Exchange Issue 12 - OCT FULL by EXCHANGE MAGAZINE

www.theexchangemagazine.com

More than a match for the markets

B ET W EEN THE TRA D I N G

F L OOR

AN D THE

F I NA L

SCORE . . .

Itâ&#x20AC;&#x2122;s a numbers game Turning sport into profit on the spread betting markets

issue 12 OCT 2011 ÂŁ3.95

Trading strategies to combat Central Bank intervention Analysis: Using currency pairs to measure risk aversion Celebrity Trader: Jason Leonard The importance of keeping your image on trend

.......................SPREAD BETTING......................FOREX......................CFDs....................FUTURES.............................

THE EXCHANGE | WELCOME

EDITOR’S LETTER Anyone feeling festive yet? Its official the advent calendars are in Tescos (other ridiculously premature superstores are available), I’ve spotted my first Christmas lights and X Factor is back on the telly, which means the country is already counting down to the end of the year. Not here at The Exchange though, because October’s issue is packed once again with all the latest from the markets and the world of trading. Greek debt and the demise of the Eurozone once again take, centre stage, but as Ken Fisher so astutely points out, things are looking brighter in the US than the media would have you believe. This month’s issue takes sports spread betting back to basics, and so a “practice what you preach” move my big news this month is thatI’ve also opened a new sports spread betting account and will be blogging regularly on my results. I’m not entirely sure whether this honesty box policy is the best idea to be truthful, after all you very rarely hear about traders who are keen to publish how much money they’ve lost, but hopefully it will at least force me to consider trades more thoroughly. Any ill thought-out punts should be ridiculed as such. I look forward to hearing from you. With sports taking centre stage for the first time in The Exchange it would be remise not to at least mention the rugby. We’re half way through the World Cup, which means we’re on the cusp of seeing some meaningful games. Ok, I know I’m still being flippant about the group stages of the tournament lacking a depth of quality, and we have seen one or two (or one) decent games, but now is where the real competition begins. With England, France, Wales and Ireland all finding themselves in the same half of the draw we’ll have at one northern hemisphere team in

the final, and judging from the way Les Blues have turned out in New Zealand to date it’s more than likely to be a home nations team. And that’s definitely a reason to be glued to your TV on a Saturday morning. The loss of Dan Carter from proceedings is huge, not just for New Zealand, but for the tournament as a whole. You have to feel sorry for the All Blacks no.10, he’ll be 33 by the time the next World Cup comes around and when all’s said and done might be the best player of all time to have never played in a World Cup final. What Carter’s absence does do though is spice up a World Cup that was fast becoming a NZ walkover. Colin Slade, Carter’s deputy, has been woeful by All Black standards in his World Cup appearances to date. Throw in the weight of expectation and a tricky semi-final against either Australia or South Africa and that “Kiwis are unbeatable” mantra is starting to show some cracks. Don’t get me wrong, New Zealand are still the tournament favourites, but for the gambler the best value can be found with South Africa. Anyway that’s enough from me again, be sure to follow me on Twitter at @ ExchangeEditor and at my blog page at www. theexchangemagazine.com. I hope you enjoy the issue.

ALEX HAMMOND EDITOR

4 | THE EXCHANGE | October 2011

EDITOR Alex Hammond Writers & CONTRIBUTORS DECLAN FALLON KEN FISHER RICHARD PERRY MARK SOUTHERN ANDREI TRATSEUSKI Peter Webb GREG MICHALOWSKI ATIF LATIF VICTORIA POWER Alastair Mccaig colin cieszynski DIGITAL CONTENT & MARKETING ANDREW CAPEL Public Relations Mark Southern Polygon PR SOCIAL MEDIA MANAGER Simon wiltshire SUBSCRIPTIONS subscription@theexchangemagazine.com

PUBLISHED BY The exchange

admin@theexchangemagazine.com

ISSN: 20472625

© 2011. The Magazine is published by The Exchange. All rights reserved. The publishers declare that any publication of any advertisement does not carry their endorsement or sponsorship of the advertiser or their products or services unless so indicated. Contributions are invited and, whether or not accepted, submissions will be returned only if accompanied by a stamped addressed envelope. No responsibility can be taken for drawings, photographs or literary contributions during transmission or while in the Managing Editor’s hands. Proof of receipt is no guarantee of appearance. In the absence of an agreement, the copyright of all contributions, literary, photographic or artistic belongs to the The Exchange. This publication (or any part thereof) may not be reproduced, transmitted or stored in print or electronic format (including, but not limited to, any online service, database or part of the internet), or in any other format in any media whatsoever, without the prior written permission of The Exchange. The Exchange accept no liability for the accuracy of the contents or any other opinions expressed herein.

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26 18

contents

the open

the spread

FEATURED

the close

12 Ups & Downs 14 Book Club 18 Celebrity Trader: Jason Leonard 24 Interview: Michael Stumm

26 Sports Spread betting

the long

34 A Greek Tragedy 36 Currency pairs to measure risk aversin 40 Making sense of forex trading 42 Trading & Central Banks 44 Gold 46 Chart Wonk 48 Ken Fisher 50 Avoiding mistakes trading CFDs 52 Laying the field

58 Restaurants 60 Weekends 62 Cuisine 64 Sweet Suite 66 Travel

72 Cosmetics 76 Whoâ&#x20AC;&#x2122;s Who 80 Glossary 82 Killa Villa

Your rightful place Becoming a Club Wembley member will give you guaranteed access to world-class events* until 2018, in the finest seats within Wembley Stadium. You can also experience the exclusivity of the Club Wembley concourse with a variety of restaurants and bars for you and your guests. To guarantee youâ&#x20AC;&#x2122;re here to enjoy our next big event call Harry Tyndall on 020 8795 9781 or email harry.tyndall@wembleystadium.com

*Subject to licence agreement. Concerts are options events. Matches that form part of a tournament where The FA are not the owner such as the Olympics Games, the Rugby World Cup or The UEFA Champions League Final are not included.

The greatest views from the greatest stadium Club Wembley is the finest way to enjoy all the action at one of the world’s greatest stadiums. Choose the right seat for your business needs from commanding corner views to fantastic half-way line seats or even the exclusivity of your own Corporate Box. A Club Wembley seat licence is the only way to guarantee access to the best events until 2018* including: • • • • • •

All England Senior home games The Football League Cup Final The FA Cup Final Both FA Cup Semi-Finals The FA Community Shield The Rugby League Challenge Cup Final

In addition, members have first option to purchase tickets or hospitality packages for other world class sporting events and concerts*. This year’s events calendar sees the return of the 5th NFL International Series^ game at Wembley Stadium in October, with the Tampa Bay Buccaneers hosting the Chicago Bears, and the UEFA Champions League Final* is set to return in 2013.

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As competition to maintain professional partnerships and win new business continues to grow, the need to establish lasting relationships with clients becomes increasingly important. Corporate hospitality has long been seen as an ideal opportunity to nurture these relationships.

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Club Wembley is a powerful and rewarding way to entertain guests. It builds loyalty with existing clients and makes potential clients feel valued as well as making staff and colleagues feel rewarded. Members have access to the exclusive Club Wembley concourse which offers a kilometre of restaurants and bars. Choose from the formality of The Venue and Arc Restaurants which offer traditional cuisine to The Venue and Arc Brasseries which offer a more informal atmosphere with a contemporary hot and cold buffet. For a light snack, the Champagne and Seafood bars offer a more relaxed environment. To make the journey to the Stadium easier, all Club Wembley members have use of the complimentary train service which brings passengers into Wembley Stadium station. Tickets are available for London Marylebone, Beaconsfield, Bicester North, Warwick Parkway and Birmingham Moor Street.

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Interested? Find out more... Contact Harry Tyndall on 020 8795 9781 or harry.tyndall@wembleystadium.com for more information about Club Wembley or to arrange a meeting.

Of course, it doesn’t have to be all work and no play. Club Wembley is also an ideal setting for spending valuable time with friends and family. Whoever you decide to bring with you to Club Wembley will always remember their experience at this exciting venue. ^Subject to availability *Excluding the FIFA World Cup Finals tournament; the UEFA European Championship Finals tournament; the Olympic Games; any association football match staged at the Stadium where The FA or the Football League is not the owner. We will however try to secure tickets for these excluded bid events where possible. ** Member events are subject to availability and may change year on year. Places will be limited to each event. Details of these events will be communicated to Club Wembley members with prior notice. Club Wembley reserves the right to change or withdraw member events at anytime.

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THE OPEN | WHERE DO YOU TRADE?

OPEN THE

IN THE OPEN UPS & DOWNS BOOK CLUB CELEBRITY TRADER INTERVIEW

From trading ETFs to trading cigarettes The markets might well be yo-yoing on a daily basis in conjunction with the Eurozone debt crisis, but undoubtedly the biggest news of the month was came from the offices at UBS. In a hark back to 1995 Kweku Adoboli, an ETF trader on the Swiss bank’s “Delta One” trading team, pulled off his best Nick Leeson impersonation by dropping a cool $2bn through unauthorised trades. Just how Adoboli managed to run up the biggest single trading losses in British history is yet to be fully disclosed, although it has been revealed that the inputting of false hedges, particularly against the Swiss Franc, and trading beyond his permitted financial limits were at least to blame for such a spectacular fall from grace. The news of wiping out of an entire quarter’s profit by one rogue employee has understandably not gone down well in the bank’s home county of Switzerland. Swiss taxpayers had to bail out the bank to the tune of $60bn after the financial crisis of 2008, so it comes as little

surprise that UBS CEO Oswald Grubel has been forced to pack his bags in wake of the scandal. Adoboli’s losses are substantially larger than Leeson, the rogue trader so famous they had to make a film about him, but are still overshadowed by Jérôme Kerviel, the most historically unsuccessful illicit dealer of all time, who managed to separate Societe Generale from €4.9bn in 2008 before he was finally nabbed. Adoboli will learn the full extent of his fate later this month, which will almost certainly include considerable jail time. So what’s the moral of the story? Investment banks need tighter regulation, perhaps? That you should pay slightly more attention to the helpful guy in the office offering to stay late and do extra data entry than you have been, almost certainly. Or maybe the lesson to be learned is just that if you are going to engage in a spot of off-piste dealing, make sure you get it right? It’s all a matter of perspective.

October 2011 | THE EXCHANGE | 11

THE OPEN | NEWS

UPS&DOWNS

From news stories to trading issues, a round-up of the things that have caught our eye this month

Send us your news, views, and unprintable gossip at: editor@theexchangemagazine.com

Star Sports kicks off Financial Spread Betting Service ‘Gentleman’s Bookmaker’ enters agreement with WorldSpreads

Can Twitter be Used to Analyse the Financial Markets? It can’t have escaped the attention of traders with their fingers on the social media pulse that Twitter is fast becoming one of the go-to tools for determining what’s going on in the markets. Scores of index and currency-related tweets are hitting the information super-highway every day. And with traders making the markets, surely it makes sense to pay attention to the opinions of the trading masses. And just to hammer the point home, even scientific research is now pointing to using Twitter as an effective trading tool. A recent study by Timm Sprenger, PhD student at the Technical University of Munich, analysed a sample of 250,000 tweets posted over a period of six months. His research identified a “striking

12 | THE EXCHANGE | October 2011

co-ordination” between the Twitter consensus about stocks and the external information from spread betting and financial trading analysts. He also found that more valuable information tended to be retweeted, giving it the opportunity to connect with a larger audience. Twitter may eventually provide a more specialised version of its Trending Topics feed. However, for traders who want to stay ahead now the best market analysts from the biggest spread betting and forex platforms are already providing up to the minute data and reaction straight to you PC now. And to make matters even better, for The Exchange’s very own market commentary and opinion you can follow @theexchangemag and @ExchangeEditor today.

