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.

Today we are going to discuss spread betting strategies that can be used ahead of a major news item. Later today the second quarter US GDP numbers come out and we get asked frequently about which spread betting strategies we use ahead of such major news announcements.

The answer is actually quite simple. Since we are technical traders and follow mechanical trading rules we are either already in a trade if we want to be in it, or know where we will get in should our entry criteria be hit. We don’t base our trading decisions on trying to predict the news items, or how the markets will react to the news. We simply follow the trend.

Since our spread betting system is a weekly system, we don’t enter trades immediately before, during or after a news item as we are already in the trades that we want to be in. We don’t therefore enter again until the following Monday, using the closing price on Friday as our entry should the price action in the immediately preceding week trigger a buy or sell signal for us. We therefore use spread betting strategies based on a weekly timeframe and don’t concern ourselves with intraday news.

Trading systems are either predictive or reactive. We don’t get involved in trying to predict, but rather react to price action. We know already where we want to get in and where we want to get out based on the price and chart structure. The rest is irrelevant. Should the market exceed the levels that we have predetermined will be optimum for entry, either for long or short trades, then we will enter. If the market does not exceed those levels then we stay out.

Let’s just look at what is expected today as far as the news is concerned out of interest, although we won’t be basing any of our spread betting strategies on it. Economists are expecting that US GDP growth for the second quarter will come in at 2.5%. I expect that it may disappoint and come in lower than that, possibly closer to 2%. If that does happen then we may see a reaction to the news that moves stocks and currencies considerably.

We have already covered this week that the long term trend is down for stocks and have identified a couple of key resistance levels, which are 1118 and 1129 on the September S&P 500. As long as the market stays below those 2 levels then the short and long term trends will remain down and the odds favour lower prices.

Yesterday we got a close below the important 1100 level at 1097 on the September contract and also below the 200 day moving average, which many traders look at. We also had an evening star pattern form on the S&P 500 earlier in the week which is bearish for the short term so various things point to lower prices to come.

What this really boils down to is that you should have a trading plan in place ahead of any news items or price reactions and know exactly what you are going to do and why. Once you have your plan in place then you stick to spread betting strategies within that plan and trade accordingly.

There are many traders and economists that try to predict news items and how the markets will react to the news item depending on what the numbers are. It’s far better in my opinion to just focus on the most important indicator of all, which is the price itself. Then all you have to do is follow the price and the trend.

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.

This week’s LS Trader financial spread trading update is now available and can be read by clicking here.

During the past week we saw an initial continuation of the stock market rally followed by failure to move higher at resistance and then a sharp reversal. We look at what may happen next for the S&P 500 focusing as ever on the long term trend and the impact that major moves from the S&P 500 on other markets.

As usual in addition to our stock market focus we look also at commodities, in particular Gold and Crude oil and the key levels to watch out for in both of these markets. We also look at the continuing rally in interest rate futures as traders seek safe haven investments.

On the subject of safe haven investments, the Japanese Yen has rallied to new highs for the year and the Swiss Franc has also risen to its highest level in almost 6 months, whilst the US dollar has continued to slide. Recently the dollar has gained when stocks have fallen and that inverse relationship seems to be abating at present as the US dollar index has fallen to new 10 week lows. This decline has been to the benefit of the Euro, which briefly touched $1.30 last week. We wrap up our forex focus with a look at the British Pound.

This week’s LS Trader financial spread trading update begins with:

The past week saw the recent stock market rally run out of steam and reverse sharply on Friday, which may be a sign of things to come.….continue reading by clicking here

Good trading

Phil Seaton

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

Continuing our focus on the S&P 500 and different spread trading strategies that can be used on this market, today we are looking at the resistance from moving averages. We tend to focus more on the S&P 500 than other stock indexes as the S&P 500 is the main stock market and the other indexes tend to take their lead from this index.

Yesterday I wrote that the S&P 500 was pushing up towards resistance at the 200 day moving average, which also happens to be at another round number, the 1100 area. The high in the market yesterday on the August S&P 500 contract was 1099, where the market reached resistance and pulled back to close at 1091.1.

Although I’m not a huge fan of moving averages (my research and testing shows that they are not nearly as important or useful as people think and I’ll write more on that another time) one average that is focused on by many traders is the 200 day simple moving average, and on my charts that is sitting at 1101.

What we saw in yesterday’s chart was not a reversal pattern but more a sign that the rally was running out of steam and this carries a bit more significance when we see this kind of formation happen at resistance. That said, I don’t think that the 200 day moving average is particularly huge resistance in and of itself but added to the 1100 level this increases somewhat.

If this resistance at the 200 day moving average holds then what will be important is that this will be yet another lower high in this market from the highs of this year and the prior bull run, formed on the 26^th April. A series of lower highs over a period of time (the longer the better) is a classic set up of a bear market. Therefore, the current resistance level is worth watching closely for short term direction when deciding which spread trading strategies you are going to use on this market.

A far more important level in my eyes is the high on the 21^st June 2010 at just shy of 1130. If the market can clear the 200 day moving average and 1100 level, the 1130 level will be the next target for the bulls. If that level is cleared then we may be looking at a different scenario for the intermediate term but for now things are still bearish and the long term trend is down.

Overall I still favour spread trading strategies from the short side only at present, not just in the S&P 500, but in all stock indexes, and am not looking at any longs as that is counter to the long term trend. Successful spread trading is all about turning the odds in your favour as much as possible and one strategy for this is to only take trades in the direction of the long term trend and reject counter trend moves.

Good trading

Phil Seaton

PS. To find out more about the LS Trader financial spread trading system and our proprietary spread trading strategies for stocks and commodities please click here.

It’s now around 8.20am on a Monday morning and my financial spread betting 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 financial spread betting 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 financial spread betting 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 trading 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 30 day unconditional money back guarantee.

Welcome to my new financial spread betting blog .This blog is all about financial spread betting and the spread betting 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 spread betting 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 spread betting 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. Find out more about my financial spread betting system and spread betting strategies here