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LS Trader Financial Spread Betting Newsletter March 2010
This month’s spread betting newsletter will be available soon. To receive it for free please click here to sign up for it.
The monthly newsletter is free and it covers the markets that we spread bet at LS Trader. We look at the markets as a whole and also look at each different market sector. We also have a market of the month and some comments on it including the chart for that market and look at what may happen next.
We also analyze some of the markets that are moving and look at the key levels to look out for from a perspective of possible targets as well as support and resistance levels. In addition we take a look at the major trends for each market sector and discuss the long term trend for the 3 main market sectors, which are stocks, forex and commodities.
In addition to the monthly newsletter, you will also receive our free weekly update which also covers the major sectors that we trade as well as the levels to keep an eye on in the week ahead. As an added bonus you will also receive 2 of our ebooks, free of charge. The first is "The 7 Rules of Successful Financial Spread betting" and the second is "The 7 Deadly Financial Spread Betting Mistakes". Both of these ebooks will be yours for free as soon as you enter your name and email address at the bottom of the page.
Good trading
Phil Seaton
PS. To sign up for the LS Trader Financial Spread Betting Newsletter please click here
Filed under financial spread betting by 
Phil Seaton’s 7 Rules of Successful Financial Spread Betting
Over the next few weeks I will publish my 7 rules for successful financial spread betting. These trading rules are timeless and will always be valid in the markets, regardless of market conditions or the state of the economy. One of the great advantages of trend following is that you can make money in an up or a down market, either by buying long or going short.
If you trade across a portfolio of different instruments or markets such as stocks, forex or commodities you will often find that one sector is trending up and another is trending down. This means that there are nearly always opportunities for trading, especially if you have the added flexibility of going short (selling)
These 7 rules must be followed consistently if you want to be a successful trader. Regardless of the trading system that you are using there will always be losing trades and even losing periods. You will find it much easier to continue trading through these losing periods if you have a set of rules or sound trading principles to fall back on. I believe that these 7 rules are the cornerstone to successful trading.
The LS Trader system is based on and incorporates these rules to help make you a consistently profitable trader.
Here is rule 1 of my 7 rules of successful financial trading:
1. Trade with the trend.
You should always follow the trend. There are several reasons for this. The first reason is that the price is the only instrument that takes into account all the knowledge everybody has about that particular commodity or market. This is reflected in the price. If the price is going up then there is a reason for that. We do not need to know the reason, we only have to get on board and stay with the trend until it ends.
The same holds true for when a market is going down. As with long trades for riding up trends, we can short a market and take advantage of downtrends.
It’s not just financial markets that move in trends. There is evidence for trends elsewhere such as with interest rates. When the Bank of England decide to increase or decrease interest rates they don’t usually raise them one month and cut them the month later. They usually start in one direction and keep going as we have seen recently with a succession of cuts.
There is a principle in physics which states that an object in motion tends to stay in motion. In trading terms this means that once a market starts to move in a certain direction there is an increased probability that the market will continue to move in that direction.
Markets do move in trends although certainly not all the time. However, markets trend often enough that when they do trend and a big trend emerges, the profits from riding that large trend will cover the small losses that occur when the market fails to trend.
How can we know how long a trend will last or when the trend will end? We can't. That is why trend following systems have rules incorporated to identify when a trend has ended and specific rules for when to exit a trade.
Trend following also has the added advantage of enabling risk control. I will discuss this later in another of my trading rules regarding money management. This is one of the huge benefits that trend following has over fundamental trading.
Let’s say for example that you are looking at Gold and your indicators or research leads you to believe that Gold is going to move higher. You decide that Gold has dropped to $845 and you are sure this is the bottom and it has to go higher (after all only a week ago it was at $900!) you buy Gold at $845 only for it to fall to $830.