The UK’s fastest growing private bookmaker, Star Sports, has expanded its activity into the financial betting space with the launching of Star Financials. The spread betting website, which can be found at www.starfinancials.co.uk, has been launched in conjunction with WorldSpreads. Clients will be able to trade on over 4,000 markets including indices such as the UK 100, stocks, forex and a selection of commodities including gold and oil. As a welcome to all new account holders Star Financials are promising to cover net losses in a client’s first eight weeks of trading up to £250, when they make an initial deposit of £500 and place a minimum of 10 trades. Commenting on the launch, Managing Director of Star Sports Ben Keith said “This is an exciting new development for us all. We have every confidence that with our emphasis on exceptional service and WorldSpreads’ leading platform, Star Financials will be every bit as successful as Star Sports has grown to be in just two years.” Conor Foley, CEO of WorldSpreads, is equally enthusiastic about the venture, saying “We are delighted to form a partnership with one of the country’s most ambitious bookmakers. Star Sports has become a major player on the UK bookmaking scene over the last few years with a strong emphasis on excellent customer service and creative marketing. We believe that our two brands will work well together and we are pleased to extend this opportunity to Star in their ultimate aim to become a one-stop shop for their customers.”

THE OPEN | NEWS

eToro pioneering trader “Investment Business” with CopyMe™ eToro, the world’s largest investment network, has shown its innovative side once again by launching another new product, CopyMe™. Designed to incentivise traders to share their knowledge and theories, CopyMe™ is an individual and personalised virtual e-store allowing expert traders to generate a second line of income by showcasing their investment skills. CopyMe’s innovative concept and business model enables expert traders to easily create their own investment shop and start promoting their financial services to every potential investor in the world. In addition, “Guru-traders” will benefit from the integration of CopyMe with eToro’s OpenBook, which exposes their trading skills to eToro users. CopyMe provides investors with full transparency on each trader’s performance, risk appetite, trading history and portfolio breakdown and is integrated into eToro OpenBook, the largest social trading network, which enables eToro community

First Mexican Culinary festivalcomes to One&Only Palmilla A-list resort One&Only Palmilla has announced that it will be hosting the first ever annual Mexican Culinary Festival next month. The event, which runs from 2nd – 6th November, will feature celebrity Mexican

members to invest in their trading performance by automatically copying all their trades into their own eToro trading account. Apart from building their own investment business, Guru traders are compensated on the amount of unique copiers they have per month and can earn big pay-outs in monthly income from their trading expertise. To become an expert trader, applicants are selected based on their historical performance, trade strategy and risk behaviour. Experts are required to maintain a successful trading history with a minimum number of executed trades over a specified time period, or hold a professional money management certificate. In the coming months eToro will offer additional marketing services to experienced traders allowing them to keep in touch with their followers and copiers and to effectively promote their investment services.

chefs Enrique Olvera from Pujol, Daniel Ovadía from Paxia and Edgar Nunez from Sud777, as well as boutique wines from the Guadalupe Valley. The four day feast includes daily cooking demonstrations hosted by the celebrity chefs and three individual dinners designed by each, as well as wine and tequila tastings. One&Only Palmilla’s fantastic resort is the perfect backdrop for the festival, making the event the perfect getaway for sunseekers in search of culinary bliss and idyllic relaxation.

A new chapter of the horizon for Kensington Place Restaurant group D&D London have announced that Kensington Place, Notting Hill’s iconic restaurant, will relaunch later this month with a fresh new look. Having opened in 1987, Kensington Place was the first modern British brasserie in London. The new look will involve interiors designed by Polly Dickens, a new menu containing not only classic brasserie dishes but also celebrating the best of British fish, and the kitchen will be led by head chef Dan Loftin, formerly at Almeida restaurant. The interior will feature a custom made communal table and banquette seating which will give a more intimate feel to Kensington Place. Wine will also be a big part of the new Kensington Place with a list containing some excellent wines from France and the New World. An Enoround at the bar will give customers a choice of many fine wines by the glass to enjoy with light-bites and snacks. Kensington Place will close for refurbishment on 23rd September and reopen on 7th October. We’ll see you there. www.kensingtonplace-restaurant.co.uk

October 2011 | THE EXCHANGE | 13

THE OPEN | BOOK CLUB

The Exchange Book Club The thinking trader’s answer to Oprah

Each month the Exchange takes you through the trading literature you’ll need to amass the ultimate spread betting library. This month: Mark Ingebretsen’s The Guts and Glory of Trading, Stop Orders by Tony Loton and 7 Charting Tools for Spread Betting by Malcolm Pryor The Guts and the Glory of Day Trading:

Stop Orders

7 Charting Tools for Spread Betting

A practical guide to using stop

A practical guide to making money from

True stories of day traders who

orders for traders and investors

spread betting with technical analysis

made (or lost) $1,000,000

by Tony Loton

by Malcolm Pryor

All those who have even the most basic knowledge of trading and investing will know of the stop order tool. Stop orders can be used with any tradable security or financial instrument – including equities, exchange traded funds, currencies, commodities, options, contracts for difference and spread bets – to help manage losses and improve profitability. However, even though this is an essential – perhaps the most essential – tool available to traders and investors, it is often poorly understood and regularly misused. Unfortunately many books on trading and investing only include a short section on the topic and gloss over the finer points somewhat. Tony Loton’s Stop Orders redresses this balance by dedicating a whole book to the subject. In a lively and engaging style, Loton runs through the different kinds of stop order available – including buy and sell orders, and trailing stops – and then moves on to how to apply stop orders effectively at entry and maintain them properly until exit, how to limit downside risk by combining stop orders with effective position sizing, and explains what you should do if the market gaps and you get stopped out. In a particularly valuable section, the book examines the practical applications of the various stop order tools and outlines some ways to use different stop order techniques when placing your trades. Whether you are a trader, investor or spread bettor, you will find something of value here – this book will help everyone to see the importance of the stop order for containing losses, locking in profits and, as a result, being successful in the markets.

Spread betting lends itself especially well to charting tools, but getting properly acquainted with the ones that are going to be most helpful to your trading is rarely a simple process. You can take your chances on the web, or pour your money into the pockets of seminar organisers, and still be left without a really full and practical idea of a tool’s potential. This is what makes Malcolm Pryor’s 7 Charting Tools for Spread Betting such a valuable book. The author has also written the definitive guide to spread betting, and a number of strategy books/ DVDs. Here he takes the same thoughtful and incisive approach to setting out a range of valuable charting tools – and demonstrating how they work through detailed and often compelling examples. The tools in question are ATR, Directional Movement, Moving Averages, Support and Resistance, Oscillators, Relative Strength and Momentum. Each chapter takes the reader through a detailed look at how the tool in question is constructed, then at its strength and weaknesses. After this, the tool’s available settings and potential uses are laid out, followed by an in-depth worked example of it in action. Pryor is a great writer of plain and logical prose, even when explaining some abstruse concepts, and these chapters are brilliant introductions or refreshers to potentially turgid topics. With the advice steadfastly practical throughout, you’ll be itching to incorporate some of these gems into your own trading and reap the rewards. And thanks to this book, that’s no longer a difficulty.

by Mark Ingebretsen As well Arabian revolutions and cats that look like Hitler, the internet has given birth to widespread day trading. It’s come in two phases. Firstly, thanks to zippy 56k net connections, traders in the ’90s and early 2000s were able for the first time to buy and sell shares as many times a day as they liked, using their own research, and all from the comfort of their own home. The boom was phenomenal. Day trading was the trendy self-employed career of the day. Unfortunately, it also coincided with the tech bubble, and a lot of those internet-enabled traders ended up trading heavily in internet-based businesses. So the bust, too, was phenomenal. Since then, of course, there’s been economic recovery and economic collapse again. But all the while, the tools available to traders have carried on improving, and now, in the second phase, an even better-equipped day trader has emerged. They also need to be more savvy, and learn from the triumphs and failures of the past, which is where Mark Ingebretsen’s fascinating book comes in. Originally written in 2001, in it he interviews twelve real-life day traders and shares their stories: the strategies they use, the mistakes they’ve made, the triumphs they’ve earned. It offers an up-close look at what it took to be successful the first time round; and how that will help anyone looking to be successful today. A critical insight that emerges from the book is that, as the author says, “an average intelligent person can indeed succeed at trading”. By the end, you’ll be persuaded of this too – and much better armed to be one of them.

14 | THE EXCHANGE | October 2011

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THE OPEN | CELEBRITY TRADER

Fronting up to the markets

18 | THE EXCHANGE | October 2011

THE OPEN | CELEBRITY TRADER

CELEBRITY TRADER Every month Central Markets and The Exchange present you with Celebrity Trader. We take unsuspecting celebrities to the trading floor, give them some money and a little training, and let them face off against the pros to find out just how much they’ve learned

Taking on the challenge of being this month’s celebrity trader is England’s most capped International rugby player and 2003 World Cup winner Jason Leonard. Opponents found Jason formidable in the scrum, but just how tough will he find it going head to head in a trading battle with Central Markets’ Trading Director Adam Stark

When it comes to meeting challenges head on and coming out successful the other side there’s very little Jason Leonard doesn’t know. A World Cup winners medal, a Lions Tour series win, numerous Five Nations, Six Nations and Grand Slam titles are proof of that. Throw in his personal achievements, which include being the most capped England rugby player of all time, a captain of his country and being only the fourth Englishman to be inducted into the International Rugby Hall of Fame, and you begin to appreciate just what a goliath Leonard has been in the sport he has loved, and dominated, for so long.

And despite retiring from rugby in 2004 Jason is still looking for new challenges to overcome, which is why we were very excited when he agreed to take up the mantle as our celebrity trader this month. Leonard is also a man who knows something about pressure. As the cornerstone of the England front row for almost fifteen years he certainly knows about the physical side of stress, after all there aren’t many of us who would even contemplate putting our bodies through the rigour and strain he has throughout his rugby career. And having played in, and won, a World Cup final, he also knows what it’s like to stare expectation in the face and still come out a winner. Yet despite displaying a fearless nature on the pitch, just the thought of turning his hand to trading full time has Jason reeling. “There are too many ways that you can lose a huge amount of money for me. You definitely need courage to be a good trader. Personally I’d rather have Jonah Lomu running at me instead!” But how did Jason do when given the opportunity to be this month’s celebrity trader? “I don’t really have that much experience of trading,” he is quick to point out, but can remember back to a time when trading and rugby went hand in hand. “In the amateur days of rugby union a lot of players used to work for trading houses. They’d get up early, do a day’s work in the City, and then train in the evenings. But the most I’ve ever done is a few trading house charity days working the phones. That was scary enough.” However, when it came down to business Jason was nowhere near as hesitant as he might have imagined. He admits that he might have

October 2011 | THE EXCHANGE | 19

THE OPEN | CELEBRITY TRADER

“You definitely need courage to be a good trader. Personally I’d rather have Jonah Lomu running at me instead!” closed profitable positions slightly too early on occasions, but once he’d gotten into the swing of things his fear of the markets quickly evaporated. A series of well-timed trades, including buying mining giant Fresnillo and selling British Airways, reaped a healthy reward that more than covered smaller losses. Unfortunately for Jason he fell £500 short of being the first celebrity to conquer a professional trader in our celebrity trader challenge. His opponent Adam Stark finished the trading session with a profit of £10,610.58 from his starting account of £100,000, besting Jason’s profit of £10,120.25 by just 0.5%. Jason’s disappointed to have come so close to winning, but overall he’s happy with his results across the challenge. When the conversation returns to rugby we’re keen to find out what Jason thinks of the home nations’ chances of bringing the World Cup back from New Zealand at the end of the month. Unsurprisingly it’s the Kiwis who he’s backing as the overwhelming favourites for the Webb Ellis trophy. “They’ve choked before, but now they’ve got home advantage and the expectation of a nation behind them, not to mention a world class squad”, he explains. That doesn’t mean he’s prepared to count out England though, who’ve been to the past two World Cup finals and have a number of past tournament winners in their squad, just yet. “It looks like there will be a Northern hemisphere team in the final, and once you get there you’ve always got a chance. The bounce of

20 | THE EXCHANGE | October 2011

a ball, a referee’s decision, any lucky break can determine a rugby game on a given day. There have been bigger upsets before. And even though England haven’t played their best rugby in New Zealand so far, you have to think there’s more to come. England are the current Six Nations champions so we know they’ve got quality players in their side, and they’ve been to the last two World Cup finals, so they know how tournament rugby works. When it comes to knockout rugby England are historically one of the strongest teams in the world. And that’s where New Zealand have been found out in the past.” And what if he could use his extensive his extensive experience to trade rugby instead of stocks, just where would he put his money?

