Financial Spread Betting
When I first wrote what was initially a book sometime ago, I had no idea that it would become the most downloaded guide on Financial Spread Betting. To date as I sit here updating the courseware, over 50,000 downloads of the free guide, from all over the world have been requested from the server. This is quite an achievement, as the first download was in January 2003. As you may know, there were two versions of this workbook; the free guide which anyone could download as was given away on the website – this free guide version didn’t not show the tech-niques but will train you well in Financial Spread Betting. The full work-book, which since then has been updated, is a core part of your training, contains the techniques section, this is where I show my techniques and is only available to private students.
have also had the pleasure during this time to train hundreds of private students in my techniques since Jan 2003. I have learnt a great deal my-self in the process of teaching and supporting both my private students and those that have simply become members of my website server Trade Focus www.insightsupport.com One of the main aspects that I have learnt from training many people over the years is that Technical Analysis is not technical or hard by any means. It is mostly visual; if you have a good eye for detail and forget about the over complicated de-scriptions of the majority of charting tools and simply open your eyes, you can become proficient at the very least in Technical Analysis. As with anything the more you look and analyse the charts, the easier it be-comes, the faster you work and the more accurate you get.
The best advice I can give to you as a first time reader of this guide and workbook – is forget about all the terms, get used to looking at charts and remember most of all – that considering the rewards that can be made in this business, the initial hard work is a small price to pay.
So now sit back and relax, as I take you by the hand and teach you how I trade successfully and probably most importantly with little stress.
Insight Support Ltd.
I have been involved in trading using technical analysis for many years. It is by far the most ac-curate way of predicting price movements in the short to medium term that I have found. I do take notice of fundamental analysis, but the strength of my decisions lie in my skill in technical analysis and it is this that I shall be concentrating on in this book. However, before I even touch on technical analysis and more importantly how I use various tools that I have found to be excellent in finding good trades, I will be teaching you how Financial Spread Betting works. In that respect, it is best to see this workbook as two books in one; the first part covers all you need to know about Financial Spread Betting and the second section covers the techniques that I have to be excellent in finding good trades in the short to medium term.
If all this sounds like ‘gobbledygook’ to you then don’t worry as by the end of this workbook, you will have a sound understanding of what I am talking about. In addition, you will have the skills and the resources to make good quality trading decisions. Plus, if you decide to take pri-vate training with me, I personally make sure that you understand everything and we work through your analysis together to make sure you are applying the techniques correctly.
Now I realise that this may sound like a complete plug for my course – but then again why not! But, also I want you to heed my advice on training courses and seminars. Don’t waste your money on overpriced training courses and seminars. Granted there are those that have a right to charge a fortune – the likes of Greg Capra and Oliver Velez spring to mind. Also, there is Steve Nison, who brought Candlestick charting to the masses and deserves to charge what ever he likes for his courses and seminars. But here’s my point; these guys only charge a couple of thousand dollars for their seminars, in fact for the cost of one of one particular Fi-nancial Spread Betting seminar that is doing the rounds at the moment, you can have either Greg, Oliver or Steve personally train you. The point I am making here is that these guys have a right to charge a lot of money for their training, yet their courses, seminars and more are cheaper than most of the courses and seminars you can take in this country. Now, put that in perspective with some of the prices that are being charged for courses and seminars in the UK. Most are overpriced and usually of poor content with no support. I have upset many pri-vate trainers in this country by providing good quality courseware and training with full support at reasonable prices – not thousands, in most cases a couple of hundred pounds.
Why? Well, I make my living from trading and not training. My website www.insightsupport.com the subscription fee’s that generates and the profits from these go straight back into developing tools for the students and subscribers. For example; by the end of July 2004 the website will provide 100% of what most traders will need and Trade Focus will be THE only website that provides everything – from news and complete resources, to an in built professional level charting package with a End of Day data feed, training videos, live training sessions and whole deal more all for the price of only £15.95 per month.
I hope therefore, that the next time you receive an invitation email to either a seminar, or asked to purchase a course, that you put it into perspective with those that have a right to charge many thousands and those that are simply fleecing those that are new.
