Insights from a Successful Full-Time Trader


Most of us have a full time job and don’t get a great deal of time to day trade but still find it very interesting. You can study all the books you want about spread trading, some things are easier learnt in practice, and here are several strategies that I like to look at.

A  successful full time  spread trader gives his take on trading strategies that will help you succeed -:

I also have lost lots in attempting to spread bet over the years, but they were trades attempted without a true system and on a part time basis. I’ve always thought that working deprived me of the opportunity to make money. I have learned over the years that if you are going to win then you need some rules and to stick with them. That trading with £1 a point to see if the rules work is as good as anything else until the formula proves itself.

The idea of using £1pp is to:

  1. Check your trading method works and avoiding large loss if it does not.
  2. Applying some pressure to ones trading bur not too much.
  3. When you make a mistake silly or otherwise and you will!!! You learn without a heavy loss and can extrapolate what the loss would have been at say £10pp.

However even if you can get a method that works on paper, the psychology of it is different in reality. Having said that I do like working under pressure as it tends to bring out the best in me.  I also suggest you keep a trading log particularly of why you lost and the mistakes you make!

Trading Insights

First, remember that spread betting allows you to short a position as easily as go long, and you need to watch for opportunities to apply this. For example, a company may issue profit warnings. Sometimes if a company has put out something negative, there is more bad news to follow, and is worth keeping an eye on the price to see if you can profit from their distress.

There’s a saying “Buy the rumour, sell the news”. This often works, but not necessarily in the way that you may think. So much so, that some spread betters avoid taking positions in companies when news is expected. The traditional way to profit that still works is to place a long bet in anticipation of good news, and as soon as it is announced sell and take profits. There are many novice investors who do not realize they are the last to hear and act on the news, and that the share price will rise no further. Do not get fooled into being late to the party, unless by choice, as in the next way.

But another way of trading  company announcements is to wait until a couple of days after the results and then buy. If the news was good, the profit takers will have bought and already sold, and you would watch for this to happen, seeing the initial rise pull back and a new price base form. Then would be an appropriate time to get back in.

Here’s another idea. You know those tips you get in newspapers, and on television channels such as Bloomberg and CNBC? If you have the guts to, short them. Of course, you must keep good tabs on the market to do this successfully, but doesn’t it make sense? After all, about 90% of traders lose money and give up trading, so why would you want to go with the herd and guarantee your demise?

This is obviously a very short term strategy. The market makers know that everyone is going to climb on board a much publicised hot tip, so they make sure that the prices are already going up when the market opens. They will often even lower the price after the general public jump on, forcing stop losses to kick traders back out.

You can also apply this tip to the small caps that are hyped up in anonymous e-mails. Instead of being in the first wave, which is over quickly, where the publicity results in the “pumping up” of the price, take a short position on an inflated price with the full expectation that it will come down to its natural previous level within a few days. If you use this strategy, you can profit legitimately from someone else’s “pump-and-dump” scheme. As always with a short-term fluctuation, you must keep in touch with the market and time your entry and exit well.

I’ve ended the year just about where I started in terms of capital but educationally its been one of my best. I planned in advance to scale out of the markets and managed to execute the plan well by banking cash without any major losses. I’m now convinced that market timing is the biggest single factor to making long term gains – buying near market bottoms and selling near market tops. I’m also convinced that there are many reliable indicators out there to tell us when we are near the top or bottom. This year’s focus will be on how to make as much as possible from doing as little as possible as in £/hr.

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