If it was a good by at $845 it must be an even better buy at $830, so you decide to open a new trade at $830 (after all this is giving you an average price of $837.50 which must be good!). Gold falls further still. Now you have a big loss on your hands and Gold stands at $820. Using the same logic as before, you borrow some money and buy more Gold at $820. Again you are wrong and Gold falls further to $790 and therefore wipes out your account.
This kind of thinking is commonplace and is a major reason for many people losing all their money because people buy into the myth that things return to normal. Sometimes they do but many times they do not.
If you had been trend following, you would not have taken any of these trades and would not have lost any money. You would have waited for some strength to buy the market and would have followed the trend.
There are of course many different time frames for trends and this will depend on your particular trading style. There are short term, medium term and long term trends. I personally prefer to trade based on the medium to longer term trends as I find these more profitable and less prone to false breakouts.
REMEMBER ALWAYS TO BUY STRENGTH AND SELL WEAKNESS. This is counter
to our natural tendencies as people are always looking for a bargain. In trading there is no such thing as the market is always right so the price in any given moment represents the value of that particular instrument at that particular time.
My second rule of successful financial spread betting will be published on this blog soon.
Good luck in your trading
Phil Seaton
PS. You can sign up for the LS Trader system here. The system comes with a 30 day 100% money back guarantee.
Filed under Phil Seaton's Trading Rules by
Since posting the article on my blog about the bottom of the stock market a couple of days ago I have received numerous emails on the subject so I thought I would expand on it a bit and give some further thoughts.
The one big question I have and would like to put out to everybody for them to think about is why is it so important to buy the bottom of the market anyway? I believe that the reason people are looking for the bottom is ego based and not profit based. People want to be right and say “look how smart I am, I bought the bottom of the stock market”.
Instead of trying to be “right” traders should be concentrating solely on making money. The fact remains that the best traders are those with a relatively low win percentage i.e. they are wrong more often than they are right, but when they are right that make more money than they lose when they are wrong and the difference is their profit.
As I have written before, the markets trend around 40% of the time and that is about the same as the percentage of winning trades that a good trader or trading system will produce. This is roughly the percentage of winning trades that the LS Trader system produces but over time the system is well ahead of the game.
Currently the trend in the stock markets is down. The long term trend and the short term trend is down so there is no reason as far as I can see for people to be trying to fight these trends and buy this market right now.
I believe that the trend in stocks is going to be down for a while yet and I don’t see the LS Trader system giving a buy signal on stocks for the rest of 2009. That does not mean that there won’t be rallies because there will most certainly be rallies and up weeks, possibly even up months, but after all is said and done the long term trend will remain down for the foreseeable future.
In the meantime there will be countless traders trying to predict the bottom and try to buy the bottom of the market and even look for market bounces and try to buy them. My point is, rather than fight the trend and guess why not just follow the trend and go short?
Using trend following, traders don’t need to guess or predict where the bottom of the market is but simply follow the trend. When the trend reverses the trend follower simply exits the trade and waits for the next trend to develop. Trend following is reactive, not predictive.
The fact remains that huge sums of money is and has already been lost by people in search of the bottom of the market. Just ask legendary investor Warren Buffett. Buffett attempted to call the bottom of the market months ago and was wrong in a big way, so far losing billions of dollars.
What is Buffett’s reason for buying the stock market? It seems that he has 2 main reasons:
- He likes a bargain. He said a day or 2 ago that he likes to buy quality merchandise and knock down prices. Problem with this is that what may appear cheap today could very well be expensive tomorrow. As I have said before, there is no such thing as value in the markets as the markets are always right. Therefore, the current price on offer for any market is the right price at that particular moment in time.
- He believes that you should be greedy when others are fearful and fearful when others are greedy. This is a popular theory and seems logical. The fact is that it is just not accurate enough as an indicator and Buffett’s experience in this example is proof positive of that.
The problem with both of these approaches is that they are both counter trend. Counter trend approaches when tested over market history show a negative expectancy as they are not statistically valid.