“How could it not be Jonny Wilkinson?” Jason replies. “His stock has always been sky high, he’s kicked teams to victory so many times. He was virtually out of the game for a couple of years because of injuries but he’s fought his way back, reclaimed the England no. 10 jersey, and is now considered one of the best players in the world again. He’s also one of the most popular sportsmen of his generation and a great ambassador for rugby, so if you could invest in him you definitely would. His stock is fantastically high.” A slight nod to nostalgia, perhaps? After all it was Jonny’s last minute drop goal that Jason has to thank for the World Cup winners medal that

THE OPEN |CELEBRITY TRADER

Breaking down the trades Richard Perry, Market Analyst, Central Markets Jason Leonard: Jason has a successful stint as the celebrity trader, but unfortunately for him he came up just short against this month’s in-house opponent, Central Markets’ Trading Director Adam Stark. Both traders showed a decent profit after taking some smart market positions, but when the trading was done it was Adam who was the overall winner, be it by the narrowest of margins.

takes pride of place in his trophy cabinet. Of course not, because Wilkinson’s career achievements stretch much further than that. As well as at one time being the leading points scorer of all time in test rugby, if England do make it to the final later this month Wilkinson will be the first fly half to lead his team to three consecutive World Cup finals. Not a bad place to start then if you’re looking a blue chip to put your money on. “If you wanted to diversify your portfolio and invest in a global player as well I think it would have to be Jonah Lomu”, Jason continues. “He’s a global brand. When he burst onto the international rugby scene nobody had seen

a player like him before, he completely changed the game. In the past try scoring wingers would have been 5’9”, speedy and nine stone dripping wet. Jonah was 6’5”, 19 ½ stone and could run the hundred metres in under 11 seconds. He was amazing, a complete athlete, and with skills too. I don’t think we’ve seen a rugby player’s stock higher than Lomu’s was in 1995.” Unfortunately investing in Wilkinson or even Sonny Bill Williams, Lomu’s heir apparent, is still a pipe dream (unless we’re talking sports spread betting, which coincidently we will be in a few pages time) so for now Jason will have to stick to betting the financials. Which is fine, because as he’s just found out, he’s very good at that.

Jason went for a bit of a techie theme with his trades sprinkled with a smaller number of commodity plays and a bit of an emotional short in BAE Systems after the announcement of huge job cuts, which gave him a very pleasing profit. Jason made some decent profits catching the market nicely as he put some long trades on as the market rallied at the beginning of the week. Chipmaker ARM holdings was a nice little intraday earner, while he also caught Mexican gold and silver miner Fresnillo perfectly on Day two. His main losses came as he bought a gold ETF which was never on side, while his defensive long AstraZeneca was a somewhat surprisingly loser. In all Jason made over £10,120 across the trading period from a starting account of £100,000, to give him a trading performance of 10.1% Adam was a touch more aggressive in his trading style, which was reflected in his performance. Opting to run his trades for much longer than Jason hugely paid off, especially with a trade in Johnson Matthey, which was a big winner (and ultimately the main reason why he one the challenge). He suffered mixed fortune in trading Burberry Group twice, scoring a big winner early in the challenge but also a confusingly picking up an almost equally large loss later in the week. The other trade which Adam suffered on was trying to catch Man Group as it fell hard on results. Overall Adam was up over £10,610 on the four days.

October 2011 | THE EXCHANGE | 21

THE OPEN | INTERVIEW

THE

FOREX FACTOR The Exchange sits down with OANDA co-founder Dr Michael Stumm to talk about one of the most technologically advanced platforms in the industry, the benefits of trading forex, and just how global economics is going to affect your trading account balance How long has OANDA been operating globally in the forex markets? We’ve been in forex trading since 2001, so over 10 years now. And despite initially being stationed in Canada we’ve been an international provider from day one. The beauty of the internet is that there are no geographical borders to expanding your business. What was your personal background before getting into forex? I’m a computer scientist by trade, and initially went down the academic route. I’m a professor of computer engineering, but we saw a challenge in forex so we decided to investigate creating a service for traders and everything has grown from that point. We wouldn’t have gotten into the industry if we hadn’t have found

22 | THE EXCHANGE | October 2011

it interesting, it’s the technical challenges that I personally thrive on and go after. In which case what do you think you would be doing if you weren’t working in forex now? I still teach, and I still do research. I’d still pursue wacky technological ideas that interested me, which is how I got into currency trading. But there is so much work to do at OANDA, its so exciting, so any other ideas have been put to the back burner. There’s so much opportunity in the industry to advance its current capabilities that I’d be foolish to walk away and do something else. How has the OANDA brand expanded since its launch? When we started out in 1996 we only offered currency conversion rates, which was just a simple webpage and not much else. We didn’t go out and sell the product, but six months after we came out AOL called us and said they wanted to publish our material on their site. That’s where we had our first licensing deal, and as of today 38,000 companies have our content on their website. What distinguishes OANDA from other forex platforms? From a client’s perspective, I think the biggest difference is our prices. The cost of trading is the spread, and we strongly believe we have the tightest spreads in the business

THE OPEN | INTERVIEW

October 2011 | THE EXCHANGE | 23

THE OPEN | INTERVIEW

encounter tremendous difficulties in the not too distant future also, which will mean you could have three of the major global economies all struggling at the same time. It wouldn’t surprise me if it takes ten to fifteen years to dig out of the current hole we’re in. I’m usually an optimist, but right now I’m very pessimistic. I hope I’m wrong.

with no additional commissions or fees, particularly on the retail side. We are also very proud of our transparency and how we treat our clients, if we make a mistake we reimburse our client accordingly and immediately, so we are known for looking after ours clients very well. We have primarily relied on word of mouth to expand the business and so our entire growth came from having such a good reputation with our clients, who also typically tend to be very long term customers. The rest of the industry tends to be very high churn for clientele, we have far lower churn and that’s from having good pricing and treating clients appropriately. Does the OANDA platform have many unique features? Firstly we’re the only platform where you can trade at the weekend. That’s important because if something significant happens on a Saturday or Sunday and you want to trade on the back of it, with all other providers that’s impossible. For example, the US credit rating got downgraded after markets closed on a Friday, and ours was the only platform where people could get into a position and short the dollar immediately. Another important distinction that separates OANDA from other providers is instant settlement. When you close your trade a lot of other platforms have a typical two day settlement period, so the profit or loss only gets credited or debited form your account two days after you’ve concluded the trade. There’s no reason at all to wait two days, we credit and debit our traders instantly. A third difference is that we don’t do rollover swaps, instead we calculate our interest on a second by second basis. Roll over swaps force the customer to pay a full day’s interest if they have a position open for only a couple of hours, but that happens after to be open after 5pm EST. And all the intraday traders pay no interest at all so it’s a very unfair system, which is why we do things differently. Is there a minimum deposit restriction on opening an account with OANDA? Yes there is a minimum deposit restriction that we enforce rigorously. It’s $1. So on a serious note, there is no financial barriers to opening an account with us. Is there such a thing as a typical OANDA trader? Not really. We have people trading with us from all backgrounds and with all levels of

24 | THE EXCHANGE | October 2011

Can you envisage a situation where the Eurozone breaks down completely? Not only can I envisage it, but I think it’s highly probable.

experience. To give you some examples in the extreme, we have major banks that use our liquidity on one hand, and on the other hand there’s a gentleman in Dallas, Texas, who works at McDonalds flipping hamburgers and doesn’t own a computer, but has an OANDA account and goes to the library to trade. We have a lot of wealthy retail clients as well, and then we have everything in between. Clients in different countries tend to trade differently as well. Can you foresee the forex market continuing to expand at its current rate? Is technology going to continue pushing the boundaries of how retail customers can trade? Absolutely. I don’t think there’s a technical limits to what we can do, there’s only a psychological limit. That’s going to go largely disappear too, we’re still scratching the surface of what’s possible in this industry. If you consider the people who trade foreign equities in the USA as an example, most don’t hedge out the forex risk involved in what they’re doing. There are tremendous opportunities for expansion everywhere. What is your overall impression of the situation the global economy has found itself in? For what it’s worth, my view of the economy at the moment is very dire. Europe’s going in the wrong direction economically very quickly, the US has great problems of its own and the Chinese economy looks set to

What effect do you think that will have on global forex markets? To start with there will be more forex pairs to trade so that will be good for us. Not that I want Europe to break apart at all, but for someone who’s in our business volatility is a good thing. Just the discussion of Greece having to exit the Eurozone has caused tremendous volatility, and trading volume is directly correlated to that. After all if the markets were completely flat all the time no one would trade. If the market is going up and down then there are more opportunities for speculating on it, and the more important it is to hedge other investments, so the higher the trading volume will inevitably be. Would you say then that now is a good time for a novice trader to enter the market? No, in fact I would say the opposite is true. It’s actually very dangerous for the novice trader right now because the market is so volatile. Central banks are intervening, when the Swiss bank made one statement recently the currency moved the equivalent of 20 standard deviations (over a 10 year period). That’s like sending a novice out sailing when there’s a hurricane on the horizon. Is there an advantage at the moment to trading forex over trading stocks? There are many reasons to trade forex, independently and in conjunction with stocks. Firstly, forex is another asset class and you want diversification in your portfolio, so a proportion of forex is always good. You should be hedging out your equities that are foreign based to minimise your exposure. Spreading your eggs around is prudent strategy. Also, if we’re in for a lost decade in the Western economies or maybe even globally then there’s less reasons to believe that stocks will rise

THE OPEN | INTERVIEW

annually anywhere near the rates we’ve expected in the past. With forex, not everything can go down at the same time, so diversification makes more sense. Is there such a thing as a safe haven currency anymore? Not really, and I think that’s one of the problems that almost every trader is currently faced with. Europe has enormous problems, so people think the Euro will go down, but then the UK and USA also have problems of their own. The Swiss Franc is in good shape, but has gone up in value so much that the Central Bank is hell-bent on not allowing it to rise any further. So you could argue that the only way for the Swiss currency to go is down. Canada is tied too closely to the US, so all in all it’s very difficult to pick a currency that’s particularly appetising to trade. You might see another currency emerge shortly, but the problem will be lack of liquidity. Singapore looks like a very good candidate for this at the moment but its economy is not big enough to accommodate being a safe haven, so if the world started buying up Singapore dollars the currency would rise so fast that the government would quickly have the same problems that Switzerland does. If the Eurozone breaks down, what will be the consequence of not having a second currency with enough liquidity to challenge the US dollar as the premier global currency? In the end the US dollar is going to win the currency war because it has a long history of being relatively safe, despite its ups and downs. Rightly or wrongly the US will benefit if the Eurozone breaks down, whether that is something the US wants to happen politically is a different matter. Do you find that you are now having more customers coming to OANDA looking to trade with a more defensive mind set because of the state of the global economy? Rather than trading for profit are people now looking to the forex purely as a way of hedging other investments? Absolutely. Large firms, small firms and individuals are in the same boat as well, and it’s an interesting observation seeing how people’s use of the forex market has changed somewhat. If you think your government is really messing your economy up, and you think your central

government does haven’t a clue about how to cope with an economic crisis, what can you do? Everything you own is valued in your currency, but you can short the currency on the exchange markets if you think that the government’s actions are causing the value of your property to go down. And then you can at least benefit a little from the loss. The principle applies to people in every country across the globe. Often people will short their own home currency because all the assets they have are in that currency if they believe that currency will go down. Finally ,what would be the biggest piece of advice you could give to traders in these economic times? The biggest flaw of most retail traders is that they don’t know how to do risk management.

