The September financial spread betting newsletter is now available. If you are already on our list the newsletter will be sent to you automatically by email. If you are not already on our list (if not, why not?) please enter your email address in the box at the top right hand corner of this page and we will send you the newsletter instantly by email.

In this month’s issue we take a look at the markets that have been moving of late with particular focus on interest rate futures, stock indexes, currencies and some commodities.

We’re now entering what is seasonally the weakest month of the year and September is on a percentage basis the biggest losing month for the S&P 500, Nasdaq 100 and Dow 30. Considering that the markets are up for this month already there could be some good opportunities for going short stocks and making money from the downside if stocks do once again break lower later this month.

The long term trend for stock indexes is very much down and there is plenty of good upside resistance so although we may see some strength in the short term the odds favour lower prices for stocks in the medium to long term.

Good trading

Phil Seaton

P.S. To receive each month’s financial spread betting newsletter by email simply enter your name and email address in the box provided in the top right hand corner of this page for instant access.

P.P.S. Find out more about our financial spread betting system for stocks, commodities and forex by clicking here.

Today we’re going to look at the importance of having and following a spread betting system in order to ensure that we catch the big winning trades. We’re going to look at a real world example to illustrate the importance on this and how not following a system negatively affected one of the world’s top traders. In our last post on Stanley Druckenmiller, we commented that Druckenmiller had decided to close his hedge fund due his inability to make outsized returns over the past 3 years which he put down to very unfavourable market conditions.

One of the factors that have negatively impacted his performance this year is that, by his own admission, he missed the move in treasuries. Since treasuries have been the biggest and best trending markets this year that has been a fatal mistake. This does highlight a very important lesson for traders and that is that you must have a trading system, or in our case a spread betting system with specific trading rules and the discipline to follow it consistently.

A good spread betting system should include each of the following:

• Which markets to trade
• When to enter a trade
• When to exit a trade
• How much to stake on each trade
• How to know when to stay out of a market

Once you have a spread betting system that incorporates the above rules, all you have to do is follow it consistently. My guess is that either Druckenmiller was relying on discretionary reasons for entering trades rather than specific rules, or his system indicated an entry but he chose to skip the trades because he did not like them for some reason.

This is in fact where many traders fall down and the mistake can be fatal, as seen by the negative impact that skipping these trades has had not just on Druckenmiller’s performance, but on him emotionally as well and these factors may have led to him calling it a day.

In reality, nobody can be sure when entering a trade whether it will be successful or not and this is why once you have a spread betting system it is important that it is followed consistently. One can never tell in advance when the big moves are going to come and if you skip a trade for any reason and it goes on to be a big trend and a big winner you are in trouble.

One of the underlying principles of successful trading is that it is always better to risk taking a small loss than it is to risk missing a big winning trade. If the spread betting system used is good then only a small percentage of trading capital should be used for each trade, for example 2%.

If one is only risking 2% equity per trade then taking a loss of that amount is not too painful. Conversely, if a trader misses a trade that goes on to be for example a 10 to 1 winner, as may be the case in the current treasury trades then that equates to 10 x 2% of missed opportunity. That is far worse than risking the initial 2% loss. It is compounded if there are a handful of correlated markets such as in the case of treasuries, the 5 year note, 10 year note and 30 year T bond. Missing out on one trade is bad but missing out on all three is fatal. That is why we say it is always better to risk a small loss than it is to risk missing a big winning trade.

Because the markets only trend around 40% of the time all trend following systems will have more losing trades than winning trades. Therefore to make money you must have the big winning trades and ensure that you catch them when they come. If you don’t, you have no way to pay for the losing trades. This is why you must have specific rules to enter trades and rules to ensure that you don’t miss any trades.

Our spread betting systems, whether it is our forex system or our primary financial spread betting system for multiple market sectors both include rules to ensure that big trends are not missed and that trades are allowed to run to extract the maximum profit potential of each move. So, the question to ask yourself is “am I using a good system and do I have the discipline to follow it consistently?”. If you can answer yes to both then you are on the road to trading success.