The question is then why does Buffett do this? Well, firstly there is an important distinction that Buffett is a long term investor, not a trader and he will therefore be taking a longer term view. He obviously also believed that when he was buying the market that we were either at or near the bottom. He was wrong.
In my opinion he is making a mistake because he has probably at best parked his money for a couple of years before it climbs above the levels that he bought at. Secondly, he is clearly very well capitalized and can afford to leave his money parked for a couple of years or so and even lose some money in the meantime until the markets recover. Other less well funded traders or investors cannot adopt the same approach.
As I have written in the previous article, the future cannot be predicted as it does not yet exist and there are way too many unknown variables, not least of which being crowd psychology and the emotions of greed and fear and therefore nobody knows either where the bottom of the market is or how long the recovery will take. If I had to give an opinion I would say that the stock markets will not make new highs for at least 5 years.
Yours for bigger winners, more often
Phil Seaton
PS. Instead of trying to predict the future, why not join the increasing number of trend followers who are making money from being short the stock markets and sign up for a 60 day trial of the LS Trader system
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The question that we at LS trader are asked most currently is where we think the stock markets are headed and where we think the bottom of the market is. This is a very common question these days and it seems to be on everybody’s lips these days.
My personal view is that nobody knows and regardless of what fundamental analysis or technical analysis you use, the bottom line is nobody knows. There are a huge number of very smart people who try to use all sorts of research and indicators to predict where markets are going but the fact remains that it just can’t be done consistently enough to make it a worthwhile approach.
Subscribers to LS Trader or regular readers of my blog will know that I don’t put any weight at all in fundamental analysis, now do I think that many technical indicators have any value. Most of them when tested over historical data have no statistical validity and the reason for this is that they are predictive and are attempting to predict the future, which as of now does not exist.
Where does that leave us then? If we conclude that we can’t use technical analysis or fundamental analysis with any consistent accuracy, what do we do? Well, the fact remains that the only indicator of any value is the price. The price tells you everything about a market and represents the sum total knowledge of all market participants in that particular market.
The price is the indicator used in trend following and quite simply, you use the price to identify trends in the markets. As of now, the trends in most markets are down, be it stocks or commodities. This is true of both the long and short term trends.
Therefore, rather than trying to predict of guess where the bottom of the market is, traders should just notice that the markets are trending down and position themselves accordingly.
At LS Trader, our system identified that the stock markets were trending down again several weeks ago and we have been short ever since. How long will this downtrend last? We don’t know, nor do we need to. We just ride the trend until we get confirmation that the trend has ended at which point we exit.
Will we get out at the bottom? No, because trend following does not set profit targets and exit trades when or if such targets are hit and it does not try to predict the bottom of the market. It leaves the trades open until the market reverses a bit and then exits. This means that we must necessarily give back a portion of our profits but this is necessary to give the trend the maximum chance to continue and enable us to extract as much as possible from the trend.
For us here in the UK, the market that we seem to be fascinated with most is the FTSE 100. As I have written previously, this market was headed towards 3500 and that was an intermediate target that we had identified. This week 3500 was taken out and the market drifted lower, although it has been higher since. Will it go lower again? Who knows?
One thing that we can do to give us some sort of indication as to where we think the market may go is to identify key support and resistance levels on the chart. Looking at the FTSE, we can identify 3277.5 as the bottom set back on the 12th March 2003. This was the level that the FTSE was at following the technology crash and this proved to be the bottom of that bear market.
If the market does fall again to test this level, one would expect major support and buying interest from bargain hunters. This level also represents a low set back in May 1995 and should represent major support. If this level fails then we may well see a swift decline further to around 3000. If this happens we will review things from there.
This is though as I have written above, all speculation as the future cannot be predicted and nobody can consistently call the bottom of the market except in hindsight and it’s equally possible that the lows set yesterday at 3464 (March contract) were the bottom of the market. Time will tell of course but the main point is don’t buy in to all these people trying to predict the bottom of the market because the fact remains nobody knows.
