Robbie Burns
Robbie Burns's columns :
05/09/2006Unexpected market statements: Interserve and Homebuy
26/07/2006A Sunny August Ahead?
10/07/2006Beware of the Penny Share
27/06/2006AIM Shares & ISAs
07/06/2006Beware of Stop Losses
19/05/2006Investors Feeling Flat
03/05/2006Go Away in May?
20/04/2006Spread Betting >>
01/03/2006My Quarter-of-a-Million Child Trust Fund
09/02/2006Time to stop on stop losses?
23/01/2006Gambling on the Indices
04/01/2006SECTOR PICKS FOR 2006
12/12/2005Will You Be Ho-Ho-Hoing Your Way To The Bank This Christmas?
28/11/2005Oil be Blowed!

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Robbie Burns – The Naked Trader

Robbie has been trading full-time since 2001. His book "The Naked Trader" (which also has useful information on how to use advfn) has become one of the biggest-selling finance books, reaching the top 150 books on Amazon - order it here. Trades made for Robbie's website have amassed profits of more than £300,000. You can read about his buys and sells daily at www.nakedtrader.co.uk.


Spread Betting

20/04/2006

Spread betting is just great. If you haven't got an account you should think about opening one. It's so easy to back a share to go up ... or down. No commission, no stamp duty, no tax. Of course you have to pay a bit of a wider spread, but these days there's not a lot of difference cost wise between placing a spread trade and a normal trade.

However, there are two things to be wary about: over-trading and over-staking.

Let's deal with over-trading first. Spread betting web sites just make it so easy for you to trade. Just press the buy or sell button and it's done. As long as you're within your credit limit, you can place as many trades as you like without having to put up the money. The trouble is it is so enticing that you end up placing many more trades than you should - which is fine if the market is going your way, but a change of sentiment could quickly wipe out profits and lead to a nasty bill.

My thoughts are to keep the amount of positions open to a manageable amount. If you have more than 15 positions open, can you really monitor them all?

Over-staking is the next problem area. It's all so easy to put on a £20-a-point spread bet but you have to make sure you understand the real value of the trade. A £20-a-point spread bet is the equivalent of 2,000 shares; a £10 one the equivalent of 1,000 shares.

So if you bought or went 'long' by £20-a-point in a share that's, say, 100p in the market your exposure is £2,000. However, if you did a £20-a point-bet on a share worth 1000p your exposure is £20,000 - a big difference!

So you've got to think every time you put on a trade: "How much exposure am I getting - and can I afford it?" Most spread betting firms let you deal on 10% margin - so if you want exposure up to £50,000 of stock, you only need to put up £5,000. So it is all too easy to buy too much stock on credit.

What I am saying is be realistic. Use your spread betting account - it is a very valuable tool - but make sure you don't over-trade or over-stake!

The market continues to be surprisingly strong given - at this point - at least a mini correction could be expected.

The biggest winners for me recently are the chip stock CSR - where I've doubled my money, and there is little to stop Charter from charting even higher given the recent excellent results. And my favourite oil stock is Tullow, which is showing no sign of slowing down!


You can read Robbie’s daily market comments together with his latest buys and sells at his website www.nakedtrader.co.uk

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