Until next time, good trading

Phil Seaton

PS. You can find out more about our financial spread betting systems by clicking here.

This week’s financial spread betting update is now available and can be read by clicking here. There is a raft of economic data coming out this week so we may see some decent moves in the markets. In the US, the latest unemployment figures are due to be released on Friday and that will likely underscore the recent signs of a slowdown for the world’s largest economy.

Today is Bank Holiday in the UK so trading is a little quiet this morning but will pick up later when the US markets open. Already we have seen the bank of Japan ease policy, with little impact being seen on the Yen. If anything traders may have been looking for something more aggressive from the BOJ and the initial small move higher for the Yen this morning has already faded away.

In this week’s spread betting update we take a look at the S&P 500, which fell to new 7 week lows last week before a recovery on Friday. Good support has come in at 1038 and that will be the level to watch this week to the downside. A close below 1038 may trigger further selling. To the upside resistance remains in place at 1100. The trend remains down for stocks.

Last week saw some decent moves in a few commodity markets with energies reversing off the lows in a counter trend move. We also saw gold and the other metals move higher with the biggest gainer being Silver, which advanced 5.73% for the week.

The focus will also be on interest rate futures, which having hit new highs on Wednesday sold off in to the close on Friday. The trend is still bullish for this sector with the markets currently holding above support.

This week’s financial spread betting update begins with:

Stocks continued to drift lower for the week but recovered somewhat on Friday but the trends remain down. Commodity and currency markets remain largely undecided on future direction as the general theme of volatility continues across many markets..….continue reading by clicking here

Good trading

Phil Seaton

PS. You can sign up for a risk free trial of our proprietary financial spread betting system by clicking here. The system comes with a 30 day no questions asked money back guarantee and covers our spread betting strategies for each of the stock, commodity and forex markets discussed above and many more.

There’s been a fair amount of activity in the markets since our last post of spread betting strategies for stocks and commodities. Today we’re going to have a look at both gold and the S&P 500 as interesting things have been happening in both markets.

In our last post of spread betting strategies we referred to last Friday’s close at 1070.3 (September contract) and suggested that the S&P 500 was headed lower and would likely test support at 1061.8 before moving lower still towards 1000. We only had to wait until Tuesday for 1061.8 support to be taken out and ended up with a decent down day which also took out 1050, and reached new multi-week lows at 1044.3 before a minor recovery.

Yesterday we saw new 7 week lows at 1038 before the lows were rejected and the market recovered to close at 1054.6, which is roughly where the market is now at the time of writing. Clearly there is some support in the market around the 1040-1050 area as the long lower shadows of the last 2 days candles show the lows are being rejected. However, the long and short term trends are still very much down and if short term support can be cleared then a move down to test 1000 will likely follow. Therefore we’re still only using short spread betting strategies in this market and will continue to reject longs.

Gold cleared the resistance level at $1222 last week that we have been writing about for some time and the market pushed up to $1239.5 before we saw a big move lower intraday on Tuesday down to $1211.70. We had seen prior resistance at this level so a change of polarity came in to effect and we saw rejection of the lows and buying came in all the way back to a close at $1237.5. This was a bullish candle on Tuesday and that momentum continued higher on Wednesday to $1243.3. That was the highest price for Gold since the 1^st July.

Therefore the short and long term trends are both bullish for gold and we may see a push further towards new all time highs. Any weakness should be met with buying around the $1211 support area. We’re therefore only using spread betting strategies from the long side in this market.

Until next time, good trading

Phil Seaton

PS. You can find out more about our financial spread betting systems and spread betting strategies by clicking here. Our system comes with a full 30 day money back guarantee.