We’ve recently done an analysis of the entire of 2010 for our retail clients, and 55% of the trades they entered into were closed profitably. So we can see that those traders are smart, they understand the markets and they get them directionally correct. But contradictorily they still lose money. How is that possible? It’s because whenever they’re in profit they close positions relatively quickly, but when they find themselves in losing positions they let their losses run and run until they’re forced out or decide to close with gigantic losses. If they knew how to do the risk management on the losses side their account would be profitable, and that’s an educational thing as opposed to anything else. So appreciating that side being a good trader, not just relying on getting the markets directionally correct, is what I would stress to traders.

October 2011 | THE EXCHANGE | 25

FEATURE

Spread the play around

26 | THE EXCHANGE | October 2011

FEATURE

Since its inception sport and gambling have gone hand in hand. There’s nothing like the enticement of a bet on the football or the races, particularly if you’re a trader used to wagering money professionally or as a sideline, and think you’ve got an edge in the market.

For the social gambler fixed odds markets are an enjoyable way of making your Saturday afternoons more interesting, but what if you want to take it up a gear? For the professional looking to making a living the high street bookies doesn’t offer enough options to turn market knowledge into profit. And that’s where spread betting on sports comes in. Once considered a fools game, sports betting is now a great way of expanding your portfolio into an ever expanding and ever technical market. But just how does it all work, we hear you cry? Well, com with us as we go back to sports betting school 101.

How does spread betting on sports work? If you’re familiar with financial spread betting then there’s nothing about spread betting on sports that’s going to surprise you. Stay with us though as we go through the basics, as there are a number of subtle differences that you might not have considered before. If you’re transferring over from high street sports betting for the first time then the similarities from what you’re used to are far fewer, so let’s start from the beginning. The main difference between spread betting and fixed odds is the method of calculating how much money you win or lose from each bet. With traditional

betting answering a question of what you have a stake and what you have to gain with any wager is a simple one; you place a bet of a certain amount with given odds, knowing that if the wager is a successful one you’ll be returned that multiple of your wager plus your original stake e.g a bet of £100 at 5/1 will return (5/1) x 100 + 100 = £600. All very simple stuff I know, so need to explain further. In addition, because you’re betting on a definitive outcome (e.g whether a team will win, lose or draw) occurring you can only ever completely win or completely lose your wager. You can’t be correct or incorrect by degrees. Therefore if you bet £100 and lose the wager all of that money belongs to the bookies, the amount you’re down won’t be a penny more or a penny less.

The beauty, and the potential pitfalls, of spread betting is that this doesn’t apply. Rather than betting on definitive markets, punters are asked to determine whether a point on a sliding scale suggested by the platform is over on under what the actual total will be at the end of the event. The spread betting markets cover almost every sport, but for sake of explanation let’s look primarily at football. Typical markets include goal difference (how many goals Team A will defeat team B by), total goals scored throughout the match, minute of the first goal scored and total number of various match incidents (corners, yellow cards etc). Before the game begins the platform will set a price (the spread) with an upper and lower limit. The punter will then predict

October 2011 | THE EXCHANGE | 27

FEATURE

whether the total will be higher or lower than the spread, and wager an amount per point based on that calculation. For example, if the spread of number of goals scored in a particular game is 2.95 – 3.05, a bettor has the option to either “buy” the spread i.e. wager that more than 3.05 goals will be scored, or “sell” the spread (a prediction that less than 2.95 the teams will combine for less than 2.95 goals). If the bettor wages £10 per point, then for every goal over or under the spread a bettor who has corrected predicted the total will win £10. In our example, therefore, if I had bought the spread at £10 a point and the game had finished 3-2, I would have won 5 (actual total of goals) - 3.05 (the price I’d bought the spread at) = 1.95 points, which would then be multiplied by my wager per point to give me an overall profit of £19.50. We can see why this appears to be so beneficial for bettors looking to make money from sports. If the score had been 4 – 4 instead of 3 – 2, our profit would have been £39.50, and if the score had been even higher then our profit would have been even greater. However, it’s important to take heed

28 | THE EXCHANGE | October 2011

of the fact that the reverse is also true. Without proper understanding of how spread betting operates and a plan of when to take profits and cut losses you can suddenly find yourself on the wrong end of a much larger losing trade than you would have been prepared to stake in a fixed odds wager. If we had sold the spread in our example instead of buying and the score was again 3 – 2, we would have lost £30.50. And don’t forget, there has already been one ten goal game in the Premier League this season. If we had been on the wrong end of our imaginary spread in that game we would have suffered an £80.50 loss, far more than we could have ever won, even if the game had been a 0 – 0 draw. The key difference between fixed odds and spreads therefore is that strategy is as important as sporting knowledge if you want to be profitable in the market. The key to being successful is knowing when to open and, even more importantly, when to close to trades. By letting all your trades run to their natural conclusion essentially nullifies the primary advantage of trading spreads over fixed odds, that you can take

profit or cut losses before the event ends. This allows you to bank profit before the unexpected ruins you bet, and to profit by reacting to outcomes you think will happen in a shorter period of time than the entire game. That’s not to say that you can’t still make a profit by letting your trades run. This is where sports spread betting does differ from financial spread betting somewhat. When you spread bet on indicies or commodities you are only ever betting on how you believe prices will move, because theoretically the markets will continue ad infinitum. On the other hand, every sports spread betting market regardless of length (be it a single game, tournament, or entire season) comes to a conclusion. This means that not only can you make money by opening and closing position after the spread has moved favourably (as you would for financial spread betting), but also through leaving a position open until the market closes after making a correct prediction e.g. last month we bought total number of goals in the Premier League game between Fulham and QPR at 2.75 – 2.95 before the game kicked off.

FEATURE

Andy Johnson scored for Fulham after less than 90 seconds, causing the spread to immediately shift significantly. We could have sold at his point and made a decent profit, but decided to leave the trade open and reaped the reward as the Cottagers scored a further two goals before half time. Because the goal total had already exceeded the price we had bought at we now knew we would be making a profit regardless of what happened in the second half, our only decision now was when to close the trade to maximise our profit. Fortunately Fulham continued to score regularly throughout the second half, and so we elected to keep the trade open until the final whistle. The game finished 6-0, giving us a profit of 3.05 points to cash in on. This highlights another difference between sports spread betting and financial spread betting. Good financial trading is affected by fundamental and technical market analysis. These also play a significant role in sports spread betting, but a third factor, time, also plays a definitive part in affecting the market. In events with a defined time period such as a game of football or rugby market prices are constantly changing as events or results become more or less likely. Traders who understand and use this difference effectively can gain a real advantage over the market. What are the advantages of spread betting over fixed bets? If you’re used to getting your sports bets on in the high street bookies or their online equivalents then the sports spread betting system might initially seem overcomplicated, and frankly a waste of time. After all, you’re backing teams on the spread in the same way as you always had in the past, the winners and losers are the same, and you’ll win or lose money in the same way as you always have. Well, no you won’t actually. And that’s because of the fundamental difference between sports betting in the spread markets and on the high street of not only profiting from picking winners, but also by laying losers, and mostly on changing prices (in exactly the same way as in the financial spread betting markets). This is where spread betting has a huge advantage

over high street betting. The reason as to why this is such an advantage is again best explained through a practical example of the consequences of this difference. I placed a wager on the all of the “Top Six” Premier League teams to win on 24th September in a fixed odds accumulator bet (where every team must win for the bet to be successful). Manchester City picked up three points with victory over Everton in the lunchtime kick off, and Arsenal, Tottenham, Chelsea and Liverpool did likewise that afternoon. The first five games of the accumulator had gone my way, meaning that my wager would have been paid out on if Manchester United won at Stoke City in the day’s late game. However, if United failed to get the win, I would still lose the bet despite picking five winners.

The price I made the accumulator bet at was 10/1, which for all intents and purposes was now the odds I was getting on Manchester United to win the game betting with my original stake, even though the bookies were only offering 8/15 to punters looking to wager on a United win. I had manipulated the odds hugely into my favour, but because profit is only paid out at the conclusion of the bet there was no way for me to realise the advantageous position I had created for myself. The game kicked off, and United went ahead through a first half goal from Nani. With a score line of 1-0 at the break, the odds on a United win had plummeted even further to 1/5. By now I was beginning to mentally spend my winnings, but of course I couldn’t go the bookies and collect them because I still hadn’t won anything

October 2011 | THE EXCHANGE | 29

FEATURE

yet. From a relatively modest wager hours before I was in effect suddenly wagering a substantial amount of money that Stoke wouldn’t pull level in the second half. And what’s the moral of the story? As I’m sure you’ll have been able to guess by now, if you didn’t know already, Stoke drew level through Peter Crouch goal ten minutes into the second half and the game finished as a draw. So despite accurately predicting five and half games of football correctly all I had to show for my efforts was a losing betting slip. If I could have collected on my bet at half time for 85% of my total expected profit then I would have done, but with an all or nothing fixed odds betting system this simply isn’t a possibility. This method of gambling, where you only get paid if you back winners, doesn’t sound so good now, does it? And that’s because it isn’t. To be successful in the sports betting arena (and move away from a position of pure gambling) it’s imperative that you adopt the same attitude to the sports books as you do the financial markets. The principles you have to adopt if you want to make a profit in the long

30 | THE EXCHANGE | October 2011

run include taking profits at the right time, cutting losses and hedging positions. All of these actions can be taken by spread betting, which adds a much greater degree of professionalism and consequentially profit opportunity to your long term sports trading account. Getting into the field And that’s really all you need to know to get started in the sports spread betting world. There is plenty of reading material to help you master the basic techniques of sports trading and tips on where to find a quality trade, including a fantastic regular

series of articles written by Bet Angel’s Peter Webb here in The Exchange, but no advice on paper can act as a substitute for devise good strategies and testing them in the markets. Developing your own individual trading system and learning how to manage your taking profit and losses take time to master, so proceed with caution, but the best way to acclimatise yourself with this new style of wagering is to get into the field and learn from experience. And you never know, you might just find that sports betting hobby you used to have had suddenly turned into a whole new career.

Which are the best spread betting sites? There are a number of exceptional platforms offering sports spread betting, but for our money the best around are Sporting Index and Spreadex. Sporting Index are the world’s largest Spread Betting Firm and offer a superb range of spread betting opportunities in almost all live televised and non-televised sporting

& special events. Spreadex offer less spread opportunities betting on nontelevised sport but also offer a range of financial spreads as part of their platform. We have accounts with both platforms, and have nothing but positives to say about both companies customer care and telephone dealing.

