When you have been trading futures, options, stocks and commodities for over 18 years, it can be easy to forget what it was like starting out. In this article Vince Stanzione will share with you some of his secrets that Vince wishes he had known when he started trading.
Much of what you read about Financial Spread Betting or Financial Spread Trading, as Vince Stanzione prefers to call it, is out of date, based on text book theories and written by thosethat lack true understanding of the flexibility of this financial product and do not practice what they preach.
Vince Stanzione says that he has traded millions of pounds of stocks and financial spread bets with most of the leading spread betting firms, mainly IG Index and Cantor Index, and he still trades actively today, so he's walking the talk.
While many areas of the media report the grim headlines, what they forget to tell you is that opportunities to make money as a smart trader are all around you. Today thanks to spread trading you too can profit from markets, shares, currencies and commodities to go down (Short Sell), to go up (Long Buy) and to even trade sideways (Barrier Range), where you would bet for a market to stay in a trading range say FTSE to stay within a range of 3,200 to 3,800 for the next 20 days. This can be done via a bookmaker such as Betonmarkets
Remember, shares and markets fall faster than they rise so you can make much more money in a failing market than a rising one. Also the financial markets are like a seesaw, if money flows out of one market, say equity markets, then it flows into another market, such as commodities or bonds. If the US dollar is weak, then the Euro, Swiss or Australian Dollar will be strong. Trading is a zero sum game, you always have a winner and a loser.
No successful trader starts out in a big way. For my own spread trading I started out with £2,000 of risk capital, today I trade £50,000, £100,000+ per transaction without even blinking. Thanks to small bet sizes and virtual accounts offered by some financial bookmakers such as Tradindex and www.cityindex.co.uk you can trade via a real system with no risk. This beats the old paper trading game. Then you can start trading with small stakes and build up. One of my secrets of success is using the power of compounding profits and trades.
The advantage of trading with a financial bookmaker is that it allows you to trade numerous products such as currencies, commodities, stocks and bonds all from one account, yet most customers stick to FTSE or DOW. By diversifying your bets you reduce risk especially in non-correlated markets, i.e. S&P500, Dow, FTSE, Dax are all major stock indices, you can safely say if the S&P goes down, the others follow. However, if you traded one of the above and also Gold, Oil, 10 year T bonds or $/Swiss Franc, you would have a far better balanced account. So let's say £2 a point short on S&P500 and £5 a point long on Gold
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Another successful strategy that I trade is trading sectors. For example, you could bet one sector to go down such as Telecommunications and one sector to go up such as Tobacco.
With Financial Spread Trading you can trade over 30 major FTSE sectors both to go Long (buy) and to go Short (sell). Here we see the Tobacco sector showing excellent strength as Telecommunications slump.
While "day trading" and short-term bets may sound exciting the truth is that my wealth has not come from short terms bets. It has come from trading trends over weeks, months and years. While brokers and bookmakers like to generate more business from active customers, the winners in the long run are the least active traders. For many readers that are more conservative and with a little grey hair, you will not be suited to short term in and out trading. As a trend trader I am not glued to a screen all day and only check prices at the end of the day and on some trades only once a week.
A good trader does not need to make money that often. In fact, you could get 80% of your trades wrong and still make money. Let's say you lose £100 on 8 trades and you then make £500 on two trades, you are in profit. However sure you are that the market will crash or XYZ is going to soar, make your first trade a small one, and then, if you are correct, add more to that trade. Pyramiding a successful trade is the key to making large returns. Never add to a losing trade!
Everyone tells you this, but few can do it. Trading comes down to psychology and everyone wants to win and no one likes to be wrong or be classed as a loser. Most unsuccessful traders take profits quickly, yet they will let losing trades run and run as they hope things will get better. What I suggest is that you have a mechanical approach to exits and entries. That is, you have a cut out point set on opening a trade. Financial Bookmakers offer a guaranteed stop loss on most products. This means that you can place a bet knowing that the most you can lose is known, say £200, yet your profit could be unlimited. Another good tip is to trail stops, which means you lock in some profits yet keep the trade running. Once a trade moves into profit, you could move the stop loss to you entry point; this means that the worse case scenario is a break-even trade. Many class spread trading "as risky or for gamblers". This is totally untrue as in fact with a guaranteed stop loss your risk is totally known ahead of time unlike buying shares with a stockbroker. Another point is that most new traders spend too much time planning when to get in and buy, when in fact they should spend much more time on the exit strategy and how much they are going to trade.
If you want to make real money, then you need to treat this as a business and work to a professional standard. Keep records of your trades, invest time and money to learn to trade, and continue to update your skills. It is a never-ending learning process. You should not be trading for fun, excitement or to impress your friends. You are in business to make money!
It is easy to get blown away by all the great software, on-line trading, real time data, charts, business channels and bells and whistles. The truth is, less is more, and information overload makes you a worse trader. The more complicated your system, the less chance it will work or that you will follow it. The majority of technical trading indicators are a total waste of time and you do not need to waste money on expensive trading software that claims to predict markets. The most important factor when trading any market is the price. If the price goes to 50, 51, 55, 60, it is going up, does not matter what the indicator or news says or what you think should be happening, the price tells you the truth and should always be obeyed.
Some of the best times to buy is when the crowd is terrified and there is blood on the streets. Markets go down because of lack of buyers, not because of sellers. For a bull market to continue you need new money to keep the party going. If everyone is bullish on the market, then it has no other way to go but down as everyone that wanted to buy has already done so. A classic example of this was the NASDAQ in March 2000. Be aware, stock market crashes do not start when everyone expects them.
Only gamblers bet on markets every single day. Some time the best trades are the ones you do not make. Trading can become addictive both for losing traders who want to get even and winning traders that now are on a roll and want to take over the world in 5 days. Markets have been here for years and they will be here for many more to come. As already stated, the best trades are trend trends where a trade is entered long or short and is left to run with the trend.
Attention: This article should not be taken that I approve or recommend Vince Stanzione expensive seminars. The article has been published here because I do believe that Vince Stanzione is a genuine trader with several years hands-on experience of spread betting. Spread trading seminars and courses are a good introduction, but what you learn is only what you can learn from books and the Internet, all for either free, or a fraction of the course price. This site in itself is already a good solid resource
YOU SHOULDN'T SPEND MORE THAN £500 TO ATTEND A WORKSHOP OR SEMINAR NOT EVEN IF THEY PROMISE YOU GOLD FOR ATTENDING
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