Last week legendary hedge fund manager Stanley Druckenmiller announced his retirement from the investment world and stated that he was going to close down his Duquesne hedge fund. Druckenmiller was part of the team (along with George Soros) that broke the Bank of England in 1992 when they bet that the British Pound would fall against the Deutschmark and racked up profits on the day of around $1 billion. Druckenmiller cites his reason for retirement as his inability to make out-sized returns over the past 3 years due to very unfavourable market conditions.

Now, I don’t know what his issue was in 2008 as our spread betting system had a record-breaking year and there were a lot of very good trending markets across many different market sectors and this enabled our trading system to have its best year on record. 2009 and 2010 I can understand though as market conditions have been tough for everyone due to excessive volatility and global uncertainty.

The question is, what does this say about the future of hedge funds and the future of trend following? Whilst many believe that this is a bad sign if someone of the knowledge and experience of Druckenmiller has struggled to make money I actually take the opposite view. My belief is that Druckenmiller quitting is actually a great sign for future performance of hedge funds and especially trend following systems and funds and my reasoning is as follows:

All trading systems regardless of what they are based on will go through periods of good performance and periods of lesser performance. This is down to the nature of the markets and the fact that no strategy can be effective in all market conditions. Trend following systems will suffer during periods of excessive volatility and non-trending markets because they rely on good trends to make profits.

What we have seen in our own research and this is also quite well known amongst experienced traders and fund managers is that investors, especially amateur investors generally tend to bail out at the worst point, usually near the bottom of the equity curve. This is usually due to a period of poor performance exceeding their threshold for what they can handle.

At a higher level, the fund manager, also feeling under pressure from his investors and due to the need of better performance also seeks to change his strategy after a prolonged period of under-performance. Once the pain reaches a certain level amongst investors and fund managers, Druckenmiller quitting is evidence that we are at or very near that point we will then likely see mass withdrawals from hedge funds.  This will mean that moving forward not everyone is chasing the same moves and many will then use different or even opposing trading strategies. This will very likely free the markets up again and return them to a strong trending phase.

When someone of the calibre of Stanley Druckenmiller calls time on his trading due to how tough he is finding market conditions, that to me telegraphs the fact that we may be near the bottom of the equity curve and that it is in fact a great time not to quit, but to begin.

The markets essentially do one of two things, they either move directionally, i.e. trend or they move sideways, i.e. consolidate. In our trading research we have seen without doubt that following a prolonged period of one, a good period of the other follows. This is in fact quite logical and can be seen in many different markets. In 2008 for example, there were many out-sized trends in many market sectors and what has followed since has been a brutal period of consolidation.

It has always been my belief, based on my own research, that following a brutal consolidation phase, the likes of which have not previously been seen to the extent that are currently seeing, that an excellent period of trending markets will follow. These large trends could be either up or down. Trend following systems don’t care whether they are buying or selling, they can make money in up or down markets.

Now, whilst it would be foolish to say that Druckenmiller’s inadvertent timing is perfect as a contra-indicator, I wonder if around a year or so down the line we can look back and say that Druckenmiller actually came out near the bottom of the performance curve. My bet is that he won’t be far off and the next few months will tell the tale. I also would not mind betting that he makes a return to the markets himself at some stage in the future.

Until next time, good trading

Phil Seaton

PS. You can find out more about our trend following financial spread betting systems and spread betting strategies by clicking here. Our system comes with a full 30 day money back guarantee.

This week’s financial spread betting update is now available and can be read by clicking here. This week we continue our focus on spread betting strategies for gold and the S&P 500 as well as looking at other markets of interest.

Last week we wrote that both gold and the S&P 500 could be setting up for decent moves and that they would be worth watching in the week ahead. Both markets did go on to make decent moves, gold broke out of the trading range that it had been in, clearing resistance in the process and the S&P 500 also made a break to the downside.

Commodity markets were mixed on the whole with decent moves to the up side in the soft commodity markets, especially Coffee and Sugar as well as gains for the cattle markets. Energy markets did not fare so well, with a new move to the downside for Crude oil, following the weakness that had been seen in heating oil and no leaded gasoline the week prior.