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THE LONG | TRADE FOR A LIVING

LONG THE

IN THE LONG ALASTAIR MCCAIG ANDREI TRATSEUSKI GREG MICHALOWSKI COLIN CIESZYNSKI RICHARD PERRY

DECLAN FALLON KEN FISHER ATIF LATIF PETER WEBB

Japan considering whether to become part of Greece bailout Japan has revealed that it is considering becoming part of a global plan to help bailout the Greek economy. As the Eurozone continues to plunge into an ever-concerning crisis that threatens to engulf the global economy Japanese Finance Minister Jun Azumi has indicated that Japan will willing to help stem the tide of Greek debt, but that Eurozone countries need to form a rational plan to solve the issues first. Mr Azumi’s statement came 24 hours after the Nikkei 225 plummeted to a two-and-a-half year low amid fears of a slowdown of global growth, a clear indication that Eurozone debt problems is having a distinct affect as far afield as Asian economies.

“If there is a scheme that is based on a firm process, involves a reasonable amount of money and could provide the world and markets with a sense of security regarding a Greek bailout, I would not rule out the possibility of Japan sharing some of the burden,” Mr Azumi was quoted as saying by Reuters. Analysts said Japan’s willingness to consider sharing some of Greece’s bailout burden stemmed from the fact that it wanted to ensure stability in the region. Europe is a key market for Japanese exports and there are concerns that if a solution to the debt crisis is not found soon, it may hurt growth and dent demand for Japanese goods.

October 2011 | THE EXCHANGE | 33

THE LONG| ANALYSIS

34 | THE EXCHANGE | October 2011

THE LONG | ANALYSIS

This Greek Act is fast turning into a Tragedy By Alastair McCaig WorldSpreads

Greece is still part of the European Monitory Union (just), the potential disaster has been averted and the markets have been allowed to return to on their merry way. If you think the wedding was expensive, wait until you see the bill for the divorce. Bear traders have so much to feast on in the European markets that they do not need to turn their attention to anything else. The European Central Banks (ECB) fear that the contagion of the Irish, Portuguese & Greek sovereign debt markets would spread to both Spain and Italy has been well founded. The ECB has spent billions of euros buying up Italian & Spanish national debt and, despite their best efforts, both country’s 10 year debt yields continue to knock on the watershed 6% level. Both the European Union (EU) and the ECB have been fire fighting in several areas. On top of trying to tackle the sovereign debt issue they have also decided that due to the impending Greek debt default (surely a question of when not if ) and the liabilities of so many of the European banks to this debt, they have banned short selling of financial stocks. Unfortunately they should have noted the lack of success that the UK has had when banning short selling. The ban has been in place for well over a month and, as things currently stand, the French banks are down 14% and Spanish banks are down 8%. It would be a relief to both the ECB & EU if the situation in Greece were clearing, however

“Bear traders have so much to feast on in the European markets that they do not need to turn their attention to anything else” the Greek government has yet to even slow down the rate of decline, let alone turn it around. The combination of raising taxes and cutting costs has seen a rise in the Greek unemployment levels from 7.2% in 2008 up to almost 16% in August 2011. Having again failed to meet their targets for austerity that they set down when they received their last tranches of bailout funds, the murmuring of discontent from European Finance ministers is growing louder. With the Dutch & Austrian Finance ministers openly criticising the Greeks for failing to meet these targets and the Finish Finance minister looking for collateral to any finances lent to the Greeks, the cracks are beginning to show in the European Fiscal Union. It should be at this point that strong leadership and direction comes from Angela Merkel, however the German leader is currently busy trying to recover her power base after some very disappointing results in local elections. The German economy, being as

heavily export weighted as it is, has benefited from the weak € exchange rate. The uncertainty with Eurozone debt has helped keep exporters of German goods with healthy order books. Despite this it is very unlikely that the German electorate would feel comfortable with the liabilities of the European Union’s debt on their shoulders if the EU were to create some sort of EU bond. The problem that Angela Merkel has is that she would prefer to kick the can down the road and deal with the Greek issue at a later date. The Greek government has already implemented wage cuts across the board, however, and if they do not receive the next tranche of €8 billion now then will be unable to pay anyone. Greece is no longer being viewed as a potential catalyst in a domino effect across Europe, that theory has already become concrete reality. Comments coming from Germany are now more frequently focused on how to deal with Greece rather than ringfencing them. The deputy leader of the German coalition party commented “The safety net was conceived for countries that are willing and able to get out of debt…Countries that are not, or are incapable, cannot expect emergency aid. They need other ways, and here no ideas can be ruled out.” These are not the words of encouragement that Greek citizens would have wanted to hear. This Greek tragedy seems to be moving into its final act…

October 2011 | THE EXCHANGE | 35

THE LONG | ANALYSIS

Using currency pairs to measure risk aversion By Andrei Tratseuski, Currency Analyst, Forex Club

36 | THE EXCHANGE | October 2011

THE LONG | ANALYSIS

“Generally, the prices of commodities and currencies that correlate tend to lose value during times of uncertainty” The commodity currencies, which include the Australian, New Zealand, and Canadian dollars, have always been an important gauge of the risk aversion or risk appetite mentality in the currency market because of their correlation between currencies and commodities. Generally, USD/CAD possesses a negative correlation with oil, the AUD/USD currency pair correlates with precious metals, and NZD/USD correlates with agricultural products. Noticing the recent drop in commodity prices and higher yielding currencies, we notice a clear trend towards risk aversion. Generally, the prices of commodities and currencies that correlate tend to lose value during times of uncertainty. Bearing these premises in mind, we would like to analyze the recent price action of the major commodity currency pairs.

The New Zealand dollar has been outperforming the United States dollar as investors show favour in the “safer” of the two currencies. The catalysis to a relatively upbeat trading range in the NZD/USD currency pair has been caused by a potential interest rate hike from the RBNZ. Whenever interest rates are raised, the currency tends to increase in value. The market participants have been rationalising that the Reserve Bank of New Zealand (RBNZ) will hike the interest rates by 50 basis points to 3.00 per cent by the end of the year, and might

pull the trigger on the rates as soon as October. As market participants continue to price-in a potential interest rate hike, the NZD continues to lose a minimum amount of ground against the United States dollar. On the technical side, the NZD/USD currency pair has been hovering above a pivotal 0.80 threshold, yet the current bias is slightly to the downside. A weekly chart reveals a clear explanation of the recent price action, as the NZD/USD currency pair has been entrenched in a rising channel formation (represented by the blue lines). Price action tends to bounce between support and resistance with a bullish bias in a channel formation, until either support or resistance is breached. After hitting the upper portion of the channel, the price action has been pressuring the currency pair in a slight downward trend. An emergence of a descending triangle (represented by the orange lines) could accelerate a move towards a lower bound of a rising channel formation. Descending triangles tend to be negative in nature. A powerful line of support is hovering slightly below current market price at 0.80. The current support of 0.80 represents: a psychological figure, support of a descending triangle, the 23.6 percent Fibonacci retracement of the 2009 low and this year’s high, and the 52-week moving average. A break below the pivotal 0.80 threshold could push the currency pair to the mid-0.70’s. A cross of the

October 2011 | THE EXCHANGE | 37

THE LONG | ANALYSIS

MACD lines also points to a bearish mentality. Conversely, a rise of risk appetite could push the NZD/USD to test the all-time highs of 0.88. With weak economic growth coming out of Canada, the Canadian central bank decided to make it clear that the interest rates are unlikely to be hiked during this year. The Canadian dollar has been losing value ever since economic growth slowed. The USD/CAD currency pair rallied from a low of 0.94 and nearly reached parity as investors continue to gain confidence in the United States dollar. A profound drop in the price of oil, which has had a 67 per cent correlation to the CAD since 2000, is adding to the heavy losses. From a technical standpoint, the USD/ CAD is rebounding from 4-year lows, yet the currency pair is entrenched in a downward channel formation (represented by the green lines). Downward channels tend to be negative in nature where price action bounces from support to resistance. A recent break of a bullish flag formation represented by the orange lines) is helping the price action test parity levels. Bullish flags tend to be bullish continuation patterns. A rising wedge formation (represented by the black lines) is another pattern which is helping the current price action. The rising wedge formation tends to be a neutral pattern that could result in an upward or downward break-out. The parity level, represented by a blue line, is an important figure to be breached if the price action stands to gain more ground. The current resistance is making a powerful presence at 1.0150, represented by: the upper portion of a downward channel formation, the upper portion of a wedge formation, and the 50 per cent Fibonacci retracement of 2010’s high and this year’s low. The current support lingers at 0.9850, which is a lower portion of the rising wedge formation that coincides with the 52-week moving average. A rising MACD is currently acting positively on the currency pair. Continuous drops in oil prices and rising risk aversion could be positive for the USD/ CAD. Conversely, oil breaking above $90 a barrel mark and resurgence of risk seeking behaviour could push the currency pair below parity for a prolonged period of time. The Australian dollar, once a poster child of a profound rally, is showing signs of topping as a result of weak economic conditions, a lower demand from China and weaker commodity

38 | THE EXCHANGE | October 2011

prices. A potential decrease of interest rates by the Reserve Bank of Australia by 25 basis points continues to linger in the minds of traders. From a technical standpoint, the AUD/ USD currency pair remains in a relatively upbeat trend, but the trend may potentially end the moment support is breached. The most important level of support currently lies at parity. A shorter term support (represented by the green line) has been in existence since the beginning of 2011, and continues to be an important mark. The parity level also tends to be an important psychological level. The longer term support line (represented by the blue line) and two Fibonacci retracements (38.2 per cent retracement of 2010’s and this year’s high can be found at parity, and a 23.6 per cent retracement of 2009’s lows and 2011’s highs) can also be noticed at the parity line. Currently, the 52-week moving average is being breached while the MACD is turning relatively negative for the currency pair.

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THE LONG | ANALYSIS

Making Sense of Forex Trading The Name of the Game is to Stay in the Game Greg Michalowski

is the Chief Currency Analyst at FXDD www.fxdd.com He is also the author of “Attacking Currency Trends” www.attackingcurrencytrends.com

