Module 2 pt 2: What can you Trade?
Dear Trader
Once again it is that time again to start on yet another module, this now being your third and the second part of module 2.
I decided to break some of the modules into smaller chunks, so that you can concentrate on each key aspect of trading. What you’re undertaking can’t be done lightly, as I am sure you realise. After-all, at the end of the day it is YOUR money you’re risking; unless you’re Nick Leeson and traded for a major private bank, and look what happened when he thought he could throw several hundred thousand million in the vain hope of moving the markets in his favour!
Thankfully, we won’t be doing anything like that and what’s more, the trades we make will never affect the markets, not only because of the size of trades compared to the overall market, but more so, the trades you open are a contrary position with that of your broker. This will become clear within the course.
Well, let’s get cracking. You have a good amount to learn in this module; and I appreciate that you’re busy, so let’s get going.
Module 2 pt 2: What you will learn!
- More detail into the types of trade you can place.
- Detailed analysis of each type of trade along with how to trade it and make the most of that type of trade.
- A detailed list of all the brokers.
This is where we really start to work hard now. You’re going to learn about each particular trade type and how to trade it. Covering everything from shares, to commodities in a spread betting sense.
As we saw earlier, there is fantastic choice when choosing what to trade. To some extent it is what you are interested in, whether it be FTSE 100 stocks, Small Cap stocks, US or European stocks, UK or foreign indices, currencies, commodities, bonds, interest rates, metals – the list goes on and is being added to all the time.
Only you can decide, but here are another couple of tips:
- Trade what you are interested in.
- Specialise so that you get to know your market well.
- Be careful with some markets like indices because they can move very fast and you can make or lose money in very little time.
To illustrate that last point, if you decide to trade the Dow Jones Industrial Index (representing the top thirty stocks in the USA), the spread might be two points but at times the index can easily move 10 or more points in seconds. If some important news breaks such as an unexpected change in interest rates, it can move dramatically. It is not unusual for the Dow to move 100 points or more in an hour once it gains some momentum.
Imagine how much money you could make at £10 per point if you trade that. It is very tempting and exhilarating unless you are losing and then it can be devastating. Trade things like this with great care; they are really for the experts. If you are tempted, trade very small positions to start with.
Even within FTSE 100 companies, some will move much more in an average day than others. US stocks will often move a lot during a day because, as a rule, more expensive stocks will move more points in a day and US stocks can easily be priced at $50 or more.
- A move of 5% on a £3.00 stock is 15p (15 points)
- A move of 5% on a £30.00 stock is £1.50 (150 points)
- A move of 5% on a $50.00 stock is $2.50 (250 points)
Points to note:
- You can trade a vast range of global instruments.
- Keep in mind that many markets that you can trade have differing characteristics e.g. expiry times and tick sizes.
- Each individual market has its own spread and margin requirements.
There are many reasons why I recommend you to know your market well and specialise. I know some very good traders who ONLY trade one index – ever! But they have researched it, they know it’s ‘personality’ and they have a tried and tested strategy to trade it successfully.
Personally, I specialise in a list of around thirty FTSE 250 and Small Cap stocks as well as some major Indices.
Note that All licensed financial spread betting companies offer comprehensive guides describing the important aspects of each particular market.
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