Hints, Tips and Strategies from Our Trading Floor

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3 Review of Trading IQ Using a trading plan Plot your trading activity using the trading plan Advice from our dealers Where do I go from here? What s next?

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5 Review of Trading IQ Having read though the previous modules you should now have a good understanding of the merits of stop losses and the benefits of limit orders coupled with the right risk reward strategy. You should also be able to use fundamentals and technical analysis in your trading decisions. There are many different trading strategies to choose from, but in the end you will probably develop your own strategy from a combination of some of the more popular ones. Whatever trading strategy you end up using, you will need to be disciplined. No stop loss will work if you keep moving it further and further away from your original position and you won t make much money if you are too keen to book your profits early. Unfortunately, trading discipline is not something we can fully teach you. It will be a hard lesson but you will only learn it by doing your own trading and learning from your mistakes. Once again these lessons won t be too expensive to learn if you keep to comfortable bet sizes when you first start trading. One of the hardest disciplines to master when you first start will be cutting your losses quickly. Remember, no one gets every single trade right all the time. Now it s time to plan your first trade!!! 5

6 Using a trading plan When you begin to spread bet, it is important to develop a trading plan. A trading plan is a set of criteria that you will follow for your trading and you should try and stick to it. You will develop this further as your trading experience increases. t Profit/Loss In the back of Trading IQ, there is a pull-out with questions that can help you to set up your first trading plan. Take the time to fill out your answers in the spaces provided and once this is done you will have your first set of criteria for your own trading strategy A lot of your strategy will be the result of trial and error so adjust your trading plan accordingly. Your Trading Plan 6

7 There is a dry wipe marker for you to be able to change your plan if need be in the future. 7

8 Clos Contract win in India, exc Vodafone VOD Full year results out next 8 weeks close to bottom for a range. New contract win and trading Look on the order ticket for the ticket code 8

9 Check the Research Centre Is this acceptable to lose? ellent potential Yes, new 20 per point 90 month... expected to be good just below the support level % e to support level limit order set up with a 3:1 risk/reward ratio to stop loss Look at charting package in the Research Centre 9

10 Plot your trading activity using the trading plan The name of the instrument you traded on Refer to Module 2 for information on NTRs, margin and exposure The price that you entered the trade The price that you closed out Vodafone 3% How much per point you traded Refer to Module 3 for information on stop losses The amount of money made or lost on the trade 10

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12 Advice from our dealers Peter from the UK equities desk When you first start off there is no need to bet large. You have plenty of time to find your feet. You will make little mistakes at first, no one is a born trader, it just comes with experience. There are some people who use spread betting for a little fun and a flutter on the stock markets, but most people will want to take it seriously. In the end, you are wanting to spread bet to make money, and making money should be a serious business. 12

13 Rochelle from the FX desk Many novice traders will look at some charts, decide this is as low as it can go, and place a trade going long (to buy because they think it will rise). This is a common mistake, the chart can always go lower and you are placing a bet against the trend. Always have a reason other than just acting on impulse. Intuition is just a hunch; it has no bearing on trading the world markets. It might work out once or twice, but in the long run it could cost you far more. Dominic from the UK equities desk Do not boredom trade i.e. trading just because there is not much happening in the markets. Always have a reason for each and every trade that you do - don t do it just because you think the UK100 looks cheap. You should only be trading with money you can afford to lose. Remember you should use only a small amount of your savings for speculative investments. When you use larger sums of your savings, especially if you are a beginner, you could make rash decisions that could cost you more in the long run. Hints, Tips And and Strategies From 13

14 Phil from the indices desk When deciding to trade a given instrument you should decide in advance the level you will trade at. Then you need to be disciplined and wait, and try not to give into temptation and buy too early. You should also set two exit points, one where the trade has gone against you and one where the trade has gone in your favour. You should link these two levels using a good risk reward strategy as discussed previously. Sadek from the Asian equities desk When you first start trading, every single trade that you do should be immediately followed up with a stop loss. This enforces your exit levels and will help to protect your capital. Novice traders will tend to learn this the hard way, but moving your stops further away when a trade goes against you is almost the same as not placing a stop loss order at all. You should always have a reason why you have set a stop loss in the first place, and when you move it further away, you have just ignored that reason. Already we have stated that discipline is the key and that you want to cut out losses quickly and run your profits. Remember that you should not be running your losses. 14

15 John from the treasuries desk When faced with a potentially losing trade, some traders will look to double up. This means buying more of the instrument at a new lower price, bringing down the average price. This is a very risky strategy which might work once or twice but in the long run will more than likely result in further losses. You should only double up if you have a very good reason for thinking that the trade will go in your chosen direction. Ginny from the US equities desk No matter what your trading experience is, you will always have losing trades. Trading discipline comes with cutting your losses quickly and not being stubborn and letting losses run. You must take the emotion out of your trading, be ruthless and committed. 15

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17 Success seems to be connected to action. Successful people keep moving. They make mistakes, but they don t quit. Conrad Hilton 17