40 | THE EXCHANGE | October 2011

THE LONG | ANALYSIS

The trade setup is thought out. You may have technical reasons to execute the entry. The fundamental story behind the position is in your trade direction too. The trade is executed – selling the EURUSD on September 14th at the 1.3589 level just as the market breaks trendline support (see chart). The initial move lower leads to an immediate unrealised profit. Confidence is sky high. An analyst on a television panel of experts says “The EU is in trouble. I see the EURUSD going to 1.2500”. You are now on Twitter chirping to all your followers “Sold the EURUSD at 1. 3589. This dog is heading lower”. The price holds support at white circle 1 in the chart. This level was a low in the first hour of trading on September 12th and later in that same day. The “market” realises this and buyers enter. You are not bothered. After all, the price is going to 1.2500. The price moves sharply higher from the low on September 13th but holds resistance at the 38.2% Fibonacci retracement of the trend move down at the 1.3740 area (at point 2). You feel some pain, but still believe the price surely is going lower, and it does. Support buyers come in after the move through trendline support fails, and the price moves back toward the same 38.2% retracement (the second 2 in the chart). The trade is starting to make you nervous, but you hold on to your fundamental conviction. The price action is up and down and each time it falls, the hope of getting back to breakeven is your only thought (1.2500 becomes a distant memory). You figure that if you double up, the breakeven will be halved. You sell another unit near point 4 as you expect the price will fall below the 100 hour MA line (blue line). Momentum on a break of the key moving average should move the price to breakeven where you will be happy to get out. The price does not move below the 100 hour MA. The subsequent trend higher is stronger and makes its way through the 50% retracement, the upper channel trendline and the 200 hour MA at the 5 area. You throw in the towel when the price moves above the 61.8% retracement level at point 6 at the 1.3902 level. Does a “Blow Up” trade like this make its way into your trading account from time to time? If it does, the chances of recovery to your account equity are slim. The name of the forex game is to stay in the game. The dreaded “Blow Up” trades need to be avoided at all costs. Here are 5 ways you can avoid the “Blow up” trade and allow you to stay in the game. Focus on entry levels that define risk and then manage the risk. In the example, the trader sold when the price broke a trendline at 1.3589. Good

idea. Risk is defined by that trendline area. If the price is to go down, it should stay below the broken trendline, and trend to the downside. Risk can also be managed by using the trendline area as your stop loss. I call these trades “Trading at the Borderline”. If the price moves below the borderline as defined by the trendline, the bias is down or bearish. If the price moves back above the borderline, the price bias is now bullish. Risk is defined and can be managed by trading near the borderline. With risk defined, it is more difficult to blow up. Follow the “If…Should Rule”. Defining risk and managing risk is no good without getting out when the price does not do what you expect. I have a rule called the “If…Should Rule” that states, “IF the price does ABC, it SHOULD do XYZ. If it does not do what it SHOULD do, GET OUT”. In the example, IF the price breaks the trendline at the 1.3589 level, the price SHOULD go lower. If it does not, and it goes back above the trendline, GET OUT. Don’t fight the market. Instead follow the market. Remember it’s the market that’s in charge. Target where you are going. If you think the price is going lower (or higher), determine where is the price going and how is it going to get there. In the example, selling at 1.3589 on the break of the trendline is step one. The next step is to get through the next key target below. This is clearly through the lows marked by the white circle 1. When the price cannot get through this level and moves above the trendline, what is that saying? GET OUT. Looking at another trade, assume you sold against the 38.2% at point 2. The main target to get through below would be the trendline from the low. Note the

price does break through that trendline but fails. The “If… Should Rule” says to GET OUT on the failure. The old trendline becomes support again. Targets tell you if the market is agreeing with you. If they are not reached or a break fails, look to get out and avoid sticking with a trade that the market is not supporting. Use fundamentals to support trades, not to control trades. Because someone can list off fundamental reasons for a currency pair to move lower or higher, it does not mean it will go there immediately or at all. It may eventually get there, but it may be after a 300+ pip correction that blows up your account. If you have a fundamental view, use it to support a technical trade with defined risk. If the technical tools you use don’t corroborate the fundamentals, listen to the technicals. By using technical tools that define risk, they tell you when you are wrong. Fundamentals never do. This avoids the blow up trade. Don’t double up a losing trade. Traders rationalise that they can make money back at a pace twice as fast when they double their position. Typically traders double up because they cannot see the trade getting back to breakeven. Doubling up halves the distance but doubles the risk. Since the market is likely trending against you, the chance of a blow up trade increases. The best way to avoid the urge to “double up to catch up”, is to be disciplined and get out earlier when first clues of being wrong are evident. The name of the game is to stay in the game and not blow up. Follow these simple rules and your life expectancy as a forex trader should increase.

October 2011 | THE EXCHANGE | 41

THE LONG | ANALYSIS

Central Banks Rained On My Parade, Now What Can I Trade?

42 | THE EXCHANGE | October 2011

THE LONG | ANALYSIS

By Colin Cieszynski, CFA, CMT, Market Analyst, CMC Markets For most of this century, traders have been taking advantage of what is known as the carry trade to make easy money. This involves borrowing in countries with low interest rates and lending or investing in countries where the potential for income or capital gains are higher. The financial crises of the last few years, however, have left investors in a more defensive mood. At the same time, however, fiscal and banking problems in many countries have dramatically cut into the number of places where investors could park their cash and ride out financial market turmoil. The Euro, which at one time appeared ready to challenge the mighty US Dollar for global supremacy, has been staggering under the weight of the sovereign debt crisis as politicians attempt to head off contagion and develop process to deal with financial problems that thought impossible a few short years ago. The British Pound has also weakened in recent years due to a combination of low interest rates, low economic growth, proximity to the Eurozone’s problems and the fiscal problems that have led to government austerity measures. Even confidence in the US Dollar has been eroded lately as a result of political infighting over the country’s spending and debt problems, supposedly emergency monetary measures remaining in place for years and the recent cut in the US credit rating. All of these problems led traders to increasingly focus on the Swiss Franc and the Japanese Yen as primary destinations for capital looking for a place to go relentlessly driving these currencies higher. The problem is that these trades became so popular that they have started to disrupt the underlying economies, attracting the attention of central banks. The recent move by the Swiss National Bank to peg the Swiss Franc to the sinking ship Euro took a lot of traders by surprise with the subsequent collapse showing what happens when everyone tries to go out the door at the same time. In the wake of the March 2011

“when one door closes another one opens”

industrial commodity, Silver has also regained its lustre and status as a currency over the last decade. Carrying the nickname “poor man’s gold”, Silver’s lower price per ounce makes it more accessible to many traders, yet still brings exposure to broader monetary trends. With the Yen having lost its volatility, the Singapore Dollar has emerged as a more prominent trading option in the Asia Pacific region representing a relatively stable, tradingoriented state. Resource Currencies:

earthquake and tsunami the Bank of Japan has intervened to cap rallies in the Yen as well in order to help the country to heal and rebuild. So with two of the world’s four most active FX trading markets having been taken out of commission by central banks lately, what’s a trader to do? Fortunately, in FX markets there are still lots of alternatives. Other Defensive Currencies:

Despite all of its problems, the US remains the world’s largest economy by a distance, with the most liquid treasury and currency markets. In times of trouble many traders end up holding their noses but going to the greenback anyway, simply because other markets just aren’t big enough to absorb all of the capital that’s out there. For millennia, gold has been used as a store of value, which continues to this day. In the past this meant owning and storing gold jewellery, coins or bars. More recently, trading gold on a short term basis has become more popular with individuals. Traditionally capital has flowed between gold and the US Dollar reflecting changing attitudes toward paper and real assets. Lately, however, capital flows between Europe and gold have increased tracking developments on the sovereign debt front. After languishing for twenty years as an

Although over long periods of time resource economies have their ups and downs, rising commodity prices over the last decade have helped many of the major resource exporters weather the financial market storms in stronger shape than others. With their sensitivity to metals and grains, proximity to fast growing emerging markets in China and India, and higher interest rates, the Australian and New Zealand Dollars have become more popular in recent years. Canada’s stable, conservative banking system, and relatively well managed national finances have become increasingly recognized in recent years. The Canadian Dollar, however, remain sensitive to the US economy and swings in the US oil price. The Norwegian Krone and Swedish Krona offer European resource alternatives with the Norwegian currency particularly sensitive to moves in the price of Brent Crude oil. Sweden tends to be more sensitive to timber and metal prices and has the more diversified economic base of the two. The South African Rand, meanwhile, tends to move in relation to swings in precious metal prices. It’s often been said that when one door closes, another door opens. While recent decisions by central banks to intervene in FX markets has curtailed opportunities in some markets, there remain many alternatives for traders looking to capitalise on market moves.

October 2011 | THE EXCHANGE | 43

THE LONG | ANALYSIS

Europe is still a tough investment as gold continues to shimmer

44 | THE EXCHANGE | October 2011

THE LONG | ANALYSIS

Says Richard Perry, Central Markets

It seems as though no matter what the fumbling Eurozone politicians do, the cripplingly high level of credit defaults swaps on Greek debt suggest that Greece is destined for default. The question is increasingly becoming not one of “if ”, but rather of “when” and “how”. If the default can be managed then investors who are fearful of contagion spreading throughout the Eurozone peripheral economies may be saved a certain amount of pain, but don’t count on it. Any financial stocks with links to Greece are being severely treated in the markets. We have seen the credit rating of French banks Societe Generale and Credit Agricole downgraded by ratings agency Moody’s over their exposure to Greek debt. The share prices of these banks have subsequently been battered. This does not bode well for other financial stocks with links to Greece. Greece may account for just 3% of Euro area GDP, but the real question is can the default really be contained? How many other dominos would fall as a result of a toxic combination of sovereign debt writedowns, investor fear and the flood of savers frantic to withdraw their money from peripheral countries? Anyone remember Icesave? The European Central Bank has been desperately trying to keep Italy and Spain at arm’s length from the sovereign debt woes. The ECB has been “actively implementing” its own bond buying programme by purchasing Italian and Spanish debt to bring bond yields lower. This has helped to keep borrowing costs for these respective governments at an acceptable level. How long the wolves can be kept from the door remains to be seen. The Euro has also come under increasing pressure in recent weeks. For several months investors had been trying to decide on which currency was the bigger basket case out of the Euro and the US Dollar. With dovish leanings emanating from the Fed, an anaemic level of growth and high unemployment, the US Dollar has tended to be the one to suffer; and that was before the farce surrounding the raising of the US debt ceiling. However,

“Greece is destined for default. The question is increasingly becoming not one of “if”, but rather of when and how” investor perception of the issues facing the Eurozone are now coming into a sharper focus. The severe problems the region is facing has meant that investors have been unable to back the Euro with any confidence and now, added to all that, Jean Claude Trichet (president of the ECB) is turning noticeably more dovish in his statements. The Euro is not a positive trade. The longer term technical analysis outlook is now leaning towards US Dollar strength against the Euro. The key support level around $1.400 on Euro-Dollar which had held for several months has been finally broken. The inference from this break is a move back towards a $1.320/S1.330 target range, while the key January 2011 low at $1.287 would be the next real support. A not dissimilar situation has been developing on Sterling Euro. The weakness in the Euro is resulting in the relative safer haven of Sterling being pushed higher. The break has been made above the resistance at €1.160 and this could now guide a recovery back towards the resistance range of €1.120/€1.124. Well at least a move like this would help take some of the sting out of the cost of your skiing trip to Val D’Isere or Courchevel. Despite this, ailing confidence could turn

around pretty quickly. In September Central Banks proved that they can come together to help avert potential crises. The announcement that the ECB would coordinate with the Fed, the Bank of England, the Bank of Japan and the Swiss National Bank in order to ensure Eurozone lenders have enough dollars certainly gave risk assets a shot in the arm. This coordination is a potential signal that isolationist policies might be off the agenda, giving hope that there is a willingness to act together as the battle heats up. This would certainly provide investor confidence with a welcome boost. However western world investments have become increasingly more risky and increasingly less viable. Stock markets may not be as cheap as they appear, especially if there are rafts of cuts to prospective earnings estimates lurking around the corner. Safer haven government 10 year bond yields such as the US and Germany are yielding around 2% and are not realistic investment options at these levels. Even the Swiss Franc, which has been a huge safe haven trade in recent times, is far less desirable since the SNB has decided to peg it to the Euro. That leaves investors with very little option other than to put their money into gold. Having already seen gains of over 25% in the year to date, investors continue to pile into gold as the proverbial hits the fan. Inflation is still a concern especially with governments seemingly intent on inflating their way out of debt. In this environment gold will continue to trade well. Despite consolidating somewhat of late, it is likely that this is just the preamble before a serious assault on the $2,000 landmark. The safe haven status of gold is assured (it is estimated that all the gold ever mined could fit into a 60 foot cube) and while the economic tribulations of western economies proliferate there should still be a place in any portfolio for an asset such as gold. In an investment environment filled with artificial stimulus, gold should continue to appreciate in value and be the trade of choice.

October 2011 | THE EXCHANGE | 45

THE LONG | STRATEGY

CHART WONK #12

Directional Movement Index Measure trend strength and direction with the Average Directional Index (ADX).  The Chart: EURUSD from Zignals.com charting application

What does it all mean?