One of the things I am sure that you have quickly noticed is that there is a strict linear ap-proach to how this workbook is presented. There are no chapters that you can skip to, there is no index. Why? Simple! I know that most of you out there will read every page. I don’t want you to storm ahead and look at the tools and techniques that I use without having any previ-ous knowledge of Financial Spread Betting (the tools and techniques are only available in the full version, it’s easy to check which version you are reading the header will show full version or free version on each page). You may think that this is mean. Trust me I am saving you more than just frustration, I'm saving you money. There is a chance that you could jump ahead to the techniques without having learnt anything of the background in the markets (and it's not difficult), begin trading not really knowing what you're doing. Then before you know it, you've quickly made a mistake and could have lost your entire investment. Something neither you or I want. So be patient. READ EVERYTHING and if you don’t understand something then READ IT AGAIN.
If you’re stuck further you can contact me using the the Trade Focus support system and this is open to any readers of this workbook, whether you’re a member, a student or not. The on-line support system can be accessed by typing in this web address www.insightsupport.com/deskpro/ simply click the link that refers to asking a question – don’t worry if you don’t have a username or password one will be created automatically when you ask a question.
Where it all began.
When I first got involved in the markets as an investor it was many moons ago, when their were advertisements on British TV as the government were selling every state owned utility you care to mention. At the time mid eighties in Thatcher’s Britain, we were goaded to buy, buy, buy. Whether that was housing or utilities, which essentially in terms of the utilities, as taxpayers we already owned. Needless to say, I was among many of the merry men and women who wanted a bit of the share/stock action. The ones that stick in my mind as I write this are British Gas and British Telecom. It’s hard to imagine that these were state owned util-ity businesses, but could only seriously grow from pumping millions into each one respectively - the tax payer was unwilling for the government to throw millions of their money into utilities which worked in the publics eyes, much like the old saying ‘If it isn’t broke - don’t fix it’. So the only real way was to float each one in turn on the stock market. Thus, creating millions of pounds in revenue, which could then be reinvested over time in each. In turn also creating for the first time a greater national awareness of that old bastion of finance - the stock market.
I only had a few hundred pounds, which I sent along with my share application to invest in British Gas. I think I was awarded 100 shares, as the stock was over subscribed 10 times over. Come to think of it, as far as I can remember - everyone got 100 shares. Which to me were worth a lot. As it taught me lessons on trading and the validity of the markets and how and when they move and why.
So what was this first priceless lesson that I was taught? It might seem obvious to say that the first thing that I noted was GREED - no surprise there obviously, as everyone invests in the Stock market to create wealth or at least profit. However, what really made me sit up and take notice was that the actual chart of the share had little relevance to the real value. In other words, what I was seeing happen with the price movements had nothing to do with the fact that British Gas was creating more gas or had secured huge global contracts. No it was far simpler than that.
It was based on the psychology of greed and to whether person X thought the share was go-ing to go up more in the future as apposed to person Y thinking it was going down over a similar length of time. This was creating a more desire for the stock so the price went up, more people bought as they saw the stock rise - but this didn't happen straight away, oh no! When the market opened thousands of small investors saw profit straight away. They got greedy and sold within the first few days. This initial mass selling of shares outweighed the buyers and so the stock went down. It was after this that I noticed the real greed and the 'Clever Money' come in. The institutions were buying the shares by the bucket load; they were cheap at that point - good value. The shares began to rise, more clever money being pumped into by the larger private investors. Followed by a final surge when the people who sold initially bought again, seeing the rise (not realising that They were near the top of the current Long upward trend) thinking the stock will keep going only to be bitten when the Institutions sell and take profit.
The rather long-winded point I'm trying to make here is, not at any time was the share price connected with any news, profit warnings, major contracts - nothing. The price movements were to do with pure and simple greed and supply and demand.
Now knowing that the share price is governed in the short to medium term by this psychology of greed, we can therefore by watching for particular patterns in a share charts, spot price movements up or down - much like reading how people are thinking and using our tech-niques, plotting where they might go next. Sounds tricky but what I will be teaching you later in this workbook is very easy to learn. Don't worry about it just yet or at all for that matter.
