept today. I watched spot price and chart movements of gold, tried to sell/buy (on paper) when I thought a change of direction was due. I seemed to have called it fairly well. Betting 10c per point, and putting a stop of 5% of 1,000 (ie max loss = €50) on all positions before the trade, I would have been up over €350 by my calcs. Obviously the spread isn't included so that'd impact things bit, but I can't see it taking more than 20% of what I woulda made.

Have I missed something PAINFULLY obvious, or by trading multiple times per day could I have actually made the deals below?


Time / spot price / change / stake -cents / profit(loss)

9.37am 906.12 2.05 1 20.5
10.03am 904.07

10.10am 903.46 -0.24 2 -5
11.23am 903.22

11.23am 903.22 1.51 3 45
12.15pm 901.71

11.33am 903.86 2.15 2 43
12.15pm 901.71

12.20pm 902.17 0.27 2 5
12.48pm 902.44

12.31pm 901.16 1.28 3 38
12.48pm 902.44

12.57pm 903.82 5.11 4 204.4
2.09pm 898.71

Rocket!

Most spreadbetting companies I know have a minimum 1euro stake(some offering lower stakes to beginners for a specified time, eg igindex). Alot trade Gold per 10cent a pip though, so your calculations are still valid even with the increased stake.

eg Gold moves from 903.8 to 898.7: 51 pip move @ 4 = 204


My advice would be to open a demo account and get a feel for a platform first while continuing to paper/demo trade.
It sounds like your using a specified system with good risk management and these are all good signs. High probability moves with low expected return are all well and good and there to be taken advantage of, but make sure your protected against the low probability moves with high expected losses. Keep those stops in!

Hopefully with a bit of extensive papertrading your system will show consistent returns. Sods law justifies that the second you start trading it for real your gonna start losing. Dont be disheartened. Remain unemotional and keep trading it.

Best of luck and keep us informed on how its working!

Hanley

Rocket! wrote: »

Most spreadbetting companies I know have a minimum 1euro stake(some offering lower stakes to beginners for a specified time, eg igindex). Alot trade Gold per 10cent a pip though, so your calculations are still valid even with the increased stake.

eg Gold moves from 903.8 to 898.7: 51 pip move @ 4 = 204


My advice would be to open a demo account and get a feel for a platform first while continuing to paper/demo trade.
It sounds like your using a specified system with good risk management and these are all good signs. High probability moves with low expected return are all well and good and there to be taken advantage of, but make sure your protected against the low probability moves with high expected losses. Keep those stops in!

Hopefully with a bit of extensive papertrading your system will show consistent returns. Sods law justifies that the second you start trading it for real your gonna start losing. Dont be disheartened. Remain unemotional and keep trading it.

Best of luck and keep us informed on how its working!

Thanks for the advice. Just seems that if something's too good to be true, it probably is!!!

I've been reading a bit around trading recently, mostly Reminiscence of a Stock Operator and Market Wizards. There's a few others on my shelf still to get thru but I think I'm starting to get a sense of why some are successful, and some are not....

The overriding impression I got from all the interviews in Market Wizards is;

1) Cut losers short and let winners run
2) Risk no more than a 5% loss on a single trade
3) Trade with the trend. If there's a break, follow it.

So far, from my analysis over the past couple of days, gold's traded tightly and predictably within support and resistance levels (pretty much just bounces around between them), so by identifying the levels and shorting just before it hits resistance, and just after it hits support, I've seen consistently good results.

On the rare occasion I've shorted and it's broke resistance I've just bailed and gone long until I've seen two successive down ticks in price. Usually recovers what's been lost on the short position. I then waited for it to establish new and consistent support and resistance levels and tried again!!

On paper, the returns have been absolutely stellar. €600 in two days off 1k risking no more than 5% per trade (assuming 10c per point). I've only been wrong 4 out of 18 times. I really think I HAVE to be wrong somewhere, because it seems too easy. I've tried to be as disciplined as possible and trade exactly as I would if I was using my own cash, but who knows when the time comes I might bottle it!!

ixus

Hanley wrote: »

I see.... thanks for the info. Would these two statements be correct;

IMF sells gold, supply goes up, price goes down.
IMF sells gold, money supply goes up, people are attracted to gold as a hedge against the inflation usually associated with an increased money supply.

Presumably if they are, the first overpowers the second, and price is driven down.

Spot on boy. The interesting thing will be to see the pace of the decline against the selling. If the price holds relatively strongly it means (to me) that there is a strong expectation of inflation in the investment market. Then it would be time to be long commodities and equities and short bonds (probably short the dollar too).

ixus

Hanley wrote: »

Thanks for the advice. Just seems that if something's too good to be true, it probably is!!!

I've been reading a bit around trading recently, mostly Reminiscence of a Stock Operator and Market Wizards. There's a few others on my shelf still to get thru but I think I'm starting to get a sense of why some are successful, and some are not....

The overriding impression I got from all the interviews in Market Wizards is;

1) Cut losers short and let winners run
2) Risk no more than a 5% loss on a single trade
3) Trade with the trend. If there's a break, follow it.

