Spread betting account – Technical Analysis 15
Today’s post is a catch-up with our technical analysis series. We’re finally ready to open a spread betting account.
Spread Betting Account
Back in September, we looked at opening a spread betting account to support our studies in technical analysis.
We looked briefly at 20 providers and at 5 in more detail.
- IG and CMC looked like the best options
Then real-life intervened, and it became clear that moving cash from non-sheltered accounts into tax-sheltered accounts (SIPPs and ISAs) before the end of the 2015/16 tax year would mean there was no spare cash for spread-betting for a few months.
- In response to this, we set up the Bonkers portfolio to dip our toes into momentum investing without the need for a spread betting account.
But now all the cash has been moved, and we can open an account.
- Before we do that, let’s have a brief refresher on why we need spread betting.
Why Spread Betting?
Here are the main advantages of spread betting:
- there’s a wide range of underlying assets (indices, FX, commodities) – it’s not just stocks
- you can go short
- no stamp duty (though the costs – the spread and overnight interest charges – still need to be looked at)
- no tax on profits (but losses can’t be offset against other gains)
- no betting tax (on financial spread bets)
- leverage – a double-edged sword, but potentially useful
- stop losses and guaranteed stop-losses for risk management
What will we use it for?
We’ll be using spread betting mostly for momentum trading driven by technical analysis.
- We’ll probably also use it to layer bets on top of winning stock holdings (to gear up)
- and to hedge existing portfolios via shorting indices,
- but momentum trading is the focus for today.
The instruments we will trade will depend on what’s available on the chosen platform, but ideally the more the merrier:
- FX (£, $ €, ¥)
- commodities (oil, gold, industrial metals, perhaps softs)
- indices (ideally FTSE, S&P 500, Euro-Stoxx, Nikkei)
When / if we feel more comfortable, there are a few “stage 2” ideas to investigate:
- individual UK stocks
- US stocks, probably tech (GOOG, AAPL, TSLA, NFLX, AMZN, TWTR etc.)
- pairs trading of matched FTSE-100 stocks
Opening the account
The last time I opened a spread betting account was 2008.
- The next week the markets started to crash.
- I never traded the account.
- You have been warned.
This time around, the process is pretty smooth.
- Head to the IG website
- I decided to go with IG as they seem to be the provider that most of my twitter contacts use – I might need to lean on them if things prove tricky
- The link for a demo account is a blue button at the bottom right of the front page
- I plan to practice with a demo account for a month or so before switching to real money
- This takes you to the demo account page
The demo account is a mock account with £10K of virtual money.
- It can be used with the IG mobile and tablet apps
- It uses live prices and charts
There are warnings about some differences between the demo account and a real account:
- demo trades don’t have slippage (price moving against you during periods of high volatility)
- demo trades don’t have price changes out of hours
- demo trades don’t have interest and dividend adjustments
- demo trades are never rejected
- there are no charges for chart packages
I hadn’t realised that there would be charges for charts
- checking the website it looks like the basic chart package is free but you can pay for extras
To open a demo account you really just need an email address, though IG also ask for your name, country of residence and phone number (I’m already dreading the sales calls).
- After clicking on the link in a confirmation email, you are redirected to a login page.
The demo account
Here’s the front page of the demo account after you login:
It’s quite a busy page. I’m hoping that you can configure it to some extent to look the way you want.
The page is pre-loaded with a Popular Markets tab, so let’s have a look at how these match up against our planned trades:
- FX – there are cross-pairs that include all four currencies I expect to try, but not all the pairs I want (eg. GBP/JPY is missing)
- Commodities – there’s just two versions of the oil price
- Indices – there’s the FTSE-100, “Wall St” (I’m worried that this will be the Dow Jones rather than the S&P 500), Germany 30 and China 300, but no Euro or Japan index)
- UK stocks are there (Lloyds, Tesco, Vodafone)
- US stocks are there (Amazon, Apple, Twitter)
The top window in the left-hand sidebar is the “Finder”.
I went looking for the things missing from the “Popular Markets” window:
- I noticed that there are UK Sector Indices, which might be useful
- The US indices include the Russell 2000 and the VIX, as well as a tech 100 and a “US 500” index
- There’s an EU stocks 50 index
- There’s a Japan 225 index
- GBP/JPY is included under “Minor FX”
- There’s even a Bitcoin index
- Commodities include gold and silver and all the base metals (but there is no industrial metals basket)
- There are bets on bond markets
- There are even “options” (more research needed here)
Next stop is finding some training materials.
The Education link on the main IG website leads to a page with five videos that I need to work through:
There’s also a section called Beginner’s Guides, which includes the following:
- managing risk
- developing a trading plan
- common mistakes
- short selling
- orders, stops and limits
I have an understanding of what all these things are, but I want to be familiar with how they work on the IG platform before I place any trades.
Each of those links leads to another page with links to several sub pages. There doesn’t seem to be an introductory booklet that covers everything in one place.
- On a hunch, I tried the Hargreaves Lansdown platform.
- Their spread-betting service is operated by IG, so it should be similar.
- As I hoped, HL do have an introductory booklet, so I’ll be reading that as well.
The third leg of the IG education stool is seminars and webinars.
- You can either wait for the next live session so that you can ask questions, or watch the recording of the last session (more videos).
- The seminars seem to mainly cover how the platform works, and technical analysis.
- There’s also a weekly market update at Monday lunchtime and a monthly session based around the US Non-farm payrolls number.
That’s about it for today.
My homework for the week is:
- read the HL introductory booklet
- watch the IG videos
- work through the IG beginner’s guides
- put together a watch list of the main 10-20 markets I plan to trade in
I’ll be back next week with what I’ve learned.
Until next time.