So did I profit from my first trade. Well without wanting to blow my own trumpet! Yes I did, but not because I realised what was going on. It was only because there was some delay issuing some of the share certificates, as at that time there was nothing like a 'Nominee Account' whereby I could sell the shares without the need for a share certificate. By the time I got mine, the shares were creeping up again, I sold and made several hundred pounds and learnt a les-son, which would crystallise over time and become one of the best lessons I had learnt.
Now lessons are great, but only become of any real use if we actually apply what we had learnt. Sadly for me that was many years later. You see for a very long time, I knew there was a better way to make money, than plod away in some ropey 9 to 5 existence working for someone else and making him or her rich and not me. To cut a long and arduous story short - I tried everything and anything. I have done MLM, sold pills and potions of all types, acted as a letting agent, import/export agent you name I've done it. In fact I had won two business awards given by Shell UK for my business ideas, one was a legal fake art import business – there are many clever, talented artists in Honk Kong who will copy works of art at a reason-able price or produce portraits from photographs – in fact I think there are still a few people doing this pretending that they are the artist, save your money and do a search on the Internet and get a company in HK to do it at a fraction. The other was an advertising service for small businesses. Anyway enough of that lets just say that if you're anything like me, you have worked hard at creating a better way of life in a rather unconventional sense. Some working better than others. In fact I am going to go into a bit of tangent for a while, to make an impor-tant point.
Attitude! This is very important. What I mean by attitude, is not so much your general attitude, you don't have to be some 'Gordon Gecko', or some ruthless individual who would sell their Gran to make some money (how much are Grans worth anyhow?) to be successful in Finan-cial Spread Betting. The attitude that I am going to be talking about is your attitude to money and how it is made. Now I am assuming that you work, which is great, we all have to have a trade or a job of sorts. Sadly it is this that we get measured on as a reflection of whom we are and treated as accordingly - but don't get me started on that one, that is another book in it-self. The attitude I want to concentrate on is our attitude to how money is made and how you can make money is important to your future success in this game and pretty much to your Financial success in life. If you are someone that believes that the only 'True' way to make money is to work hard in a job all your life towards a pension and spend the rest of those pen-sion years playing golf and reminiscing with your spouse. Then I wish you all the best because you will need it. Sadly the old attitude of a 'Job for Life' is no longer part of the new millen-nium. Many people are now having to continue working into their retirement as their pensions have either been eaten away by inflation or stock market fluctuation (excellent for Financial Spread Betting) or both.
Many retired people are having to re-mortgage property to keep their heads above water and recently in the British press, it is becoming so common now for retired folk to sell their homes to pay for private residential health care - leaving nothing but debt for the next generation to pay. Now, hopefully if you are one of those people that believe that working for someone else is the only way, then I just hope that I have angered you just now. Yes I am saying all this to get a reaction, but more so because it's true! Some of you may protest and tell me that you have made solid plans and anyway you've had promises from the government and your em-ployer "...That things have now changed and will be very different when you retire, don't worry, go back to work!" Oh so true! The funny thing is that's what your parents were told and so are now you, and YES things will be very different when you retire. In fact it scares me to think how different. Put it this way. I can't see things getting any better and financial pressure on the government are increasing yearly as more and more older people live longer. Trust me when I say that retirement isn't going to be a cushy thing if you continue working for someone else and rely totally on your pension income for your future. So the attitude I am talking about here, is your belief in the fact that there are other, better, quicker, easier ways of making money than just working for someone else. Granted, not everyone can deal with Financial Spread Betting. What makes this game hard is not applying the techniques or learning the skills - its you. It’s your mentality and psychology that will either make you either a winner or a loser in this. As there will be days when you will make an awful lot of money and by same to-ken there will be days when you will lose an awful lot of money. How you see it, is what will make you a success in Financial Spread Betting. If you see the losing as a negative, painful, depressing event whereby you have doubt in what your doing and the system that you're us-ing - then you will not be successful. IF on the other hand, you see these losing days and win-ning days as part of a greater picture and part of trading and treat them just the same, remain-ing focussed, calm, controlled. Then you my friend will be a success in Financial Spread Bet-ting. That is what I mean about attitude.
