Learning to Spread Bet

What else do I need to spend on?

Nothing much. There are loads of things you can subscribe to (specialized software, training courses, tipsheets & newsletters, etc). Some of them might make life easier, but they are not essential. Some of them are a total waste of money that could be invested instead. Some of them include facilities a beginner will never make use of. Some involve techniques and processes that are wholly inappropriate to the particular area of investment which best suits your personality. Some duplicate facilities that are available for free. So have a look around for a while first.

I keep saying how much good useful information there is out there, and how many cheap trading facilities, and free tutorials. But I guess that's because I know how to briskly sweep aside so much of the bad or unnecessary or irrelevant stuff. I sympathize with anyone who finds the vast array of investment related websites off-putting rather than inspiring - admittedly across the internet as a whole, there is certainly far more misguidance than guidance - making it a scary place for any newcomer to investment or trading.

90% of the overly technical stuff that can be learnt is wholly unnecessary. Pick out the simple stuff (I just remind myself that I began with none of it and did OK). If it's complicated, you don't need it - leave that stuff to the nerds. There are over a hundred different 'indicators' that can be applied to charts. Three is plenty. Devise a routine that suits your own personality and ignore the arcane stuff that others rabbit on about.

I happily dismiss Elliot Wave theory as being a hobby for anoraks (far too much effort, for results that merely trigger further debate ad infinitum - a system which only appears to work because it has a built in curve fitting facility to make it do so! i.e., the previous assumptions/predictions are allowed to be reassessed so freely as to ensure they match the outcome - thereby convincing its adherents that they have a winning system) along with many other aspects of 'doilyism' (throw a perforated paper doily onto any chart and be amazed at how many patterns coincide. Go on from there to develop a religion based on these miraculous discoveries. Thousands of believers will indeed follow).

There never was any reason why Fibonacci's number patterns had any relevance at all to share price movememt. Applying them was an example of doilyism. Unfortunately if enough people fall for it, their trading actions (jumping in and out en masse at predetermined levels) do establish chart patterns on which further excited followers feed, and the patterns formed by their actions 'prove' it works. Measurements taken from the proportions of a standard metric housebrick (26:41:86 and corollaries of) would work in the same way if people wanted them to. Fibonacci patterns have now captured such an audience that my dismissal of it is futile...

Fancy labels applied to most Japanese Candlestick combinations are offputtingly silly. But I use candlestick charts every day. The names used are irrelevant; one can apply other names to them if preferred. The excuse I make for regarding candlestick charts as acceptable, is that they merely display exactly the same information as an OHLC Bar Chart. OHLC Bar Charts are totally acceptable - even to those who scorn candlesticks while failing to realise that they are merely a more graphic image of the same thing. (I will clarify the distinction in a later post for the benefit of anyone unfamiliar with both).

There are thousands of stocks, a dozen major indices, numerous magic pattern theories, various trading mechanisms (shareholding, CFDs, spread bets, options, warrants, etc, etc) and hundreds of different permutations. Amongst all of which there is whatever will work for you. And for me. And for whomever else. Pick and mix whatever works. Don't be told (by me or anyone else) what to do. Shop around and build your own manual.

For me it all boils down to buying stuff that's on a roll and selling it when it ain't. From which you might gather I don't pore over company accounts and don't go along with the Warren Buffett lifetime approach. A 3-6 month horizon suits me.

I am more of a trader than an investor - which means I move in and out of stocks whenever it suits me to do so, sometimes holding them very briefly, taking advantage of what might be only temporary opportunities. Nothing to do with what would suit anyone else. Some of the stocks I described as going well at the time will have continued going well since, and others won't.

It's an area in which everyone must accept responsibility for their own decisions. If I find myself influenced by someone's description of a company, I always look around for alternative assessments. If I am convinced it is worth buying, I buy it. If it goes belly up I don't blame whoever wrote what I read. The decision was mine. I didn't have to buy. There are around 3000 stocks available on the UK market. Most people are unlikely to hold more than a dozen or so, which means that over 99.5% of stocks can be excluded from their portfolio at any given time. Plenty to choose from and no reason for anyone to copy anyone else.

Many brokers and tipsters have a vested interest in promoting certain stocks - sometimes merely to bump up the price prior to making a profitable exit themselves. So a tip of any sort should only ever be taken as a lead, for further investigation and possible rejection. Same goes for any stock I mention.

On various financial websites, and sometimes in newspaper columns, there are individuals who do publish an ongoing log of their investment or trading activities. Such logs, if they give explanations for each action, can be educationally very useful in showing the kind of factors to be taken into account in reaching decisions.

For anyone who doesn't fancy the hassle of poring over charts and annual reports, most stockbrokers and many financial advisers will offer to manage an investor's portfolio, for which of course they charge a fee.

Some of them offer only a limited selection of 'off-the-shelf' portfolios; clients merely state a preference for low-risk, higher-risk, or whatever, and all clients are plugged into whatever portfolio the broker is running in that category.