Good luck in your trading
Phil Seaton
PS. If you want a way to simplify your trading and avoid all the noise and hype in the markets you can sign up for a risk free trial of the LS Trader system here.
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The Bank of England will probably cut interest rates to 1% at midday today. I expect that the nine-members of the Monetary Policy Committee will cut the bank rate by a further 0.5% to 1%. This will be the lowest interest rate since the Bank Of England was founded in 1694.
The Bank of England rate is currently 1.5% after the BOE reduced rates by 3.5 percentage points since October. In the US, the Federal Reserve has already reduced its rate to a range between zero and 0.25 percent. I expect that he European Central Bank will keep its rates on hold at 2 percent today.
The plight of the pound still looks bleak even though we have seen some relief rallies over the past week or so. Currently the long term trend is down for the Pound and this looks as though it will remain the case for some time to come. Certainly the market is looking for rate cuts and these to an extent will already be priced in to the market.
The March contract hit a low of $1.3492 on the 23rd January and this level may well provide support should the market decline to this level. On a longer term chart this level also produced support back in 2002. If support at $1.35 fails then a decline to $1.25 may be seen.
Further out the Bank Of England may continue to cut rates to near zero in line with the US. This is only likely to send the pound lower as interest rate differentials is a key factor to currency trading.
The pound has fallen 16% against the Euro and 27% against the US Dollar in the past year and is also down 32% against the Yen. The short Pound/Yen trade was our second best trade of the year in 2008 as we caught most of the decline.
Currently we have no trades on the Pound against either the Yen or the Dollar as we wait for the next signal. As the long term trend is down, I don’t see us having any buy signals on the Pound any time soon.
Good luck in your trading
Phil Seaton
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What the January S&P Barometer says about the stock markets this year.
The January Barometer states that as the S&P 500 goes in January, so does the rest of the year. This indicator has had only 5 significant errors in the past 58 years and has a 91.4% accuracy ratio over the same period!
The 5 times that this indicator was wrong coincided with some fairly major events.
1. In 2003, the anticipation of military action in Iraq
2. 2001 saw 2 interest rate cuts in January and of course September 11th.
3. In 1982 we had the start of a major bull market
4. 1968 and 1966 were both affected by Vietnam
In January last year the S&P 500 was well down and we had a subsequent bear market, which we are still in. The current contract in the S&P 500 is the March contract and this opened the year at 902. It ended the month on Friday at 822, almost 9% lower for the month. This indicator suggests that the markets will also end 2009 down for the year as the bear market continues.
At the time of writing this, S&P 500 futures are further down at around 809. As I have written before, round numbers have a tendency to produce support, even it’s just from a psychological perspective, and therefore we may see some support at 800. This level is also quite visible on the chart as buyers have come in at around the 801 level several times recently.
If this level can be cleared then we may well see a move lower to around 750. Support should be seen at that level but we’ll have to review things if and when we get there.
As I have written many times before, everyone still seems focused on where they think the bottom of the market is and when they should buy. It’s quite amazing really that you rarely hear people say “the market is going down and I’m going to sell it short”. People seem to want to fight the tide instead of just go with it. This is of course why trend following works. You simply identify a trend in the markets and jump on board until the trend reverses.
As subscribers to my LS Trader financial spread betting system will know, we were short the stock markets for a big part of 2008 having first shorted the markets in January. We are again short some of the stock markets right now and will be for as long as the markets continue to trend lower. If you want to learn how to make money by shorting the stock markets you can subscribe to the LS Trader system here
There is an upward bias always in the stock markets as people buy in to the myth of buy and hold. This strategy is all well and good if you are in a multiyear bull market, but if you buy and hold through a multiyear bear market you will be in trouble. I believe this bear market has quite a way to run and I don’t see us having any buy signals in the stock markets in 2009.