There, got that off my chest, but it is an important point. Your attitude to this will be the great-est indicator of your successful application of what I will be teaching you later within the work-book and your longer-term success of profiting from Financial Spread Betting over the years.
Back to lessons being learnt. It wasn't for a long time that I realised what I had learnt way back in the 80's. In fact it wouldn't be until the late 90's and the subsequent 'Dot Com' gold rush and then collapse of technical shares. Wow what a mad time that was, but such a mas-sive example of greed and supply and demand in an exaggerated way. To this day we all look back and think how any of it was possible. Some kid would have a 'Dot Com' idea, go to a Venture Capitalist who would then throw a couple of million at them, they create the company and then go IPO (e.g.: PLC) and sell shares in it to an ever greedy public who had been swept along with everyone else – here is where the future lies and everyone wants a share. Investors would go crazy and buy the shares, which would sky rocket, created paper millionaire's for the VC's and MDs of that 'Dot Com'. When fundamentally, their actual worth was whatever physical stock, property etc. they would have and the piddling market share they may or in more cases not have. It took a while, but it was lastminute.com that signaled the end in the UK. When people realised that the shares were not worth the initial investment, more so these ‘Dot Com’ or dot Cons as they became known as, started crashing. When the financial re-ports of companies such as Boo.com where made public it transpired that this company and many others were spending money like water and wouldn't be in a profitable position for about 20 years, when in truth to cling onto the tiny market share they had was costing them millions every month and would soon run out of money. Now this is where fundamentalists got it right, they looked at the real value of the company and the stock etc., and came to the con-clusion that things couldn't hold out and sold at a profit. Technical analysts noticed too be-cause of various key indicators and patterns (which you will learn) that things were getting choppy and time to bail out. Sadly it was the private investor that got burnt more than any-one.
That was the period for me where I started to become more interested in both Technical and Fundamental analysis. Just so you know. Fundamental Analysis is looking at the REAL funda-mental worth of the company and its market; it simply can't predict price movement in the short to medium term that is why we concentrate on Technical Analysis.
So as you now know. Share prices over the short to medium term reflect nothing but the psy-chology of the people buying that share. If shares were just based on their true value all the time, both the Index of every country (more on those later) and the shares themselves, would be nearly flat and only rise/fall when the company announces its profits at the end of their fis-cal year. The same therefore can be said for commodities and every other area that Fund Managers pile their money into these days.
I know what you're thinking? Yep, the Stock market and all the other markets are just one big Casino. You know what, you're right. No one knows what the future will bring; no body can tell with 100% certainty what will happen to any market sector or business. Some people like to use all manner of ways to second-guess price movements. Many rely on tip sheets; hearsay and what the guy they met in the pub once said about company XYZ. If that is your source of information then I hate to say it, but you will be getting poor very quickly. I know that I am one of the many people and companies out there that are vying for your buck, with the promise of wealth without hard work. Well, what I am promising you is my system and that it works and from reading this workbook you will understand why and from using the Trade Focus service you will see that with your own eyes. What you decide to do with this information is entirely up to you, but I shall leave that for another page. What I am saying is this. From now on, ignore the press, friends, and colleagues, tip sheets, news groups, forums, tips boards etc. don't take their word for it. Instead learn the techniques that I am teaching here and apply these techniques to the markets and make your decisions that way.
DO NOT; let Joe in the pub who once got lucky with a Tech Share in the late 90's, tells you what you should put you money on. Let the charts and your knowledge tell you what to put your money on. Of course following Trade Focus or becoming a private student will help mas-sively should you need any clarification on your choices of trade or clarity in your training and support.
We've covered two important issues, which have to be addressed before you even begin to think of learning what I am going to teach you. We have looked at your attitude to trading and making money, this alone can hold you back and cause a million problems for you, if you haven't get the mentality for this. The second is listening to others opinions.
