From the Frontline: the Tragic Tales of some Spread Betters
The stories which follow are real stories from spread betters who have lost their way and should serve as lessons for those of you who think that trading is easy.
So we have DA (our first character) who was famous turning the lights out on the London Office of Alan Bond’s Exco. Wherever there was quick money, DA was there – until it ran out, of course, which it inevitably did.
Similarly Filth (second character), as our luck would have it, performed so badly in London that he had been posted to a little-known back corner of the Empire – Hong Kong. Filth (Failed In London, Try Hong Kong) was a rare and valuable commodity. He was our inside man; he knew what was going to happen in Asia before London.
Spread betting started in London in the 1980s. I remember it well. Advertisements in the Financial Times from an upstart company called City Index offering to take our bets on the direction of the FT All Share index, or any index. Incredible, we thought. Pitting ourselves against mere bookies in our (not their) field of expertise. We rejoiced at the opportunity to clean up and quickly opened our spread betting accounts. These amateurs would not be in business for long.
And so we began our education.
Armed with Filth and our Pay As You Go City Index accounts, we took to punting like wild men on the Hang Seng, an index that could move 300 points in a day. We could not believe the vein we had tapped into.
A couple of months later and I was out. On £18,000 a year, there is only so long you can rip around the Hang Seng on City Index on £10 a point. Bodge (third and last persona), on the other hand, clearly had a bit of a run on and his already wide persona expanded to the heights of a Champagne Charlie. Always in a bar, always smiling, always paying for everything. And though
I say so as a man, one of the most attractive men in our field, with that devil-may-care, anything-could-happen glint in his eyes that had the ladies opening up their personalities to him without any apparent research.
I assumed he was rich, but a phone call for help late one night and an examination of his City Index account explained it all.
Bodge was one of the biggest swinging dicks on the City Index books, with “dick” being the operative word. He started out at £10 a point, but a run of successes saw him up the ante. It turns out that when you don’t know if you are going to be up or down £30,000 in a night, who cares who pays for the meal, the bar bill or if you have a salary.
And so it is that the sharemarket has the ability to render us financially irresponsible.
With so many thousands of dollars flying around in the background, it is hard to take everyday money seriously. With so much credit available, we forget it is debt. And that, as we are finding out now, was and remains the root of all evil. Rather boringly, we are about to go into a period of taking debt and money seriously again – or what’s left of it.
I had finally learned that you don’t beat ‘em easily. That Bollingers don’t mean what they’re meant to mean. That oversold markets can sometimes mean a really bad wave of selling is about to happen…etc…etc. I had not traded for years and was fairly happy, when I, too, was e-mailed about trading. This electronic tome contained reference to the original ‘how to get rich’ book by Napoleon someone or other (and a few related items). The take home message was about not stopping however bad it gets, because that way you are a loser. Whereas, if you keep on giving them your money, one day you will succeed. There were stories of gold miners who lost the family fortune and ‘quit’ (it was from our American brethren), a few inches from the gold seam. The Devil himself could not have done better on my mind. I decided that it made sense and to have given up was, indeed, was not the way to go.
So, shed loads down four years later, I say, set a limit for yourself and if it does not go your way at all, then it is not as you think and, if you want to avoid destitution, you must give up.
Just in case there are people thinking, ‘well, he must just be an idiotic, utterly useless trader’, I made three grand in a few hours on my very first share deal (over the counter at a high street bank), with only a student grant to start. My first serious options trading resulted in about £45,000 (as you say, over a year’s pay), in less than three months. But then the ability/luck/vision/whatever it is, can desert you and a yawning great chasm seems to swallow your money – if you’re lucky in one go, if not, then the slow, painful way.
Sometime ago I commented that ‘In these volatile markets I’ve reduced my bets down from £10pp to £2pp because I very rarely use stop losses’. I think I was laughed at for being poor – I consider my strategy as being careful, making small profits beats a loss any day.
Like in the tech bubble in 2000, people thought they were trading gods because every stock they touched was gold. NOT TRUE! The market was rising like a crazy madman so you would have been very UNLUCKY to pick a losing stock. That was the downfall for many when the market turned abruptly. So even if you win big in the first few trades you do, it is not a sign you are a skilled, gifted or a trading wizard, just you was in at the right time and the right place. Live and learn they say, but learning is always ongoing until the day you die.
“…wishing you were in. Than to be in the market, wishing you were out.”
First off thanks Peter for sharing your story. In fact it prompted me to tell my story of a now twice failed trader.
I first dabbled in shares back in 1998 and the very first share I bought was HSBC bank. It was just after the Asian financial crisis and more down to luck rather than skill the price I paid was the very bottom for that share. Over a couple of months it had already gone up by over 70% and naturally that gave my confidence a big boost and I sold them and began to look at other blue chip shares to invest in short-term. They all also gave a moderate return and I enjoyed the share trading game. Then towards the end of 1999, sharedealing was sweeping the nation and that was when I started looking away from the blue chip stocks and started my journey into penny shares and tech stocks. It was by now the beginning of the new millenium and I now was obsessed with sharedealing, being in front of the computer day and night either trading and when the market was closed, reading up on what my next trades were going to be. Nevertheless, it was happy times and I couldn’t believe I was getting all my trades right. Some days I was earning more than the wages I get in a year. But then.
March the 8th, 2000. That was the day my life was going to start to turn upside down. Those lovely profits began to diminish. Soon, they were gone and made way to losses. Suffice to say, within a year, I was heavily down and eventually by 2001, I quit completely and struggled to build my life – and more significantly – my financial situation back together again. It has been a tough few years and was a lesson that still stings to this day. Even now, I think the most dangerous tv programme that has ever been shown on British TV is “Show Me The Money”. I think it must have ruined the lives of many households. I am sure this story may well reflect similar situations with some members of this board.
Anyway, I had been clean of sharedealing for over 6 years. Then 5 weeks ago, I got an email from T1ps.com promoting their new spreadbetting business and maybe through stupidity or just to tempt fate, I checked it out. I saw they had a demo account feature where you can trade without spending a penny and so I had a go. A week later, I had opened a proper IG Index account and deposited a bit of money. I told myself, it will just be for fun and to help pay some of my bills. Taking full advantage of the volatlity of the Hang Seng, my initial 600 quid deposit turned into 9000 within a matter of days. And there the demons inside me that have been hidden away these past 6 years were finally released. Confidence leads to greed and greed leads to foolishness and here I am now…penniless again and still cannot believe how fast it happened.
It will probably be another 6 years before I rebuild my life back to the way it was, but if you see me here again in 6 years time! Please, please, please remind me how stupid I am and to go away!
Enjoy trading but do please be very careful. Sometimes in the heat of the moment, you do not think straight. A lesson I learnt hard TWICE. I swore I would never trade again back in 2001 and yet I was still tempted back in by a spreadbetting demo. However, I have no one else to blame but myself.
I wish you all the very best of luck! And may my tale warn you of the dangers.
If you too want to share your story with fellow traders you can do so here – be it your thoughts, strategies, downfalls, cautionary experience – it all allows us to learn! Please e-mail Andy at traderAtfinancial-spread-betting.com