All things considered it is unlikely that we will such much upside movement in stocks for the foreseeable future. There will most certainly be some bear market rallies along the way but I don’t see us having any buy indicators for stocks any time soon.
Good luck in your trading
Phil Seaton
PS. Click here to sign up for the LS Trader system. The system comes with a no quibble 60 day unconditional money back guarantee.
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It’s now around 8.20am on a Monday morning and my trading for the week is already done! Now all I do is wait for the weekend and can go about my business. I don’t have to worry at all about what the markets do as I know that most of what goes on in the markets on a day to day basis is just noise. My stop losses are in place to protect my trading capital from any losses and also to take me out of my profitable trades if the market reverses.
How is this possible? Well, the system that I created, the LS Trader system, is a medium to long term trend following system which only takes around 15 minutes each week to follow. This means that all we do is open trades up on a Monday morning, add some stop losses and then move the stop losses on trades that we had open from previous weeks.
Sometimes we will get stopped out after a day or two if the market moves against us and other times we could be in trades for several months if some nice trends develop. Last year there were several markets that trended very well and we were in numerous trades for more than 100 trading days (assuming 5 trading days per week, that’s more than 5 months for a single trade!)
To use the LS Trader system, all you do is log in to your account at the LS Trader website (once you have signed up) and go to the trade bet calculator page. On this page there is a full list of all the markets we trade and details of all the trades we are currently in as well as all the trades we are opening this week.
You then go to your spread betting platform, such as IG Index and go to the market that you want to open, check the current market price, enter this figure in to the bet size calculator that we provide. You then enter how much money you have to trade with and the calculator tells you exactly how much to bet per point. It’s so simple. The software also shows you exactly where to put your stop loss.
All in all this is a very simple process which takes on average around 15 minutes per week. This week is a busy week as we have 9 new trades to open, so it actually took me a few minutes longer than normal.
To follow this system you don’t need to know anything about trading or the financial markets and you certainly don’t need to be reading newspapers or watching TV trying to figure out what’s going on in the markets. There are no charts that you have to read or data feeds that you have to subscribe to.
We’ve actually made trading the markets very simple even for the complete novice. And you can do it all from the comfort of your own home on your pc in just a few minutes per week. You don’t even need to phone a broker as you can execute all your trades instantly online. Best of all, as what we are doing is trading the markets via financial spread betting all our profits are tax free! Currently spread betting is tax free in the UK.
The bottom line is trend following works. It’s been around for several decades and has always and will always work. It takes all the guess work out of trading as it has simple specific rules to follow which lead to capturing big profitable moves in the markets.
There are numerous top traders who use trend following as their strategy to consistently beat the markets. Now, we’re making a very powerful version of this trend following strategy available to you and we’ve done all the work for you. All you have to do is simply copy our trades. How easy is that?
If this sounds like something of interest to you, and after all why would it not be as who does not want to “work” for around 15 minutes a week to produce a tax free income, then simply click here to visit the LS Trader website and sign up.
Good luck in your trading
Phil Seaton
PS. Click here to sign up for the LS Trader system. The system comes with a no quibble 60 day unconditional money back guarantee.
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The LS Trader system is a medium to long term trend following system that is ideally suited to be used via a financial spread betting platform such as IG Index.
I created this trading system several years ago and began trading it on my own account in 2002. The results were hugely impressive from back testing and that gave me the confidence to trade it with my own funds. Once real trading began, it was evident that the system performed very well in real trading as well as simulated trading.
Before long the requests came in from family and friends to have access to the system to either enable them to trade the system themselves or have me trade it for them. These accounts all became profitable and at that point I decided I would make a website and give people the chance to copy my exact trades as and when I made them.
This website was launched in January 2007 under the name of The Winning Trader system. 2007 and 2008 were both very successful years and towards the end of 2008 it was evident that I could not realistically continue to run the site without any (up to this point I had run the trading system and the website by myself) help as the subscriber base was growing rapidly. At this point I teamed up with a close friend of mine, Robert Stewart, and we created an updated and improved website, with extra functionality to handle a larger number of subscribers.