In fact, for now, DO NOT tell anyone that you're reading this workbook. Wait till they ask you why you are go-ing on nice holidays and have a new car, and then tell them. If you tell them now at this early stage, you will get a million stories of woe. Stories of their mate who once tried a similar thing and lost everything. True! 90% of people who go into Financial Spread Betting lose their de-posit within 3 months. Now is that your knees I can hear knocking - I hope not, don't worry. The reason being is that the people that lose their money have usually heard that there is easy money to be made (yes true it's not hard work). They have then blindly choose a trade and lost their money. They would have had no idea of the markets, no idea of a system and no idea of knowing how to protect their trading profits and limit their losses. You my friend will be in the 10% who will be winning. You have here a workbook that teaches you the key points in the markets, a real tried and tested system with a real history and you will know and have peace of mind knowing that your money is protected. Everything you will be doing is calcu-lated; there is no error of judgment. You will know exactly why you are making a trade and when you will be coming out - with a good idea of how much you can make.
You still with me then or have you chickened out already and believe you wont be able to hack it. If that is you, then take stock for a second. It saddens me to hear of people that have only read part of this workbook and then criticize it. Not because I'm defensive about what I write or my website etc. No it's that I know that these will be people who will go through life, work-ing for someone else and scrimping on some ropey pension. This is what upsets me. I set up Insight Support Limited and this website to educate the many who are out there, who work for a living and have little or no knowledge of how to make relatively easy money from Financial Spread Betting .
If that is you and you are getting itchy feet reading this Workbook, then this is what I want you to do. Stop reading, shut down your PC and think about what I have told you so far. Then for-get about it for a couple of days. Then when you're ready come back. Reread up to where you left and then have another think. IF you're still having doubts about all this and have con-cerns, then drop me an email. I always personally write back to everyone that writes to me. I want to know what is worrying you, what your concerns are and perhaps you can tell me what the reason for joining Trade Focus are. You don't have to go into any massive detail. I just want to get a picture of who I am talking to and your concerns. I will then personally write back to you, answering every question. email me below:
www.insightsupport.com/helpdesk/ I know that I am going on about it here, but I genuinely want to help you and I can't help you if you decide to quit at this early stage. At least give me the opportunity to address any con-cerns and worries you may have, I know I can. As I have been where you are. You see I know what it's like to feel edgy about something like this. After all what were doing isn't conventional and we are spoon fed things in life, which is both familiar and safe. That is why politicians are like the way they are, why the secret services are secret and why papers create diluted news, and why most of us work for someone else for a living.
It's conventional and by the same token, when someone like you and me does something like this that is out of norm it is frowned upon and taken in an automatic negative light. You now have no excuses, I want to help, I want you to succeed, and I want you to be driving that new car into your drive... AND I want you neighbour to ask you how you got so lucky.
My friend you have no excuses ... do you need to email me! If so do it now and stop reading. As from now on, were going to get to the 'nitty gritty' of the markets, Financial Spread Betting and how to profit from them.
ARE YOU READY?
Starting Out In Trading
Mention charts to most people and they begin to think of Pie Charts, graphs etc. and School. Instantly the dread factor creeps in before we have even seen one and we instantly begin to think that we can't read the damn thing and what's the point of it all anyway. I hope that you're not like that, but I do understand totally why you may be like that. As I was like that ini-tially. After what is exciting about a Chart! Well without sounding as if I need to get out more (and maybe I do), when someone shows me a chart I instantly begin to look for familiar patterns. We will be talking about Technical Analysis (looking for familiar patters that signal price movements) later. For now we going to get used to what Charts are and how we should read them. After all it would be pointless for me to talk to you about charting etc. if you didn't know exactly what I was on about. Sadly many websites assume that we all have a degree in business and mathematics and therefore present their content in such a way that you need a million degrees to understand what they're on about. As an aside. The main focus of this website is to teach people not only a technique that really does work, but more so in a way that most people can understand and relate to. Not in a pompous aren't we clever way, which sadly seems so common today and is partly responsible for the 'Smoke Screen' that the institutions want to throw, to prove how dif-ficult it all is. Also, to the same degree many trainers within this field like to give the impression that by spending 000’s on their course you will learn something different, secret and hidden – rubbish! We all know the same techniques pretty much, no one has found any magical secret. What most seminars teach, is a fraction of what’s covered in this entire workbook and what is also available to you online as a private student of my website, yes that’s a plug, but then I am not charging thousands unlike some.Once you've read this workbook and practiced a few trades, you will quickly realise how full of bull some of these training guys are.Back to the plan Batman! OK. So what is a chart? Well simply put a chart shows in graphical form the price movements over a given date range. The information contained in these charts are very adaptable and if you're not even a little bit versed in what they mean, you would be tearing you hair out and giving up very quickly indeed.Lets look at the following chart. Now it may look complicated, but really it is very simple. We will start with just the basic information to begin with so that you can become familiar with how charts work etc., before we start adding the tools that we use to look for price movements. That will come later. I just want you to become comfortable with working with charts etc.