So far, from my analysis over the past couple of days, gold's traded tightly and predictably within support and resistance levels (pretty much just bounces around between them), so by identifying the levels and shorting just before it hits resistance, and just after it hits support, I've seen consistently good results.

On the rare occasion I've shorted and it's broke resistance I've just bailed and gone long until I've seen two successive down ticks in price. Usually recovers what's been lost on the short position. I then waited for it to establish new and consistent support and resistance levels and tried again!!

On paper, the returns have been absolutely stellar. €600 in two days off 1k risking no more than 5% per trade (assuming 10c per point). I've only been wrong 4 out of 18 times. I really think I HAVE to be wrong somewhere, because it seems too easy. I've tried to be as disciplined as possible and trade exactly as I would if I was using my own cash, but who knows when the time comes I might bottle it!!

Great post, and you've renewed my faith in this forum, actually doing a bit of homework rather than simply posting should I buy/sell why/why not questuons.

One of the hardest things to do is to trade the range. I have a preference for trading small breakouts from range. The thing is, there's so many different strategies it really comes down to risk management and the psychology of the trader (have you read Van Tharp's bit in Market Wizards yet).

Here's something to think about:
Positive Expectancy = (Probability of Win * Average Win) - (Probability of Loss * Average Loss)

There's a phrase called picking nickles in front of a steamroller. If you have positive expectancy, you expect to make a profit over the average of your trades. Negative is the opposite. Tight risk management is one of the keys to this.

Hanley

ixus wrote: »

Spot on boy. The interesting thing will be to see the pace of the decline against the selling. If the price holds relatively strongly it means (to me) that there is a strong expectation of inflation in the investment market. Then it would be time to be long commodities and equities and short bonds (probably short the dollar too).

Let me see if I'm understanding this....

The price of gold stays strong because people are expecting inflation so they hold/buy it as a hedge. Commodities and equities do well in periods of high inflation (not sure why? Maybe because high inflation equals higher earnings all things being equal, presumably debt spirals too, so if the previous two statements are correct, low geared companies do even better?).

Bonds do badly because the rate of interest on them is easily swallowed up by inflation, so there's no point holding them.

Why short the dollar tho?

Hanley

ixus wrote: »

Great post, and you've renewed my faith in this forum, actually doing a bit of homework rather than simply posting should I buy/sell why/why not questuons.

Lolz.... thanks!! I'm worried I haven't done enough tho, because as I've said, it looks TOO easy???

One of the hardest things to do is to trade the range. I have a preference for trading small breakouts from range. The thing is, there's so many different strategies it really comes down to risk management and the psychology of the trader (have you read Van Tharp's bit in Market Wizards yet).

I haven't yet... I'll give it a read before I go to bed tonight.

Is there any obvious way of predicting breakouts, or do you just wait for the break and then run with it? Presumably the more times it hits resistance or support, the more likely a breakout is. I might have a look this evening and see how many times gold has hit support/resistance before breaking over the last week. One thing that seems to happen is that when it does break, it just runs.

How do you decide to liquidate? I've been doing it off the basis that if there's two small movements against me I wait for the third and then bail if it's another small one, or if it moves back in my favour I'll wait for the first move against me and then bail. So it could be the case that two movements go against me, three go for me, and one against. That's when I'd go.

Here's something to think about:
Positive Expectancy = (Probability of Win * Average Win) - (Probability of Loss * Average Loss)

There's a phrase called picking nickles in front of a steamroller. If you have positive expectancy, you expect to make a profit over the average of your trades. Negative is the opposite. Tight risk management is one of the keys to this.

I've heard that phrase before... Not too sure where tho!!

That's a nice formula. Assuming a 50/50 win:loss ratio, and you set a stop at 5%, all you need to do is return more than 5% average on your wins to be up?? I don't even think it's a true 50/50 shot either. Observing the chart and picking your moments when obvious patterns form should greatly increase your odds....?

I wonder if other commodities perform similarly. I'm guessing that the tactics I outlined above won't work forever, so it might make sense to start looking for other areas where they could be applied too. Thing is tho, the only reason I see the plan not working is it there's some fundamental shift in how gold's traded, and I don't nkow what or why that would be..

daveirl

This post has been deleted.

Hanley

Guys, help me out!!

Been having a look around at sites to spread trade gold on. Capitalspreads.com looks decent enough.

A few questions tho;

For gold, the "Underlying stake / unit risk" is €1 per .1 point move. That's estentially the same as 10c per .01 point move right? Anyone any ideas how the .1 move is calculated, like does it round up/down. Or if there's a .14 move do you just end up with .14 * €1 = €1.40??

Assuming trade's are done at €1 per point;

The IMR's 100. So I need at least €100 on deposit to trade?

The CGSL is 300. As I understand it, €/$/£300 is the maximum you can lose before the computer steps in and closes you out, regardless of where you want to set your stop?

EDIT: .5 spread between buy and sell figures too, is that normal?? Seems like a lot.

luckystrike23

a bit late but i've covered your question here http://www.financial-spread-betting.com/Trading-gold.html