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The Active Investor show 2007 brought private investors and traders face to face with industry experts during a packed programme of seminars and events. Simon Keane picks out some pearls of wisdom from the day’s many highlights. |
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Highlights With its spectacular recovery since August everyone had one question on their lips for expert chartist David Jones – ‘will the FTSE 100 breech 7,000?’ ‘The index hit 6,950 in 1999 before coming back 50%. This is a really big level, if the index goes above this I would expect to see it go higher,’ said Jones, addressing the 200-strong audience at the Active Investor Live 2007 conference last week. Explaining the benefits of spread betting, the chartist, who is chief market analyst at CMC Markets, gave tit-bits of his market nous to a crowd that had come from near and far to soak up advice and network with peers at the Shares and MoneyAM-organised event. And Jones certainly didn’t disappoint as he took the room through some live market trades using CMC’s spread betting platform. Sell the FTSE 100 or buy it he asked the audience, and the bulls won through with a one-pound-a-point buy trade placed at 6,726. As it turned out it was a losing trade (sorry, than man in the front row whose insistence on a buy won through). But so what, this day was as much about learning the tricks of the spread betting trade than anything else. ‘When they plan their trade a lot of people don’t think about the downside,’ explained Jones. ‘I suggest with every trade you should have a plan in case things don’t go the way you think they will.’ And so we moved onto the topic of stop losses which only ‘mug punter’ fails to use. Jones talked about the phenomenon of ‘gaping’, citing the example of Northern Rock (NRK). When the BBC reported, after market close, of the bank’s funding difficulties shares opened the next morning at 450p, 27% down on the previous day’s close of 620p, so ‘you couldn’t have traded at 550p since the stock never traded at 550p,’ explained Jones. Stop and listen Guaranteed stop losses offer some protection again gaping but Jones told the audience he doesn’t personally use them. It was clear Jones had captured the imagination of the crowd with a long line of questions fired his way. The event, at the Business Design Centre in Islington, London, was an opportunity for investors to glean advice from a string of experts. The variety of topics was wide, covering ‘systematic’ trading (perhaps better known to most as ‘black-box’ or ‘algorithmic’ trading), how to navigate betting exchanges, the psychology of investing, how to use contracts of difference (CFDs). Finally, there was an explanation of using warrants from Richard Miller, listed products sales person at Societe Generale. Looking for comfort David Purkis, an NHS psychologist from London, was among the crowd. The 55-year-old, who has 20 years’ investing experience, came to find out more about spread betting: ‘I am actually already signed up with CMC but I have not used the account. I tried trading a few years ago but lost money. I wanted to be a bit more comfortable with spread betting and understand how it works before trying it again.’ Couple Keith and Pat, from Chelmsford, Essex, came along to find how how they could earn sufficient money from investing to give up work. Financial analyst Keith said: ‘Like 12 million other people in this country we have not got a pension and I am looking at trading as a possible source of basic income.’ Looking to unlock capital in their house and employ cash savings, Keith is confident of making a return of between 15-20%: ‘Spread betting offers the opportunity to gear up.’ Meanwhile Kirit Patel, 65, from London, had come along to listen to the City Index presentation and size up the broker’s CFD trading platform. Kirit currently has money frozen at Pacific Continental Securities. But not deterred by his experience with the disgraced broker he is adamant he’ll continue investing: ‘I was trading CFDs with Pacific and now the funds are tied up with them. As soon as they are released I need to take up a new platform’. | Webb of intrigue Many had come along to listen to Peter Webb, the Shares columnist and founder of Bet Angel. Bet Angel provides an enhanced platform to access betting exchange Betfair. Webb set out the attractions of shortterm investing on betting exchanges versus conventional equity markets, which include instant settlement, no capital gains tax and zero commission to pay when you lose a bet. As bookies change their odds he illustrated how the price of a horse can move rapidly in the minutes leading up to a race commencing. Like investing in shares, basic charting methods can be employed, explained Webb, who says no knowledge of the underlying sport, whether it be horse racing or tennis, is required: ‘The tactics that are appropriate in this market are no different to how you should approach a stock market.’ Listening to this were brothers Ravi and Vijay Raghunandan. Ravi says: ‘I bet on the horses. The good thing about Betfair is you’re not employing a lot of capital. If you have got £1,000 or so you can quite easily make some money out of it. The whole point of coming today was to introduce my brother and also get a few tips off Peter.’ Vijay must be wondering whether he can replicate the success of his brother, who is making enough money to trade on betting exchanges full time. The former financial adviser, who calculates he’s making on average £50 profit a day, says: ‘I don’t always win but I always come out up on average so that’s a regular £350 a week, tax free. The good thing about this market is that horses races go into the evening so it’s not nine-to-five.’ Trading psychology Another popular speaker was Sandy Jadeja, chief market strategist and head of global trading at ODL Securities, who discussed trading psychologies. Experienced trader Jadeja talked the room through the importance of having a clearly defined strategy before setting out: ‘Write down you personal trading plan, if it is in your head it is adjustable.’ But he couldn’t be clearer on one point: ‘Always begin with realistic goals. If you are starting to trade, for the first two years you should not aim to make a profit.’ While some companies will let you open a CFD account with as little as £200, Jadeja recommends a minimum of £500. If you’re more into computers than psychology, Saxo Bank consultant John Howard talked through the concept of ‘systematic trading’ in FX markets. Using Saxo’s Trade Commander product clients can set a variety of conditions which, when met, will prompt the system to trade on your behalf. This puts you on a level with the ‘black box’ traders at the bulge bracket investment banks, explains Howard: ‘There is an opportunity for those with an inquisitive and analytical mind to put together a strategy and really challenge the way you trade.’ Whether you were interested in CFDs, spread betting, betting exchanges or FX, Active Investor Live 2007 had it all. With the everwidening trading options open to the private investors, attendees – both novice and experienced – took away valuable lessons.
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