Look at this chart we can see the main price line which depicts the value of the share over a given period. The date range chosen for this chart is shown running along the bottom of the chart. The value of the share is Plotted from left to right by a simple black line – sometimes, as in the case for this chart a black line is used for a price movement that is going up and red when it is going down. This line as you can clearly see fluctuates and this is the price move-ment over time. You can get an instant idea of the share value by looking at the price line and looking to the left or right to see the value, then looking at the date that its line with where you are looking on the chart. The software that I used to show you the charting examples in this workbook is a package called Sharescope – the member website on www.insightsupport.com also has its own pro-prietary charting program and data service included, as I write this in the rather gloomy sum-mer of 04, I expect this charting package to be available at the end of July 04. As regards to Sharescope, I don't get a commission for people buying their software but I would recom-mend them if you don’t intend on becoming a member of Trade Focus. As for charting their software is exceptional value and easy to use. Needless to say there are many other compa-nies that offer similar packages, some are on the Internet only, some are downloadable. There is many to go for. If you live in the UK or any part of the world, my personal choice would be the in built software on Trade Focus as this covers the major indices across the world, but also has a built in algorithm that pre-analyses the markets for you and presents them as a short list for you to select from. This alone will save you hours of work. Over 10,000 stock charts analysed for good trading opportunities and presented to you each morning. Together with a professional charting program and the support system, the resources, training videos and much, much more.However, the majority of the price movements that you see and in fact pretty much any chart you will ever see have little relevance to real company events. It's mostly based on rumour and speculation, no one really knows. Well apart from the owner of the company, but then they have to be very careful buying shares in their own company and there are strict rules that they have to follow. If they have been found to have an unfair advantage on a share movement that they could have known about, then they get go to prison for 'Insider Trading'. I am sure all of us can recall stories of Directors getting into trouble with this. Although, I must point out that to prove the Director was involved in 'Insider Dealing' and is very hard and most cases fail. So the prices that we see are based on the whim of other traders faith in that company and share. That's all it is. What you are seeing there is mass crowd psychology in action, nothing more. The great thing that you are going to be learning is that this mass psychology creates patterns in charts. That once you're shown what to look for and what signals to take note of. You can judge where prices maybe in the short to medium term. I will be talking more about Technical Analysis later. For now I want you to get used to reading some charts. What I want you to do is go to a charting service, whether that’s the member website or one of the very basic charting services that you can find for free, a good place to look at is www.ft.com. Select some charts of companies that you are familiar with. Now don't worry about some of the additional lines and graphs that may appear. I want you to get used to se-lected date ranges and looking at the price fluctuations and reading the data accurately. If you know of a company that has recently been in the press for good or bad reasons the have a look at their chart and see how the price fluctuates before and after news. I think you maybe surprised to see how in fact that the companies real value has little to do with that of the value of the stock price. The Markets & Indices.
We have all heard about the Stock market. It is always one of the evening News favourite things to mention, especially if there has been a big drop. The papers also love it when there is a big drop, so they can use the words 'Crash' at every given opportunity. But what are they, what do they mean and are they any use to us.
What are they!The main and most popular indices are a group of selected shares that represent the coun-tries top 500, 250, 100 or even top 30 companies. The shares are then added together and are then presented as one Index covering that share market.The most popular are as follows:DJIA America's largest and consists of the States very top companies. DJIA stands for Dow Jones Industrial Average. I will be talking a little more about our friend Mr. Jones later as we use some of his legendary techniques. Usually referred by its first word 'The Dow theory'.FTSEThe FTSE (pronounced 'footsie') comes in two sizes 250 and 100, there are other variants but we shall only concentrate on the most popular. The most popularly quoted index is the 100. The FTSE 100 is the UK's largest and most popular Index and includes the countries top 100 companies. FTSE is an acronym for Financial Times Stock Exchange 100. Although the FTSE only covers 100 shares, the capitalization of the London Stock Exchange (LSE) is over 70%. Therefore, the FTSE 100 gives a snapshot of the LSE UK market. So a great deal of people pay attention to indices like the FTSE and the Dow.