Currency markets were also interesting, with the Euro resuming the long term downtrend and a general move away from the riskier currencies towards the haven currencies, Swiss Franc, Japanese Yen and US dollar.

So far this morning the markets have been fairly quite with a mild continuation of the trends from last week. The week ahead could be an interesting one and the stock markets may be building up for a big move.

This week’s financial spread betting update begins with:

Stocks moved further to the downside, reaching 4 week lows in the process having failed once again to clear short term resistance. The US Dollar continued its recent rise against most of the major currencies, whilst commodity markets were mixed..….continue reading by clicking here

Good trading

Phil Seaton

PS. You can sign up for a risk free trial of our proprietary financial spread betting system by clicking here. The system comes with a 30 day no questions asked money back guarantee and covers our spread betting strategies for each of the stock, commodity and forex markets discussed above.

Today we are going to focus on some spread betting strategies using the 200 day moving average  and we will use the S&P 500 for our example.

The first thing to do on any market is to determine the direction of the long term trend for the market that you are looking to trade. Once you know this, you then select your spread betting strategies in the direction of the long term trend only and ignore signals in the opposite direction.

The reason for doing this is that counter trend moves have a much higher probability of not developing in to a good trend and moves against the trend are generally shorter in duration. In this case we are looking at the S&P 500, which is currently in a long term downtrend.

Each trader will have their own ways of determining the trend and this can be based on moving averages or any one of a number of indicators. One of the most popular indicators for determining this is simple moving averages. The most common time period for longer term trend analysis is the 200 day moving average. If the market is above the 200 day moving average, then the market would be in an uptrend and if below then it is in a downtrend.

I have developed my own proprietary indicators for determining the long term trend and each trader can do their own research to see which indicators and time periods they prefer. The 200 day moving average is widely used and is a good place to start, especially as many traders look at it.

On the S&P 500 September contract, the 200 day moving average is currently sitting at 1107, so as the market on Friday closed at 1070.3 this is below the 200 day moving average and the trend is down. Therefore, for the best chance of success, use only spread betting strategies from the short side.

In our last post on spread betting strategies for the S&P 500, in addition to observing the long term trend we also pointed out that the market was struggling with resistance from the 200 day moving average and the 1100 level. Since then the market had another go up towards the 1100 level and failed, moving back towards the support area at 1165 and even moving below that briefly.

Therefore, the short and long term trends are down so the odds favour lower prices in this market for now. Friday’s close at 1070.3 was a new low close for 4 weeks and this indicates short term weakness. For the short term, Friday’s lows of 1061.8 may provide support but if support here fails then we may see a move lower towards the 1000 level.

Until next time, good trading

Phil Seaton

PS. You can find out more about our financial spread betting systems and spread betting strategies by clicking here. Our system comes with a full 30 day money back guarantee.

Today we take another look at spread betting the S&P 500 and some spread betting strategies that can be used in this market.

As we have been writing for quite some time now, the S&P 500 remains in a long term downtrend so we are still only using spread betting strategies from the short side.

The important things to look at in this market at present are the direction of the long term trend, which is down, and the failure for the market to clear strong resistance at 1129. We have been writing about the importance of that particular resistance level for a long time and the market’s behaviour over the past couple of weeks has confirmed the importance of that level.

Resistance at 1129 has been tested on numerous occasions and each time buying has dried up and sellers have taken over and this culminated with the steep sell off last week. Since then the market has found some support but has not been able to recover.

On the longer term charts using the weekly timeframe we got a bearish engulfing pattern, which suggests that the market may move lower again in the direction of the trend. The highs of that pattern should also provide some resistance at 1127.5, just below the major resistance at 1129.

This week has so far seen the market move higher from a support area around 1065 but fail to clear the 1100 level. As we have mentioned before, 1100 was previously providing good support for the market but once that support failed we get a change of polarity so that old support becomes new resistance.

