What a real roller coaster ride its been in the markets recently! And what a lesson its been for all of us to watch our exposure and make sure that we dont lose any money that we can't afford to.
There have been some stories on the ADVFN bulletin boards of late of people losing all their trading capital: a friend-of-a-friend recently decided to start trading with £50,000 and now hes only got £2,000 left! This is a big warning not to use all the leverage available in your spreadbetting account.
Perhaps one of the main points to have come out of the volatility and the falls is to realise that it can be quite hard to sell - or get out of stocks - if you have big amounts.
Those trading AIM stocks or smaller caps should make themselves aware of the Normal Market Size (NMS) in shares. This can be found on the quote page on ADVFN for all shares and is the maximum amount of shares market makers are obliged to let you sell at the quoted price. If you have 10,000 shares in a share with an NMS of 1,000, you may find yourself in the position of watching the stock tumble and being unable to sell all of them. Obviously it's a terrible thing to watch your money evaporate and be unable to do anything about it. Market makers may well deal in amounts over the NMS but will often charge you for a much wider spread. Also, if you try and close out a large spreadbet, you may find your spreadfirm unable to do it because of a lack of liquidity at the time.
ADVFN's level 2 quote pages tend to show the exact amount of shares a market maker is prepared to deal in and this is where having a level 2 screen comes in very handy.
Because of the high amount of trading going on, some broker sites struggled to keep up and some went slow or went down. So generally, you should be aware that in a sudden falling market you might not be able to sell something straight away.
I have no idea whether this was just a correction or whether the markets are likely to continue to fall - It certainly looks like a correction at the moment with stocks going back up. But for the time being, I feel that Ive gone and done the sensible thing: Ive reduced all spreadbetting exposure, which leaves plenty of leverage and cash on the side in case of major falls. Then, I can pick up some bargains. However, I have held on to all my strongest smallcap shares because I take a reasonably long-term timeframe on these.
It's certainly been a difficult time but we should all learn from what happened and be ready to take action and close out positions if need be. I have quite a few stocks that have been doing well despite the recent tumble. Renold in particular has been going up strongly with a restructuring in place. Also, star awards must go to Elementis, Morgan Sindall and Keller