Help me make the "Better Spread Betting" book even better!

Help me make the "Better Spread Betting" book even better! Check it out at betterspreadbetting.com.

Go to the Trading Trail...

I've now decided to discontinue this blog in favour of my Trading Trail blog which people seem to be really enjoying. It's well worth a visit!

"In January 2010 Tony Loton established a demonstration spread betting account with a starting capital of just £1000, with the aim of growing this to a sizeable sum by the end of the year. The Trading Trail blog documents the performance of the account, including the trades made with associated commentary, over the course of the year to December 2010."

I look forward to seeing you there.

Stockbroker's Praise for "Stop Orders"

Today I was pleased to receive the following kind comments about my Stop Orders book, from John Cotter, Vice President (Brokerage), Barclays Wealth:

"I found it excellent. Very readable, practical and suitable for both the trader and investor."

Thanks John, for allowing me to publish your comments.

Reader's "thank you" email

Today I was pleased to receive the following email from a reader:

Subject: Thank you!

Hello !

I am an medical doctor - learning to speculate. I would like to thank you a lot for the three small and consice books that you have written. Will you write on the subjects of spread betting , CFD, warrants and options and also trend trading in your clear and pedagogic style, in the near future?

I've edited it very slightly to correct a couple of typos, and I've removed the sender's name to protect his identity.

Download Trading and Investment Books as PDFs

Do you know that my books "Financial Trading Patterns", "DON'T LOSE MONEY! (in the Stock Markets)" and "Stock Fundamentals On Trial : Do Dividend Yield, P/E and PEG Really Work?" are also available to download as PDFs?

Downloads in United States Dollars ($ USD)

Download Financial Trading Patterns for $7.50

Download DON'T LOSE MONEY! for $7.50

Download Stock Fundamentals On Trial for $7.50

Download All Three + Win Your Way to Wealth for $20

Downloads in UK Pounds Sterling (£ GBP)

Download Financial Trading Patterns for £3.75

Download DON'T LOSE MONEY! (in the Stock Markets) for £3.75

Download Stock Fundamentals On Trial for £3.75

Download All Three + Win Your Way to Wealth for £10

Any problems with downloading after purchase, just drop us an email at...

Something for the New Year: Trading Trail

Throughout 2010 I am intending to maintain a brand new blog, the Trading Trail.

The idea of the new blog is to start with an initial deposit of £1000 in a clean-slate spread betting account, and to see how much I can grow it by the end of the year. I'll be going out on a limb by posting my real-life trades -- restrospectively, so don't try to follow me in real time -- with commentary.

I conducted a similar, more limited, demonstration in 2009 for my Stop Orders book; in this case managing to grow an initial £300-ish deposit to more than £9000 (that's > 3000%) in six months!

Nothing is certain in trading, and maybe the markets can stay irrational longer than I can stay solvent in this new account. Let's find out!

Tony Loton.

Stop Orders FAQ

If you're thinking about using Stop Orders in your trading or investment strategy, you might find the following list of Frequently Asked Questions (FAQ) -- and answers -- useful as a starting point:

Q: What is a Stop Order?

A: An order that executes at some future time when the price of a financial instrument falls to the level you specify (Stop Order to Sell) or rises to the level you specify (Stop Order to Buy).

Q: Doesn't this mean buying or selling at a price less favourable than the current market price?

A: Yes, but the theory is that a falling price is likely to keep falling and a rising price is likely to keep rising. The market price will become more and more unfavourable, and so it's better to get out as soon as the price starts to become unfavourable.

Q: What can you achieve using a Stop Order?

A: You can buy at the onset of an uptrend or sell at the onset of a downtrend; you can "stop a loss" before it becomes unacceptable, or you can "lock-in" some profit without prematurely closing a position.

Q: What is a Trailing Stop Order?

A: A stop order that moves automatically, or which you adjust manually, to trail a rising or falling price. It allows you to secure an increasing amount of profit on a profitable position, or establish a new position at an increasingly favourable price.

Q: What kinds of traders use Stop Orders?

A: Day Traders might use Stop Orders to close a position quickly if it goes the wrong way. Swing Traders might use Stop Orders as protection in case the price moves out of its recent trading range. Position Traders might use Stop Orders to "lock-in" long-term profits, and investors might use them as an if-all-else-fails safety net.

Q: Which financial instruments support Stop Orders?

A: This is broker-specific, but typically all positions established in Spread Betting or CFD (Contracts for Difference) accounts allow Stop Orders. Equity and Index ETF (Exchange Traded Funds) positions in regular brokerage accounts typically allow Stop Orders. Fund Managers typically do not allow Stop Orders on their funds.