One thing that you have probably noticed about the above charts and if you haven't I suggest you go and take a closer look. Both charts look very similar. Now it has nothing to do with that we both speak English or that we're cousin etc. It's because the American markets reflect to some extent global economy and this is reflected the following day (New York Stock Ex-change NYSE closes later than UK, at about 9.30pm GMT) in the FTSE. There is an old saying that will come in handy "When New York Sneezes London Catches a cold". Meaning, if the markets go down or up in New York you can expect the same to happen ini-tially when the LSE opens. Obviously that is not always the case.NIKKEI
The NIKKEI indices cover the largest companies in Japan. NIKKEI is published in Japan by Ni-hon Keizai Shimbun newspaper and is based on the average prices of 225 equities traded on the Tokyo Stock Exchange. There are other NIKKEI variants much like that of the FTSE and DOW, but for the main part most people take not of the NIKKEI (pronounced 'nick-eye').There are many other indices but the above are the BIG three and the ones to take real note of. The other indices such as the DAX (Germany) the CAC (France) and others to, can all be traded in additionally to those above. Depending on your skill and how good your nerves are, you may want to stick to more sure footed (as indices can be) indices above, until you get pro-ficient in your skills in Technical Analysis.The above indices are also broken down to smaller parts, which represent market sectors. Look into the back of any newspaper and you will see under the financial pages listings of shares broken down into their market industrial sectors. The list is quite extensive and covers anything from Insurance, Electronics, and Publishing etc. These like the main indices reflect the top companies shown, but per sector. So that you know which area of industry is strong and which is weak. Which may in turn reflect on the price of the FTSE 100. As an example: looking at the industrial sector for Oil (ENERGY & MINING). Now when I first wrote this tensions between the West and IRAQ are strained to say the least, the UN are trying their best but tensions and time are wearing thin. IRAQ has the second largest deposit of OIL in the world. Since then a great deal has happened. Iraq has been ‘freed’ for want of a better word and the UN has recently handed over Iraq to its own people and Saddam is in the Iraq court claiming he’s still the president. Various sympathisers across the Gulf region have targeted the west’s oil supply pipelines. Obviously this will hike oil prices again. As you can see, any threat to the supply of one the worlds currently most needed commodities creates a knock on affect.So we can expect the price of OIL to rise and fall as tensions mount and ease - remember you can trade OIL which you will find in the commodities section of your brokers website. The in-stability (remember it's all about psychology) and likely increase in the price of OIL has a knock on effect in the market Sector of ENERGY & MINING, so this can be hit good or bad and the FTSE (and all shares) why? Everything we buy has a cost in it that is the result of the actual supply, shipping & delivery of those goods. Now I just don't mean when the item was sent to you or delivered to the shop you bought the item from - although there is a small percentage in there. I am talking about the cost to manufacture the item. In everything some of the cost is the result of OIL. Now if you need me to tell you exactly why, then maybe Financial Spread Betting is beyond you, but for the sake of the few. OIL for EN-ERGY = Manufacture OIL = Petrol, Petrol = Transport, Transport = Delivered components, Components = Product. So the price of OIL because of the problems in IRAQ could have a long term knock on prices, people buy less, companies make less and profit falls, and share confidence is knocked in the longer term. BUT the psychology of all of the above takes place way before anything drastic such as war happens, that is why prices such as OIL fall or rise.
We've had a quick look into the main indices and to be honest you don't really need to know the complete ins and outs of them, so I don't want to chat about them in too much detail. This workbook is about making money using a tried and tested system that I have used over the years, not about the history of the money markets. However, having said, that I would like to talk to you about the main Exchanges in the world. This compliments your knowledge of the indices that we covered previously. Even though I don't want to burden you with too much detail about the indices and exchanges, it is impor-tant that you are aware of who, what and where they are. We need to cover the basics before I can go into teaching you my techniques.