In late 2008 we launched the LS Trader system and before long the subscriber base was growing rapidly again as word of mouth recommendations spread based on the success of the system. The new website works extremely well with Robert running the site on a day to day basis and dealing with customer support which frees me up to work on the trading side.
2008 was a record year (it was a great year for trend following systems in general as there were some great trends across several markets throughout most of the year). The results for 2008 for the LS Trader system at the end of the year were staggering with a gain in 2008 of 1504.1% in 2008 alone.
Now, it should be made clear at this point that 2008’s returns were exceptional and well above average. The system has actually averaged around 165% compound annual growth rate since back testing began in 1983(approximately 26 years). Remember that this is all tax free if used on a financial spread betting platform as spread betting in the UK is currently tax free.
So far in 2009 the results have been fairly flat as many of the trends came to an end in late 2008 but some new trends started to emerge last week and we got in to some nice profitable trades in the stock index markets and currency markets. This week there are 9 new trades so it is an excellent week to get started.
You can sign up to the LS Trader system here. The system comes with an unconditional 60 day money back guarantee so you can sign up for the system and paper trade it if you feel more comfortable doing so to prove the effectiveness of the system before staking real capital.
Once inside the member’s area, we have numerous guides which cover everything from how to open a spread betting account to how to place your first trade online. It’s all covered. We even have an online helpdesk which has a large database of FAQ as well as offering the facility to email us for support should you need it.
So, what’s in store for the markets in 2009? Well, it’s a good question and not one that anyone can answer with any degree of certainty. That’s why we use trend following as the basis for our system as it means that we don’t have to guess or try to figure out what the markets are going to do, we just wait for a trend to develop and then jump on board for the ride, letting our profits run and grow in to large profits.
Whatever happens in 2009 it will no doubt be interesting due to the high level of volatility in the markets at present, but no doubt there will be some big trends along the way. The question is, will you be one of the growing number of LS Trader subscribers in a position to take advantage of these trends when they arrive?
Good luck in your trading
Phil Seaton
PS. Click here to sign up for the LS Trader system. Remember the system comes with a 60 day unconditional money back guarantee.
Filed under financial spread betting by
Welcome to www.PhilSeaton.co.uk .This blog is all about financial trading and the strategies and beliefs that I have discovered over the past decade or so that lead to financial success in the markets.
There are many different styles, methods and systems that traders use in trading the markets and my aim on this site is to explain the benefits and pitfalls of many of these methods. There is so much conflicting information and what I would call misinformation in the marketplace on what is required to be a successful trader so my aim is to help you navigate this path successfully and avoid any unnecessary and unprofitable detours!
Over the weeks and months ahead I will post my thoughts on the financial markets and what I think may be on the horizon. It is important at this point to state my belief that the future cannot be predicted as there are simply too many variables and unknowns and the fact that as of now the future does not exist, but by looking at market trends in the markets and certain support and resistance points on the charts, a trader can get a good idea of what may be ahead.
Over the years I have read a vast amount of books that are available on the markets and have specifically made a point of studying successful traders and in doing so look for common denominators that enable these superior trades to step ahead of the crowd and achieve consistent returns in the markets.
Backed with all this information I have vigorously researched and tested virtually every trading system and or indicator and have found what is reliable and what is bogus. I have coded hundreds of different systems and rules and run literally hundreds of thousands of backtests over a long period of market data.
My aim when I started this was to approach the markets with a blank canvas and not take anything on hearsay, but to test it out and find out through experience what works and what does not work. This has enabled me to create an extremely powerful trading system which I myself have traded for several years.
I hope you enjoy and benefit from my articles on this blog site and please feel free to leave any comments or ask any questions.
Good luck in your trading
Phil Seaton
PS. I am offering a few places for one on one trader coaching. Click here to learn more.
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