Therefore, in the short term we have resistance at the 1100 level and the market has tested that level unsuccessfully in each of the last 2 days. The market is also below the 200 day moving average and this may also provide some resistance. Currently the 200 day moving average is sitting at 1107.

In summary then, the long and short term trends are down for the S&P 500 and there is resistance from 1100 to 1129. There is also some support around 1065. These are the levels to watch over the next few days, but whatever happens I won’t be buying this market at any time during the next few weeks. Longer term I still believe that this market is heading substantially lower but we’ll have to wait and see.

Until next time, good trading

Phil Seaton

PS. You can find out more about our financial spread betting systems and spread betting strategies by clicking here. Our system comes with a full 30 day money back guarantee.

This week’s financial spread betting update is now available and can be read by clicking here. We cover both markets that have been the focus of our recent series of spread betting strategies, gold and the S&P 500. Both of these markets could be setting up for decent moves and will be worth watching this week.

It’s been another volatile week for the markets and there have been decent moves in stocks, commodities and currencies. We’ve also seen a large move in the VIX, which is a measure of volatility, with the VIX rising by 20.7% during the past week.

Once again, the resistance level at 1229 on the S&P 500 held firm and stocks finally moved lower from here, breaking out of the recent trading range and resuming the longer term downtrend. As of Last Friday’s close, everything is pointing to lower levels for stocks at present but of late Monday’s have been fairly strong so we may have a cleared picture for the week ahead after tonight’s close.

Interest rate futures continue to do well, with new contract highs seen across the board. From a trend following perspective, interest rate futures have been the best trending sector for quite a while with a steady continuous uptrend seen. We’ve been riding this trend higher since the initial breakout back during the first week of May.

This week’s financial spread betting update begins with:

Stocks made a breakout to the downside, in the direction of the long term trend and the US Dollar rose against the major currencies, reversing the recent trend..….continue reading by clicking here

Good trading

Phil Seaton

PS. You can sign up for a risk free trial of our proprietary financial spread betting system by clicking here. The system comes with a 30 day no questions asked money back guarantee and covers our spread betting strategies for each of the stock, commodity and forex markets discussed above.

Today we are bringing you an update on spread betting strategies for the S&P 500. This market has continued to be of great interest to many traders as it is the primary stock market from which the other stock markets take their direction. The only stock index not following the S&P 500 at present is the German Dax, which continues to be in a long term uptrend. That said, a major move down on the S&P 500 will very likely drag the Dax down with it.

In our most recent post on the S&P 500 2 days ago we wrote that the market had held within a range from 1127.5 to 1102 and a break out from that range could give some decent movement in the direction of the breakout. We also mentioned that we had a rising wedge pattern that added weight to an eventual breakout and that we were therefore still favouring short spread betting strategies for a breakout to the downside, especially if the market moved back below the 200 day moving average and the 1100 support area.

We have since got that breakout to the downside with the S&P 500 moving back though the 200 day moving average and through the 1100 support area, making a new low for this move at 1070.50 during yesterday’s trading. This was the lowest level for the S&P 500 in 3 weeks and we still have our next target to the downside at 1050.

What is of great interest in this market is that the major resistance level that we had been writing about for several weeks at 1129 held firm in spite of numerous attempts to break though, all of which failed. This means that 1129 may be a significant high for this market and that we remain in bearish mode as long as the market stays below this level. Because 1129 failed then the market is still making lower highs and this is also bearish.

If the market does fall to 1050 and support there fails then we will be looking for the lows formed on the 6^th July on the September contract at 1003. For now we will continue to trade the S&P 500 with the trend and that continues to be to the downside.

Until next time, good trading

Phil Seaton

P.S. You can find out more about our financial spread betting systems and spread betting strategies by clicking here. Our system comes with a full 30 day money back guarantee.

P.P.S For those that are interested in spread betting forex markets we now have a dedicated forex system. You can take advantage currently of a 30 day free trial to our forex system here