18 Sally from the European equities desk One of the hardest lessons to master at the beginning is not to take your profits too soon. We must try to take as much emotion out of our trading as we can. For the risk reward strategy to work, you must be willing to work on at least a 2:1 ratio, if not more. Remember, if your position is going in the right direction, it is a good strategy to move your stop losses closer to the current market price in order to book some of your profits. Gary from the Sales Trading desk Even if you have the relevant stops and limits set with each trade that you do, always check up on your positions on a regular basis. It is important that we have contact details for you so we can be in touch easily in case you go on a margin call. It is not a good idea to have open positions if we cannot easily contact you. We might have to start closing down some of your positions if they start going against you and it is important that we can arrange for you to send further funds to cover this. Remember it is your responsibility to monitor your positions. 18

19 Craig from the UK equities desk One simple method of helping to lower your risk is diversification. This means spreading your capital across different investments to reduce risk, such as opening spread bet positions over a variety of equities and sectors. For example, if you had all your investments just in the mining sector and there was a sharp decrease in the price of copper, all your positions would suffer losses. But, if you had mining, retail and pharmaceutical stocks, for example, you would be less exposed to losses. Omid from the corporate trading desk In the beginning just stick to what you have the most experience in. You want to give yourself the best chance of making money at the start. Once you have built up more trading knowledge and have hopefully learnt from some of your mistakes at the beginning, you will be ready to move on to other areas to trade. Always fully research new areas you want to explore with your trading. It is a good idea to fully research any instrument that you are looking to trade. Check the business news and make sure you know the market hours that it trades and what typical ranges it covers during a trading day. You can also look at company reports and use financial websites to help you in your trading. Always remember to check the margins and check your total exposure on each trade that you do. 19

20 Ryan from the commodities desk Some traders will look at a range-bound instrument and buy near the bottom of the range and sell near the top of the range. Using this strategy they might choose to have their stop losses just below the bottom of the range or just below the top, depending if they are going long or short. If you are willing to risk 10 points in order to make 20 points, you should set the levels of your stop losses accordingly. Ross from the Education team If you have any problems or issues we are just a phone call away. Most of our new clients need a little help, especially at the beginning. Now is the time to get educated and we are here to help. Once you have started training, we have a whole host of free educational courses to help you to develop your trading knowledge even further. from our Our trading Trading floor Floor 20

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22 Where do I go from here? Trading IQ is really just the first step in a potential lifetime of learning about trading. As proof of our commitment to you, we offer most of our trading education completely free. We hold free seminars in our local offices in London, Edinburgh and Dublin which cover the following trading practices. Spread Betting Basics We look at the advantages of spread betting including a detailed look at our Marketmaker trading platform and how to place your first couple of trades. Live Trading Workshops These are traders forums where we discuss technical analysis, charting and what is currently happening in the markets. Everyone who attends has access to a demo trading platform to apply what they have just learnt on real-time examples. One-to-One Seminars One to one training with a member of our team, and you ll receive a personal demonstration of our Marketmaker software, a tour of our office and the opportunity to ask any questions you have about our service and trading products. 22

23 What s next? There are also a number of courses that we offer you for a fee. These typically last half a day and go into far more detail than the free courses. Each course costs 75. For our new clients we have included a voucher for our advanced full-day training course, which usually costs 200 with Trading IQ. We hold these regularly in our London office. Please see the voucher for details. Understanding Financial Markets - Our half-day course is a comprehensive introduction to all aspects of trading the financial markets. Essential Foreign Exchange - Do you want to gain a greater understanding of the currency markets? Our comprehensive half-day course is exactly what you need. Essential Technical Analysis and Charting - Our half-day course provides an intensive look at popular technical analysis techniques and how best to use them. Candle Stick Charting - Our half-day course has an in-depth look at candlesticks. What they are, how they are used and how to identify the most common reversal patterns used in the markets today. We also run specialist courses periodically on different technical analysis techniques. Please see the education section of cmcmarkets.co.uk/education for more details. Finally, if you want to carry on learning, we also have our online Education zone. This has short interactive videos which cover different topics that you will find useful for your future trading. New courses are always being added and created mainly from client feedback. Please feel free to let us know if we can help you. Hints, Tips And Strategies From Our Trading Floor 23

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26 Contact Payments London CONTACT US CMC Markets 66 Prescot Street London E1 8HG United Kingdom Edinburgh CMC Markets 40 Princes Street Edingburgh EH2 2BY Dublin CMC Markets T: +44(0) United Kingdom 1 Upper Hatch Street Dublin 2 Contact Helpdesk T: +44(0) Ireland E: helpdesk@cmcmarkets.co.uk T: +44(0) F: +44(0) T: +353(0) Contact Education E: education@cmcmarkets.co.uk T: (UK only) E: helpdesk@cmcmarkets.co.uk T: +44(0) F: +44(0) Contact Spreadbet Dealing Desk E: spreadbetdealers@ cmcmarkets.co.uk T: +44(0) from our trading floor 26

27 We hope you found this module useful and interesting. If you want to know more then contact one of our educational advisers on Or visit cmcmarkets.co.uk/education for more details of our seminars on the subject. Risk Warning Remember Spread Betting is a leveraged product and carries a high level of risk to your capital. It is possible to incur losses in excess of your initial stake. Spread Betting may not be suitable for everyone, so ensure that you understand the risks involved and seek independent Margin advice and Exposure if necessary. 27

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