Those who know me are well aware that I don't usually endorse spread betting trading systems, not because I don't believe in them but because from my experience there are so many so many scammers and charlatans in this business pushing books, trading systems and costly seminars that I just decided to steer clear. In the past I have done my best to expose trading systems which don't work or courses that are heavily overpriced to the extent that I ended having legal clashes with some of the big names in the industry; Darren Winters and Greg Secker to name two!
However, this doesn't mean that I am not a believer of trading systems - trading without one is like driving blindly on a highway and most traders who do not use one (whether developed by themselves or adopted) are likely to make poor decisions based on fear and greed. This means that when the market moves against them they are unable to detach themselves emotionally from their trading and end up closing their positions at what most often is the high or bottom. Other traders end up taking positions for no other reason other than for the excitement of being in the market which is nothing more than gambling and this type of trading isn't destined to last long (if when trading you can feel your blood racing rest assured that you are gambling).
Around 8 months ago I've been contacted by a certain Robert Stewart who runs a spread betting system known as LS Trader asking me to test their long-term trading system out (he works with a partner Phil who is the actual developer of the system) and urging me to keep testing it for as long as I need. Which is what I've been doing as I've been following his real-time weekly signals for a number of months and so far I've been impressed with the overall results and with the way they conduct their service. Don't get me wrong. I had doubts about the size of the returns (1504.1% +) asserting that such incredible returns aren't possible but after all this is a risk-reward game! However on further inspection of the trades it appears that the 2008 seemingly astonishing results were because almost all markets were trending in the correct direction that year, normal years seem to hover around the 100% mark. Whether though it's 100% or 1000% the system is still high risk and 2009 was a really bad year for the system ending the year with a 43% drawdown. I believe the system has potential if you have a decent sized account, but is high risk otherwise.
Needless to say you need to be very careful when looking for companies that offer trading signals - be apprehensive and at least ask to see the past years results. The returns of the Long Short Trader's spread betting system for the last 10 years are as follows:
1998: 411.2% (backtested)
1999: 55.1% (backtested)
2000: 156.2% (backtested)
2001: 116.6% (backtested)
2002: 229.2% (backtested)
2003: 334.7% (backtested)
2004: 86.7% (backtested)
2005: 21.2% (backtested)
2006: 155.0% (backtested)
2007: 116.74% (real results)
2008: 1504.1% (real results)
2009: -43.00% (real results)
2010: 19% (real results as at 10th January 2010)
Robert additionally says that the biggest drawdown was 59.1% but during this period it was not just starting capital but it was inclusive of all the profits as well, so they have never made a big loss on their capital. The strategy is aimed to make around 150% per year and therefore the results of 2008 were not just outstanding, they are unlikely to be repeated in 2010.
The spread betting system is a trend following system designed to capitalise on big market moves and extract the maximum profit. The system is aimed to identify the trends of each market as trading trends create much bigger opportunities than trying to second guess moves within a trading range. In fact the best 90% of market returns are made only 10% of the time, and those usually happen when there is a clear and major trend in place.
The logic is that if a market is oscillating but ending up in the same neutral price as when you first started watching it, it is not easy to win consistently, and win big (!). But if you focus your trades on markets with clear and strong trends, it is possible to ride a number profitable trends, and win consistently over time. More information on the LS Trader System Methodology is available here.
LS Trader trade in 44 markets with the average trade lasting between 6-8 weeks. LS Trader provides trades every week, and recommends stop loss limits that members will copy each week.
The system works by giving out a signal when they enter the market and in this regard is basically a black box system. Once a week on a Sunday you will get an email notifying you of the new trades. You will login to the members area and see the spread bet calculator. You will enter your starting bank in, and it will tell you how much to invest on this trade. That's it. They do not divulge their strategy, or teach anyone the mathematics behind the system. So what they do is to provide trades which their subscribers can copy at their own risk. They do not give financial advice. They simply say these are their trades, you can copy them if you wish, but at your own risk.
I asked them the reason they are giving the system away and not continue using it themselves?
I will quote their reply; 'There are trillions of dollars traded on Crude Oil which is one of our markets, and having members following the system does not affect our own trading performance. We make more money through membership fees, and that allows us to pump that straight into the system. We already do all the hard work every day so we may as well allow others to follow the system, and make profits from it too. Even if we do get a substantial following, by that we would need at least 10,000 to really move the markets, and if we did, they would move in a good way for us, not a bad way.
Do not expect to make a 1000% on your first year of following the LS Trader system. You need to have realistic expectations and don't expect that this system will pump out profits on a weekly/monthly basis like clockwork - it will inevitably have losing runs and in such cases you need to keep following the system even if it hurts. Remember, this is a long term trading system and so short term results are not so pertinent.