The Average Directional Index (ADX), Minus Directional Indicator (-DI) and Plus Directional Indicator (+DI) is a trend strength measure developed by Welles Wilder in 1978. ADX is nondirectional so a trend’s strength can be measured if it’s up or down. High ADX values represent strong trends, low ADX values are associated with trendless markets. Crossovers between +DI and -DI lines are used as signal triggers.

and -DI values are smoothed using Average True Range The ADX applies another smoothing factor to the relationship between -DI subtracted from +DI divided by +DI added to -DI. The ADX typically uses a 14-period look back, although traditional Wilder smoothing factors require at least 100 historic data points. The ADX does not indicate trend direction, only trend strength. The indicator does lag, so a trend will have established before ADX signals a trend is underway.

How does it work?

Directional Movement is calculated by comparing the difference between two consecutive lows with the difference between the highs. Directional movement is positive when the current high minus the prior high is greater than the prior low minus the current low. Directional movement is negative when the prior low minus the current low is greater than the current high minus the prior high. +DI is the current high minus the prior high when result is positive, otherwise is treated as zero. -DI is the prior low minus the current low when result is positive, otherwise is treated as zero. +DI

46 | THE EXCHANGE | October 2011

So what are the signals to look for?

ADX values below 20 indicate a weak trend. ADX values above 40 mark strong trends. Extremely strong trends have ADX values above 50. The strategy designed by Wilder first required an ADX value above 25. A buy signal occurs when +DI crosses above -DI with a stop on the low of the signal day. The trade holds as long as the ADX remains above 25 even if +DI crosses below -DI. The trade exits when +DI crosses below -DI and the ADX is below 25, or the stop is hit. The reverse is true for a short signal except for the

ADX condition, which is independent of trend direction. However, crossovers between Plus and Minus Directional Indicators are frequent and use of a trailing stop, like a Parabolic SAR, can improve performance and reduce whipsaw. Alternatively, the ADX can be used as a trigger to switch between different indicator signals. For example, when ADX is below 20 use a momentum indicator like Stochastics for buy and sell signals, but when above 20 use a trend indicator like Moving Average crossovers to govern trades. In our EURUSD example, ADX strength rose through March as the Euro rallied. A buy signal was triggered mid-April, but this would have stopped out at the signal low if no trailing stop was employed. EURUSD then started to consolidate. This caused a gradual weakening of the ADX from a high of 29 in early May to 16 in early September. By July the Minus Directional Indicator had started to dominate the Plus Directional Indicator, although net trend strength remained weak. Increasing bearish pressure (as measured by the Minus Directional Indicator) may suggest a break lower for this consolidation, particularly if the ADX ticks up from September lows. A close below 1.3980 may be the point at which a new bear trend starts. When do I make my move?

The Directional Movement Indicator is best used in conjunction with other indicators. A ‘buy’ signal created on a cross of +DI above -DI may be confirmed if the current price is above 50-day and/ or 200-day MAs and the ADX is above 20. Because of the whipsaw risk, signals should be ignored if a broader trading pattern, such as an head-and-shoulder reversal, contradicts the direction of the signal trigger. The presence of nearby support and resistance or Fibonacci levels should also be factored when considering +DI/-DI crossover signals. The Directional Movement Indicator is an excellent confirmation tool, particularly to discern whether a market is trending or range bound. One more tool in the technicians arsenal.

THE LONG | KEN FISHER

KEN

FISHER

Because all the data is telling us it’s Not 2008, say Ken Fisher

48 | THE EXCHANGE | October 2011

THE LONG | KEN FISHER

As I’m sure everyone has seen in the past couple of weeks, headlines are currently screaming that it’s 2008 again! Media everywhere is predicting a double dip recession and a resurgence of the bear market. The whispers (and cries) are endless — but what these people can’t see is that the actual data paints a very different picture. Yes, there are some global trouble spots (which is always true), but the world is economically much healthier today than it was in 2008. And if there’s no recession, recent market action must be a correction — not a new bear market. Currently the media is only reporting bad news and either ignoring the positives, or simply claiming the data is wrong — or soon to morph to bad. But there are positives aplenty as those who are prepared to do the research well know — but most of what I say here you won’t have seen elsewhere though it’s all publicly available data. For example, lets examine the US Leading Economic Index (LEI ) — an index of 10 economic metrics — which is a decent predictor of future economic health. Year-on-year positive index growth typically signals future economic growth. When the index shrinks, that typically predicts recession ahead. And LEI grew 6.2% in July. People say, “Yes, but, look at the negative components within LEI. That’s bad!” True, but LEI components never move in lockstep. With one exception since 1959, when US LEI grew 6.2%, economic growth continued for at least 21 months when the data was this strong — and usually much longer. LEI grew 6.1% September 2004 — 39 months before the recession. LEI grew over 6.2% in 1993 and the economy grew for 97 months—over 8 years! And 55 months after a similar growth in December 1985. Just once — in 1973 — LEI was at or above 6.2% and a recession occurred within six months. But in that instance LEI growth had been decelerating for months. Currently LEI has been accelerating for four months from already historically high levels. Never in history can I

find acceleration to this level followed fast by recession. Not once. And if the US doesn’t go into recession, the world won’t. Plus, global LEIs overall remain expansionary — even in most of core Europe and, yes, the UK! LEI decelerated all 2007 and turned negative in December — just as the recession began. Today things look very different. Then too, a negative yield curve fairly reliably predicts recessions — and today’s is very steep globally. A yield curve is just different maturities of similarly rated bond yields plotted on a graph—from short-term to long. Banks borrow money short term and lend

“Never in history can I find acceleration to this level followed fast by recession” long. So when the yield curve is steep, it’s more profitable in the future for them to lend — and they become more eager to do it. That means a healthier future economy — firms have easier access to credit to buy equipment, expand, buy competitors, hire, research and innovate, etc. People too can get credit easier to buy big ticket items. And maybe even start their own businesses! But when a yield curve is flat or inverted, banks don’t have much incentive to lend—not a great signal for future economic health. A flat or negative yield curve has frequently signalled increased recession risk in the next few quarters. The US yield curve was negative in July 2006

through to July 2007—and the recession began December 2007. The yield curve was negative (short-term rates higher than long rates) from July 2000 through January 2001—recession began in March that year. But when the US yield curve has been as steep as it is now—a 2.7% spread—recession hasn’t materialised for many years. Individually, some small nations’ economies have turned negative on this measure, for example India and Brazil. But that’s normal. In addition Brazilian firms tend to rely more on international financing, so a negative yield curve there isn’t as troubling as it might be in a larger developed country. But the GDPweighted global yield curve remains steep. There is yet more positives we can see clearly that are also being ignored: Global total trade (imports plus exports) has rebounded strongly since its 2009 low and is a hair’s whisker below its all-time high (of May, 2011). US corporate earnings has grown for seven consecutive quarters (through Q2 2011) — all strong double-digit growth — and the same is true globally. Earnings growth is good, but can reflective of cost cutting. But Q2’s US revenue growth of 12% plus strong global trade directly reflects strong global demand. Interest rates are historically benign, making borrowing cheap. Inflation globally remains benign. This data taken alone might not mean much. However, if all these indicators are added together to give a wider impression of what’s going in the market we can see that they don’t paint the dour picture of the global economy that’s widely being assumed. Add the fact that the media almost entirely ignores positives—focusing solely on the same morphing debt fears—and you have a world where expectations are vastly divorced from reality. That may not be enough for big index level returns through the balance of 2011, but it does mean the correction will end and the stage is set for the bull market to resurge with gusto in 2012. Fear of another 2008 is false— and false fears are always bullish.

October 2011 | THE EXCHANGE | 49

THE LONG | STrATEGY

50 | THE EXCHANGE | October 2011

THE LONG | STRATEGY

By Atif Latif, Guardian Stockbrokers

Everyone makes them, most traders have probably been told by someone how to avoid making them, and yet investors still believe that this is a phenomenen that only happens to other people. However, the reality is that the vast majority of investors make little or no plan when they start trading, when setting a strategy will clearly help make larger profits and avoid unnecessary losses. To help you consider the best course of action when trading, or just to refresh your memory, below are some of the main mistakes to avoid when trading CFDs: Little Preparation

So many people start trading without a trading plan, thinking they can beat the market. You need to set out your rules of trading and guiding principles. These must at least cover major components such as methods of trading, method of identifying positions to trade, entry and exit rules, risk management and trading reviews. Over trading

There are two forms of over trading to be aware of, frequency and open positions. Today there is an abundance of information available to the investor, whether received via a newspaper, trading magazine, investor website, trading signal program/platform or direct from your broker, which in turn creates trading ideas for the investor to consider. You need to remember that you have the choice as to which ideas you will trade and how many. The more you trade the higher the risk, rest assured that there we be more opportunities tomorrow. A result of trading too often invariably means that investors end up holding too many positions in the hope that they will all eventually make a profit; this distracts you and affects your decision making process, which frequently makes your positions unmanageable. You need to consider how often and in what size you will be trading within your trading plan and review your frequency regularly, making sure not stray too far from your set trading limits.

“setting a strategy will clearly help make larger profits and avoid unnecessary losses” Over leverage

One of the biggest benefits of CFDs can inversely lead to the most costly mistake a trader can make. You have the ability to trade large exposure with a small margin requirement, but this does not mean you have to use the maximum leverage that your platform will allow. Profits and losses are amplified to the size (value) of your positions and not the initial margin. Always look at the maximum exposure of all of your positions and the potential losses of these positions. The risk warning “Trading using leverage carries a high degree of risk to your capital and it is possible to lose more than your initial investment.” is given for a reason. Running loss making positions and taking profits too early

All too frequently investors hold a position in the vain hope that one day the trade will make a profit and eventually prove that the decision they made was the right one. However, doing this only helps to add to your losing positions and you miss out on better trading opportunities that you might have taken had you closed out at a small loss much earlier. No one likes to make a loss because it’s an admittance that they were wrong, but taking a loss is a brave decision to make and this decision needs to be made at the time you make the trade. Investors should consider carefully how much they are prepared risk on each trade, and then stick to it. Obviously the risks will vary with each decision that you make, so stick to your trading plan and consider carefully your entry and exit rules. Taking a profit is a great deal easier and you should have an exit strategy for this, just as

you should for taking a loss. There are many tools to use depending on your platform, and using limit orders or trailing stop losses are a good way to ensure that you maximise your profitable trades. Long only portfolios

If you only have long positions in your portfolio it will all be based around one trading idea, that the market will only go up. This long only strategy is high risk; obviously when the whole market goes down all your positions will lose money. You are missing an essential investment tools that allow you to be able to profit from a falling market, hedging your portfolio and the option to pairs trade. This means varying your portfolio with both long and short positions so that your investments are more balanced. Investors should be aware that in a short position the risks can be very large indeed and are in effect unlimited as the value of an investment could go up ad infinitum. Unrealistic Expectations

You will no doubt have heard of investors doubling their money or have seen adverts claiming you only have to trade for 15 minutes a day and you will no longer have to work. Anyone can double their money by just visiting a casino and choosing red or black, but the risk is you have to stake everything. Your trading plan should have set levels of profit you are trying to achieve and what you are prepared to risk. This should tell you whether the trade is right. No risk management

CFDs are high risk, so you need to ensure that you manage the risk. This should stem from your trading plan, firstly you should only be trading with what you can afford to lose. Then your rules of trading and guiding principles should be followed when considering; exposure, open positions, diversification and leverage. Also use whatever tools your platform provides such as stop loses, guaranteed stop loses and trailing stop loses. Finally always run through your trading plan before you place a trade.