Q: Are there any dangers in using Stop Orders?

A: The main problem is that sometimes prices "gap" up or down, so your Stop Order executes at a worse price than the price you set. Opening and closing positions frequently using Stop Orders can lead to whipsaw losses.

More Questions

There are many more questions that are too complex to answer here in brief; such as "How close to the current price should a stop order by placed?" and "How can you combine Stop Orders with Position Sizing in order to manage risk?". You will find answers to those question in the book.

Stop Orders book now In Stock at Amazon.co.uk

After being available for pre-order for some time, I was pleased to see today that my new book on Stop Orders was now showing as in stock at Amazon.co.uk. So you can get it in time for Christmas!

Latest "Smart Investor" Articles

My article on Swing Trading has now gone live in the Barclays Stockbrokers Smart Investor magazine web site.

You might also like John Cotter's article on the Life of a Trade, which has a lot in common with my own position-trading style.

Those articles are free to read, so go ahead a click the links!

"Stop Orders" book now In Stock at Global Investor

After being trailed for a few months now, I'm pleased to say that my new book on Stop Orders is now in stock for immediate dispatch at the Global Investor Bookshop.

Click the link above to find out more about "the one essential tool in the armoury of every trader, investor and spread bettor."

Stop Orders - The Video

I've created a short video to introduce my new book on Stop Orders.

In the video I show a concrete example of pyramiding into a position while using manually-trailed stop orders to manage risk and secure increasing profits.

Here it is:

If you like what you see, you can buy the book from Amazon.com, Amazon.co.uk and many other stockists including the Global Investor Bookshop.

How to: Make a 3000% Return in Six Months

In this blog I've shown you the progress of the example spread betting portfolio that returned more than 3000% in only six months, and I've hinted that this was achieved through a combination of position sizing, leverage, stop orders, and pyramiding.

Here are my notes on how these key concepts fit together:

Position Sizing

The minimum position is established initially, for example a £1-per-point spread bet. Positions are only added to when this is possible at no additional risk because some profit is locked-in by the stop order.

Pyramiding

Subject to Position Sizing above, positions are 'added to' as they trend upwards. Thus: the longer the trend, the bigger the position size, and the higher the profits.

Leverage

Ideally this approach practised in a leveraged account using Spread Bets or Contracts for Difference (CFDs) so that many positions can be established with small stakes. Leveraged accounts also tend to allow you more funds for trading by freeing up margin as your stop orders are ratcheted up.

Stop Orders

Stop Orders are of course the key to all of this. They are used to minimize risk only newly-opened positions and to lock in profits on profitable positions. They also serve to free up risk capital.

You can buy my new book on Stop Orders from Amazon.com, Amazon.co.uk, or the Global Investor Bookshop.

3123% in Six Months!

The spread betting portfolio that I ran as an example in my forthcoming Stop Orders book (Amazon.com and Amazon.co.uk) has now been closed out for a total return of 3123% in six months. I started the portfolio in March 2009 with only £288.02 "net equity" and in the 26th week I closed all of the remaining open positions for a final "net equity" (including my previous withdrawals) of £9226.55.

This feat was achieved through a combination of position sizing, leverage, stop orders, and pyramiding as described in the book.

In previous installments I have included a table showing the ups and downs (mainly ups) of the portfolio over time. They say that a picture paints a thousand words, so here is the portfolio appreciation in graphical form:

Building Better Pyramids

If you liked my article Pyramiding Explained you'll like the follow-up article Building Better Pyramids in which I give a concrete example of how you can lock-in profits using stop orders, and then re-invest those profits in the same (or new) positions.

You can find out more about stop orders, their use in pyramiding and other scenarios in my forthcoming book "Stop Orders" to be published by Harriman House. It's already available for pre-order on Amazon.com and Amazon.co.uk.

2600% in 23 weeks!

I've been a little quiet on this one recently. Well, what do you expect with the markets having 'corrected' after the March-to-May bull run? Normal service has now been resumed, and my example spread betting portfolio has reached another new high to show a total 2600% increase (from £300 starting equity) in only 23 weeks!

You can see the full transcript in the table below:

(Note that I have withdrawn a total of £3000 over the period, which for consistency I have added back in to the Total Net Equity figure as though it was still present but having never grown nor shrunk since withdrawal)

Don't forget that some of the techniques of using stop orders, pyramiding and leverage are documented in my forthcoming book on Stop Orders.

Day trading revealed

If you class yourself as an 'investor', or maybe even a 'frequent trader', then the world of day traders may be somewhat alien to you. Surely this is a world of professionals sitting behind banks of telephones and computer screens in corporate trading rooms?