It is important to remember that this is a long term trading system, and every system will have drawdowns. That is a part of trading but managing a drawdown is what separates a successful trader from an unsuccessful trader. LS Trader experienced a substantial drawdown in 2009 following their ridiculously profitable year in 2008 which saw them make a 1500% gain. On an average we are told that one can expect to have 4-5 months of great trading months in a year, and 7-8 months of relatively trendless months or months with a slight drawdown. LSTrader has money management rules in place, and this is why the LS Trader system performs well over time.
The LS Trader system recommends different types of portfolios and risk per trade all dependent on your starting balance ranging from £3,000 to £50,000 or more. Controlling your risk is crucial for success and long term survival - if you only risk 2% of your account on any one trade then even if you have 7 consecutive losing trades you can only lose a maximum of 14% of your account. In this regard LS Trader does a good job in helping you manage your risk, per trade, to allow you to participate in several trades at once and yet minimise the possibility of getting blown away if one goes wrong.
The LSTrader Trading System currently works but you must realise that market conditions change over time. The use of systems themselves changes the markets over time. Systems may increase or decrease market volatility and change it in other ways. Also, as any given profitable system becomes known and widely used, market participants may act in ways to take advantage of what they know to be the behavior of those following the system. A number of analysts feel that there will be good gains in commodities next year so it may well be a good time to start with them.
This spread betting system is suitable for those who have at least 15 minutes a week to follow simple instructions - notice that some of the markets like Oats, Rough Rice, Live Cattle, Corn, Gold...etc may sound a bit exotic and a bit strange to trade but LS Trader does include detailed instructions on how to spread bet these markets. Robert also includes details about why he is making specific trades, which way he expects the current trades to go, and detailed information about current markets and trends in his weekly e-mails...etc. However, do keep in mind that the LSTrader is a black box system so may not be suitable for those who want to experience trading by making their own decisions on which markets to trade and decide entry/exit targets themselves.
I'm promoting this system simply because I believe in it myself having personally inspected past years results and having started using it on a personal basis - although in the past I've received several requests from readers asking me to recommend a trading system I've always hesitated because I'm generally critical of over-the-counter trading systems (god knows there are many promising the earth). Most are simply marketing machines to bring in clients and never actually trade their own signals, hence it follows that if a company does not trade its own signals then they do not have a consistently profitable system.
I am also fully aware that charts and technical indicators matter a HUGE deal. I don't think the people at LSTrader are putting their fingers in the air and taking a punt. Their systems, as with 99% of the 'systems' out there is one built almost purely on back-tested technical analysis with various conditions that they assume work well to trigger trade entry and exit points, manage stop-losses and over the long-run generate good profits.
I also asked Robert as to why they don't publish the monthly profit/losses breakdown for 2009 as well as past years results and his reply was as follows -:
Most people who come to the site sign up for our newsletter which shows how the system is progressing with weekly emails and an in depth monthly newsletter. We publish the results at the end of each year as this gives a true reflection of the system's performance over the whole year. The system is medium to long term and we do not really look at short term volatility. And at any given point when a new subscriber comes on board the performance that has gone before in the previous weeks is not relevant as they would not be placing those trades as they have already missed them, but would only be taking fresh signals. All trading systems have winning and losing periods as we amply explain on the site and in our documents and emails so we are fully transparent. With a trading system the things that count are long term profitability and how robust the system is over the long term, not the short term volatility.
The LSTrader system is legitimate but I will endorse it only for as long as it keeps working - at the time of writing it is already up some 25% up for 2009. If I see that it has generated a negative return on my capital after a year I will remove any mention of it from my site. I also ask my readers who decide to give it a try to get back to me with their comments after using it for sometime (just allow it sufficient time to work, say 6 months) so that I will post comments for other traders to see.
Phil and Robert have big plans for the system - they are currently working on developing a Forex and Futures website for worldwide use, especially America, as spread betting is illegal there.
The LS Trader system isn't particularly cheap at £147 a month but on the other hand it is not prohibitively expensive. You will also need a minimum account opening balance of £3000 (but I would recommend £5000 as the system is designed to trade many diverse stock markets including bonds, commodities, forex and stock indices).
The spread betting system also comes with a money back guarantee so if you're satisfied any time within the first 60 days of your subscription just let Robert know and he will refund you your subscription fee. Note that LS Trader use IG Index as their main broker but I would suggest you to use them in conjunction with Capital Spreads (it won't always be possible as Capital Spreads may not offer the more exotic markets) as they usually offer the best possible spreads.
More info on The Long Short Trader system including past results, can be found on their website here
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