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Finance Blog: Is There Any Science in Financial Trading?
Financial spread betting has potential for high gains, but why are people generally so unsuccessful at it?

This section of my website refers to financial spread betting, as it is known in the UK. The idea is to trade in financially leveraged products. In the USA similar products exist, e.g. options (although they have a different risk profile) and the e-mini Dow offered by the Chicago board of Trade. The point is that the same basic principles apply to everything!

Spread betting can be hazardous to your health! It is easy to lose a lot of money very quickly, but I think by adopting a number of measures you can avoid actually losing. Whether you can make significant money this way or not depends on a variety of factors. I think I can do just that and with this in mind I have spent a considerable amount of time learning the methods and trying to apply them. I generally have a dogged determination and despite my significant losses in the past, I have started to apply my previous scientific training to the task at hand to turn the situation around.

I have no illusions over this, and you should not either: spread betting is difficult and time consuming, despite comments from "get rich quick" charlatans. My illusion if you like (or call it arrogance!) is that there is nothing I can't understand if I put my mind to it: the benefits of a Cambridge PhD, I'm afraid! The point is that financial trading is about seeking patterns and relationships, and separating signals from the noise. These are exactly the techniques that scientific research demands. Yet, despite my 30 year research career, why have I not been able to make money in the past (except with regular share trading of course)? We will find out, or if I'm too embarrassed, this whole section will be removed from my website!

I can't go into a lot of details here, but fortunately during some quiet moments over the last few months I have been able to write down my thoughts in a coherent form as an e-book, which is also available as a paperback, Day Trading for Profit. Also, these web pages form a collection of the trades that I have made with financial spread betting so that you can see it for what it is: warts and all.

Account progress for 1st April 2015 to 31 January 2016, together with linear regression line through the daily data.

Trading Diary

For progress during earlier months purchase the ebook Day Trading for Profit

1 - 15 October

16 - 31 October

1 - 15 November

16 - 30 November

1 - 15 December

16 - 31 December

1 - 15 January

16 - 31 January

Date Total sum Profit Daily Profit Monthly Profit
31/01/16 £989.99 -£310.01
01/02/16 £993.39 -£306.61 £3.40 £3.40
02/02/16 £1,015.59 -£284.41 £22.20 £25.60

With my trading thoughts from January to the fore, and in particular with the last few weeks trading having resulted in major swings in my accounts, I thought that it would be appropriate to start February with a clean slate. I am taking the view that my first 10 months of active trading have been my "training" period, which has cost me in losses about £300 in total. I hope that from now on, the sort of horrendous mistake, such as occurred last month, are in the past. Clearly, I will need to keep my wits about me.

1/2/16:With the Footsie having increased substantially from its lows of last month, the market is now looking a bit toppy, having reached the upper Bollinger band in the multi-day chart. When this has happened in the last year or more, this has resulted in the market dropping. However, I would not want to commit 100% at this time, as these are unusual circumstances so the market may still go up further.

Soon after the market opened, it did indeed look to be going down, so I opened the first of three shorts for the morning. The first was almost £70 up at one point, but I waited too long to close, and ended up with a profit of £27.60. After the partial market recovery, I went short again at 6075, closing half an hour later for a profit of £28. The market dropped again, and once the further reduction appeared to be confirmed, namely by the price setting new low values for the day, I went short at 6032, closing for a profit of £25. The market continued, almost reaching 6000, so I missed out on a larger gain. However, I am not too dissatisfied: even if I had hung on for more like I did in my first trade, I might still have ended up closing near the current level. All in all, it was a good morning's effort: an £ 80 profit from three trades.

The afternoon was disappointing. I went short at 5993 in the early afternoon, just as the price hit the lower Bollinger band on the 5 minute chart. Unfortunately, I had jumped the gun somewhat, not having waited for "confirmation" of the sell signal. The market turned and I closed for a loss of £36. Shortly after I went long at 6016, but I became nervous about the volatility and closed near break even. I came to rue that decision, as the FTSE rose significantly I didn't get back in until 6041 but wanted to close before the end of the trading day so my profit was £17 on the trade for a total profit of £64 up to that point.

After the UK market closed the US market rose and I became somewhat mesmerised. I finally went long again at 6081 thinking that the market would continue to rise overnight, bearing in mind that on the multi-day chart the MACD histograms were still rising. Alas, shortly afterwards the market started dropping, and the multi-day moves were probably about to change to negative again. Nonetheless, I kept my long position running overnight, as the multi-day trend is still on a knife-edge. The accounts for the day include the loss on the running position.

2/2/16:Once the market opened in the morning, the FTSE started to drop, after the initial froth had disappeared. I therefore closed my long position from last night, but at a whopping loss of £131. Shortly after, I went short at 6016, but it seems that I have already forgotten some of my lessons. I became nervous and closed for a small loss of £15.60. After a while, it became clear that the market was sincere in its desire to drop. I therefore sold again at 6016 and held on. I eventually closed for a profit of £101, the allure of the century sum being just too much. I had closed a little early, but as I write this, the FTSE has now gone back up to near the 5960 level, so I have not lost out much. My hypothesis is that the FTSE may recover a bit perhaps when Wall Street opens and then there may be a chance to open another short with a target near the multi-day moving average of 5907.

I watched all afternoon hoping for a good entry point to go short on the FTSE, but boarding a moving train is always a challenge. As it was the FTSE dropped below my target price of 5907 and by early evening had dropped further. I am half expecting an upward correction at some point. With that in mind, twice in late afternoon I went long, but it proved to be too early, and I managed to add only a modest £7.60 to my account. It brings the profit for the last two days to £25, but that scarcely conveys the wide swings in my account over that period.

Previous Months' Accounts

I welcome comments to enigmascience@outlook.com

Website revised by John Austin, 2/2/2016. © Enigma Scientific Publishing, 2016.