It’s been about 3 weeks since I opened my IG Index spread betting account. I wrote about my first day’s trading here, and since then, have embarked on a mission to try and educate myself on how to actually trade. My research has led me into all kinds of useful websites but the first one that made any sense to me was this one.
I came across the ‘introduction to spread betting’ series of videos by John C Burford and after watching the first video in the series on ‘tramline trading’, I felt like I had the starting point to a basic level of understanding. Understanding may be too strong a word. The reality was his view of tramlines seemed to simplify everything for me in a way that I could understand so I copied it.
I proceeded to trade the next week or so looking for ‘tramlines’, with the underlying belief that the global economy was still in dire straights and that would continue to push gold prices up.
On my second day’s trading, (13th March 2012), I started to place bets using this tramline technique. My positions in William Hill and Banco Santander seemed too boring and I closed them out at a small loss, preferring instead the excitement of the spot gold price, which always moved on way or another. It didn’t occur to me at the time, but I was entering gambler territory.
Using John’s tramline technique, I found what I thought were a some highs and lows. I waited patiently for the price to reach these highs and low entry points but it seemed to be taking too long so I entered the market anyway on the assumption it was on it’s way up to the top tramline.
It worked, I made 60p in no time and I thought I was starting to figure it out.
By the end of the second day’s trading, I’d made 12 trades. I’d lost on 3 of them and made a profit on 9 of them. My profit for the day was £2.83 trading 20p a point.
At round about this time, my head was starting to fill with thoughts of using larger amounts per point and ‘scalping’ small gains throughout the day. I learned later that scalping was a known day trader’s strategy where day trader’s attempt to place trades on the momentum of a price and take lots of very small profits throughout the day. It sounded like a decent strategy and I stuck to it for about 5 days – until I made a big loss.
Chasing Losing Bets
On my 4th day of trading, I started the day up about £5.50 in total but then I experienced something I hadn’t really experienced before. I lost quite heavily in the early hours of the day. Despite my tramlines going up, the price of gold was just dropping away as (I later found out) the Fed had decided against a new round of quantitative easing. I got into a situation where I was so sure my lower tramline ‘support’ level was hit, that I just kept placing more shorts; from 20p a point to 50p a point, up to £1 a point.
I ended up losing £10 in a few hours in about 7 trades.
Unwilling to end the day there, I started placing more trades in the opposite direction, hoping to catch the ‘falling knife’ – I didn’t.
By the end of the day, I’d placed 21 trades and closed the day £5.72 down.
I lay in bed later that night and told myself if I ever made 3 losing trades in a single day again, I’d stop trading for the rest of the day and take some time out.
It was at this point that I decided making lots of small trades each day was not the best strategy for me.
I had to be more pragmatic.
In my head I envisioned using £10 a point. I wanted to try and make £1000 a month and if I broke that down into 21 trading days each month, that meant that I needed to make £50 per day. At my current trading level of 20p per point, this was equivalent to £1 a day.
That is my target from now on.