What are exchanges?
Well I think the clue is in the name! Exchanges are world financial centers devoted to the ex-change (buying & selling) of financial products, commodities etc. There are various key market exchanges that specialise in differing sectors of global exchange, commodities, metals etc. I aim to show you the main ones that are out there. One important point I want to get across to you, is that you WILL NOT be dealing with these guys at all, but their opening times etc. do have a relevance to your trading activity.Stock Exchanges used to be an 'open house' for anyone wishing to trade. It soon became apparent that some kind of order was required to stabilise trades and agreements. From that moment the Stock Exchanges became 'club' like and very cliquey, so from the early days from being a public place to trade, it soon became a closed network of traders who had to be members of that exchange. There are many stock exchanges around the world and much like the main indices we talked about before, they centre on the worlds largest markets. So for London we have the London Stock Exchange (LSE), in New York we have the New York Stock Exchange (NYSE) and finally the Tokyo Stock Exchange in.... yep you guessed it Tokyo. See told you it's not that difficult. Strange as it may seem but the largest in terms of capitalization (money that is invested in a business or the value of a company’s stocks and bonds) is Tokyo, but because of their strict rules and laws of trading and high fee's they lag behind NYSE and LSE who are way ahead in terms of number of trades made etc. There also exist smaller exchanges that deal with the exchange of money from differing coun-tries - Foreign Exchange, also known as the FOREX. There are also various metal exchanges that deal in the sale of metals (Gold, Copper, Platinum) etc. for instance there is the London Metal Exchange in the UK.As you can see, there are a broad and varied number of exchanges across the globe. Now before you start to panic. I must point out again, that you will not be dealing with these guys at all. However, it is important that you know where they are and what they do as a whole. Why worry about another exchange in another country?One of the great things about Financial Spread Betting is that you can trade in anything and I really do mean pretty much anything, but more about that later when I talk in depth about Fi-nancial Spread Betting. The point I am making is, being that you can trade Indices it helps to know where they are located, else you wouldn't know when that market opens so you can begin trading in that Indices. One of the wonderful things about being able to trade in all of the major and minor indices (CAC, DAX) is that you can trade 24 hours a day if you so wished. Which is handy if you are working and want to get your hands dirty with some intraday trading (trades opened and closed within hours). Although I hasten to add that I wouldn't recommend intraday trading to begin with, but as ever I shall be talking about the merits of them all, when we get to actually teaching you about the techniques etc.I would put up a list of the opening times of all the exchanges but the main exchanges open from 8am to 4.30pm local time. Trading in metals is one of the funny ones as far as trading. As they only trade at specific times of the day, usually for periods of 10 minutes or so – yes that small. To be honest you don't have to worry about that too much, although you tend to get better prices when they're being traded. Of course you can trade outside of these times, you will get better prices however, when you trade when that particular market is open - lower spread on trades.So there we have it. Not rocket science. The exchanges are mostly electronic now and allow quick trading. The NYSE still has a trading pit where you can see traders going nuts and ex-changing prices and trades using their own sign language, similar to that used by 'Bookies' tic tac at the race tracks. With this increased speed in trading, means that prices fluctuate con-siderably during the day and when you get to see a live chart of a company share, commodity etc. You will see how even just over periods of minutes there is a degree of positive and nega-tive where traders are making their decisions on the fever of the trading floor and the psychol-ogy of the market. This is where you banks, major corporations, key financiers make their eve-ryday money. The market makers, fund managers and pit traders get paid thousands of pounds to do this too. Does make you think doesn't it!We've covered the main parts in this early stage. We now know what a chart is and what it consists of and how it is read in its basic form. We have discussed the major indices and how and what they are and what effect the differing sectors within each indices can have. Finally we have just looked into the main exchanges across the globe. This gives you an idea of the trading world at large. Next we can look at what Financial Spread Betting really is and how to best use the techniques.
Please look out for more very soon....
- Stock Spread Betting
Read the next chapter (module) in this hubpage tutorial.