As a matter of fact, there are legions of private day traders who operate from their home offices using a single computer with a broadband internet connection.

Read more of my Day Trading Revealed article...

Pyramiding Explained (Part 1)

While averaging down can be an effective strategy when investing in stock indices and other instruments that cannot conceivably ‘go bust’, it can be disastrous to allow all of your capital to gravitate towards stocks that are in terminal decline.

There is another way. You can average up by making a small initial investment and then committing additional funds to your profitable positions as they head north.

Read more of my article on pyramiding on the Barclays Stockbrokers "Smart Investor" web site.

Trader Interview with Tony Loton at spreadbettingcentral.co.uk

I was interviewed recently by Malcolm Pryor, author of the best-selling Financial Spread Betting Handbook, for the spread betting educational web site that he runs.

The interview was great fun to do and you can read it at http://www.spreadbettingcentral.co.uk/strategies.htm?id=121

2000% in only 12 weeks!

Although I ended the experiment officially after 9 weeks in order to meet the deadline for my Stop Orders book, I did run this example spread betting portfolio for a little while longer so that at 12 weeks it was showing a cumulative percentage increase of almost 2000% (having peaked above that level in week 10).

Note that I withdrew £2,500 when the experiment concluded in week 9. In subsequent weeks (above) I have added this amount to the Net Equity figure as though it was never withdrawn.

As noted in my original posting, this performance was achieved through a combination of good stop placement and good position sizing coupled with aggressive pyramiding and leverage. Not for the faint hearted!

1800% in only 9 weeks!

As documented in my forthcoming book titled Stop Orders, and using the techniques outlined in this book, I turned a small spread betting "net equity" of £288.02 into a net equity of more than £5,700 in the nine weeks to 4 May 2009. That's an increase of 1879%!

Although modest in terms of portfolio size, this was a real traded portfolio -- which is still increasing, as it happens -- rather than a hypothetical paper trading example. Here is a transcript of the progress over the nine weeks:

This performance had more to do with sound money management using stop orders and position sizing than it had to do with clever stock picking (although there was some of that too).

If you'd like to find out about using stop orders and position sizing effectively, you can pre-order my new book from Amazon.co.uk or sign up to be notified at Amazon.com.

In the meantime, you might like my previous books available at www.lotontech.com/money:

• Stock Fundamentals On Trial : Do Dividend Yield, P/E and PEG Really Work?
  
• Financial Trading Patterns
  
• DON'T LOSE MONEY! (in the Stock Markets)
  

Exchange Traded Commodities

My latest article has just gone live on the Barclays "Smart Investor" web site at http://www.stockbrokers.barclays.co.uk/?category=whatweoffer&usecase=landing166.

It's all about Exchange Traded Commodities.

Stop Orders (the book) by Tony Loton

I'm pleased to announce that my new book on Stop Orders will be published by Harriman House (financial publishers) on 24 August 2009. You can pre-order it now at a discount.

This book describes the one essential weapon in the armoury of every trader, investor, and spread better – the Stop Order.

If you think I said Stop Loss Order, think again. The application of stop orders is as much about protecting profits as it is about avoiding losses. And if you think you saw ‘investor’ in my list of people who can benefit from stop orders, you don’t need look again. I really did say ‘investor’.

Do you think you know everything there is to know about the humble stop order? Well, it’s not so humble when you consider that there are buy stops and sell stops, trailing stops, guaranteed stops, and stops-with-limits. And the various combinations thereof.

Do you know how to apply stop orders effectively from entry, through maintenance, to exit so as to buy low and sell high? Or buy high and sell higher? Do you know how to limit your downside risk by combining stop orders with effective position sizing? What will you do if the market gaps and you get stopped out for no good reason?

Exit Strategies

As viewers of the popular TV show Dragons’ Den will know, experienced investors do not part with their money unless they have a clear idea of when and how they will get it back. This goes for private equity, venture capitalists and other professional investors. They only go in if they have a well-defined exit strategy.

Read more in my Exit Strategies article on page 12 of the latest Smart Investor Magazine.

Mind the Gap!

My latest article Mind the Gap has now been published on the Barclays Stockbrokers Smart Investor web site. I hope you enjoy it!

Tony Loton's Money & Finance Feature Articles

Barclays Stockbrokers Smart Investor Magazine

> 6 Ways to Trade Commodities by Tony Loton

> Tony Loton's Smart Investor Profile

Barclays Stockbrokers Smart Investor E-mail Update

> Protect Your Portfolio / "Don't Lose Money!" by Tony Loton

> Trade Smarter / "Net Assets" by Tony Loton

The Sunday Times (UK)

> The Day Trader (follow the link, and scroll down to "The Day Trader")