October 2011 | THE EXCHANGE | 51

THE LONG| LONG |STRATEGY BET ANGEL

Laying field the

In his latest column Peter Webb xplains how backing the field to come up short can is one way of guaranteeing a sports betting profit Laying a selection has always been a popular way to pick a winner on the exchanges. In a ten horse race only one can win, so being able to find a loser has to achieve a much higher success rate. And if finding one loser sounds like a good proposition then what about two, three or four? Using techniques such as Dutching, backing, or laying part of the field is a popular method. One problem with these techniques though is that they carry additional risk due to the way these bets are constructed. When backing or laying part of the field on multiple selections, your profit always comes from offering quotes to the market under a total of 100% of book value. In essence you profit from the difference between your offer and the chance of it occurring. For example, if you lay two runners at 6.00 you are effectively laying 33% of the field for a profit. You can calculate this by dividing 1 by 6 which equals 0.1667, multiplied by two runners = 33% of the field. The significance of this is that you will profit on these two, but you have a net exposure of two thirds of the remaining book in potential losses. That’s not to say you can’t profit, it’s certainly possible to profit in the long term, but only if your two selections win more than 33% of the time. In

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summary you are effectively placing a value bet. There is a variation on this theme however that can offer frequent reward, slightly lower profits, but significantly lower risk. To fully understand this method we have to do a little maths to show you how you will profit. With this strategy, what we are going to try and do is offer 100% probability to the exchange market for more than 100%. In any sports event, the entire market is always priced around 100%. Something either happens or it doesn’t. If you can ‘sell’ 100% for more than 100% you will definitely profit. When you look at odds on an exchange each set of odds represents the implied probability of your selection winning. So something priced at digital odds of 2.00 means that it has a 50% chance of winning. This is because 1/2=0.50% or 50%. In this case we need to lay or back two selections at digital odds of 2.00 to ensure we break even by offering a 100% book to the market. There are very few markets that will be priced in such a manner, so we have to be creative as to how we achieve things. There are two ways to achieve a profit. We could change the odds or increase the number of selections. If we want to make money, rather than break even, we could change the

THE THE LONG LONG| | BET STRATEGY ANGEL

October October 2011 | THE EXCHANGE | 53

THE LONG | STRATEGY

odds to 1.98 for two selections. At odds of 1.98 both selections add up to 101% so this means that we need to lay both orders to the market to make money. 1% isn’t a great deal of margin so we may want to lower our odds to make more. Therefore, if we lay two selections at 1.50, we would make a 33% return on our stake, a much better return for our efforts. So where can you find two selections to lay at 1.50? You are unlikely to find them before an event starts. If you could find somebody to lay selections at 1.50, you would be guaranteed an enormous profit instantly and that’s unlikely. To find our two selections we have to use a bit of imagination and we also need to use the in-play markets. Usually in-play betting is considered quite risky, but using this method we can have a good play around at little risk. As discussed, we can also increase our selections to achieve our aim. The basis of this activity is simple, if we choose three selections we will need to lay at odds of 3.00 to break even or odds of slightly less to profit. If we pick four selections, we need to lay of odds of 4.00 and soon on. It’s quite a simple process to understand. Basically you are looking for markets and situations where the odds on at least 2,3,4 or more selections shorten in price to at least odds of 2,3 or 4 etc. Horses by Numbers Horse racing in-running is perfect for these types of scenarios. Targeting a price of 3’s in running is effectively saying that the horse has to have a 33% chance of winning at some point in the race. You could envisage a number of ways in which a horse could trade at 3’s. If you had a short flat race the favourite could get off to a slow start and drift slightly before recovering late in the race. Because of this drift, the second favourite will most likely shorten in price and this would give both a good chance of both trading at 3’s. In a competitive handicap over the jumps anything could happen and you would hazard a guess that more than two could trade at or under 3’s. Look at a short price favourite or a small field over the minimum trip however, and you could be looking at a different scenario. If the favourite is already below your target price, you would get matched immediately on that favourite and have to rely upon the favourite not being in contention at some point in order for it to drift and for you to get matched on another horse that is headed into 3’s. When you put a little logic into your thought process you can suddenly see a number of scenarios where three or more could trade at 3’s or less and some scenarios where it is much less likely.

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your choice and is often a snap judgement on how the race is turning out in-play. Of course, you will get races that fail, but you will also get races that succeed unexpectedly. Going for four runners to be priced at odds of 4.00 or lower only offers limited scenarios as you need at least four runners to hit the mark. So you should aim to vary the number of runners you are trying to catch per race. Going for lower odds means you have potentially much more profit than going for lots of runners at bigger prices. Trying to catch two runners at odds of 2.00 or lower means that there are several profitable scenarios including the occasional huge payoff when there is a shock in the last furlong. Don’t ignore other sports either, wherever uncertainty occurs, this tactic works very well. So next time you have a bet on the exchange, rather than just laying one runner, lay at least a couple and put yourself in with a good chance of profiting.

In the illustration you can see we have traded a competitive handicap at Ayr. Despite being just an eight runner, the odds start near fives, so in this race we feel quite a few horses could get into contention. We used the lay all function in Bet Angel to lay the entire field with £10 at 2.90 and then hit the ‘keep all’ button to hold over our positions from the pre-race market to in-play. As the race got under way ‘Benny be Good’ hit 2.90 first, followed by ‘Race the brave’. We just needed one more horse to hit 3’s to make a profit. Two mid division fallers and a late surge by ‘Tillietudlem’ ensured our profit. You can see that ‘McMurrough’ also almost reached 3’s and this would have given us extra profit. Currently we have a £1 profit on our three matched bets and £30 on all other runners. Four matched at 2.90 would deliver £11 profit on our four selections that reached 2.90 and we would still have a potential profit of £40 on any of the remaining runners. Whether you cancel or leave the remaining bets in is

Profiting from the Lay the field strategy Stake £10.00 Runners that reach the target odds 2

1.50

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-£30.00 -£20.00 -£10.00

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-£40.00 -£30.00 -£20.00 -£10.00

7.00

-£50.00 -£40.00 -£30.00 -£20.00 -£10.00

8.00

-£60.00 -£50.00 -£40.00 -£30.00 -£20.00 -£10.00

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-£70.00 -£60.00 -£50.00 -£40.00 -£30.00 -£20.00 -£10.00

10.00

-£80.00 -£70.00 -£60.00 -£50.00 -£40.00 -£30.00 -£20.00 -£10.00

For example: -If you lay the field with £10 at 2.00, then you will win £20 what ever the result if four runners are matched at 2.00

£-

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IN THE SPREAD... RESTAURANTS WEEKENDS CUISINE SWEET SUITES TRAVEL

High flyers set to benefit as Jetsetter.co.uk launches in the UK High flying, high rolling travellers will be licking their lips this month following the launch of Jetsetter.co.uk. Jetsetter.co.uk is a new, different breed of travel website, which provides its members with curated holiday experiences, expert knowledge, but most importantly exclusive travel deals at prices up to 50% off. On the website you can find some of the best-in-class experiences and properties from around the globe, including luxury hotels Hôtel de Crillon in Paris and The Langham Hotel Hong Kong; hip boutiques such as St. Martins Lane in London and Miami’s Soho

Beach House; and once in a lifetime experiences including a South African safari, Galapagos cruise, and sky diving over Mount Everest. This impressive list of travel partners makes some of the world’s most inspiring destinations and prestigious hotels available to an audience of British travellers looking for incredible holidays at an affordable price tag. Jetsetter will feature 10-15 destinations on sale each week at prices up to 50% off. These deals are available for a limited time only – usually five to seven days - and while availability lasts. So if you see a deal you like grab it quickly, else you might just miss out on chance of a lifetime.

October 2011 | THE EXCHANGE | 57

THE SPREAD | RESTAURANTS

Restaurants of the Month

We’ve been diligently traipsing the streets of London once again to bring you our best findings of the month

Gauthier’s Soho Soho, W1D 5AF

Gauthier’s Soho is the rather charming, rather French Michelin starred enterprise of Alexis Gauthier – A chef who stays true to a philosophy of ‘cuisine by intuition and instinct’. Expect only the finest cuts of Angus beef or seasoned poultry from the chef who vows that “cooking is all about the original ingredient”. This delicious eatery is set inside a well-kept Georgian town house just off the corner of stylish Soho; entrenching the restaurant in the heart of one of the trendiest spots in town. And by carving out a desirable reputation for itself as one of the few restaurants in London to offer serious and sensitive vegecentric food, Gauthier’s culinary excellence is second to none. The restaurant is also the first UK Michelin star to publish a calorie count on their menus. (Do NOT let that put you off Alexis’ signature dessert, the Golden Louis XV – a heavenly combination of dark chocolate and praline at only 480 calories.)

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At Gauthier it’s guaranteed that you’ll enjoy dining in an intimate setting, with no more than six tables per room. Relax upstairs beside a handsome fireplace while you are engulfed by a sophisticated colour scheme and crisp white table cloths. From downstairs let the sounds of Dizzy Gillespie and Charlie Parker sweep you from the London streets to ‘A night in Tunisia’, classic Jazz which can only complement the excellent choice of wine provided by your personal sommelier for each course of your meal. The Foie Gras Royale makes for a divine premiere plat, and the Summer Truffle Risotto with Jus de roti & brown butter does likewise for a sumptuous deuxieme. The piece de résistance has to be the Wild Sea bass & Scottish Girolles, a simply stunning dish bursting with aromatic flavours and a sweet and sticky finish. Victoria Power http://www.gauthiersoho.co.uk/

THE SPREAD | RESTAURANTS

Orrery Marylebone High Street, W1U 5RB

This elegant first floor eatery, situated above a converted stable block in Central Marylebone, not only shares its name with the intricate and periodic cosmological instrument, but truly follows its meticulous suit. Orrery is a fine dining experience where you can be assured everything will run like clockwork. From the warm welcome you receive at the foyer to the carefully prepared aperitifs at the bar whilst you a wait to be shown to your seat, no attention to detail, big or small, is overlooked. The superbly balanced tasting menu, complete with a wine selection, has been designed to satisfy your every expectation for French cuisine and is impeccable. Head Chef Igor Tymchyshyn lets his Michelin star shine brightly here, with a menu adorned with seared diver caught Orkney King scallops, Escalope of red wine poached duck foie gras, Pavé of Salmon, herbed crust, wild mushrooms, braised Castelluccio lentils, and a Pannacotta, orange & Champagne terrine with fennel essence. The Orkney King Scallop, butternut squash, truffle velouté; is a delight, posing as an entrée but claiming the victory as more of a savoury desert, with lashings of truffle sauce on a sweet and crisp biscotti, and the poached duck foie gras is as delicious as it is delicate. But the piece de résistance has got to be the after-dinner cheese board, which is actually more a three tiered trolley of creamy, crumbly heavenliness. Orrery not only holds a reputation for outstanding food and service, but a rather superior wine list. Head Sommelier Shana Dilworth will guide you through a menu of unique and rare wines amongst some of the more classic finds, ensuring the perfect combination for your menu of choice. This is a real treat for the palette, as well as a wealth of rich wine trivia for the mind. Victoria Power OrreryReservation@danddlondon.com

October 2011 | THE EXCHANGE | 59

THE SPREAD | WEEKENDS

Is There Life In Spas? We’ll take any opportunity to get a Bowie reference in, but the obvious answer is, yes, more life than you’ll find in an Attenborough documentary. However, as the luxury relaxation industry booms, which UK spa hotels should the discerning traveller indulge in? Mark Southern donned his robe and slippers to find out

Stoke Park, Buckinghamshire A country club within easy commute of London, Stoke Park is a pantheon of prosaic pleasure. Set in beautifully manicured gardens, the hotel offers a genuine five star experience from start to finish, complete with excellent golf course to work up a reason to relax. Once you’ve finished in the nineteenth though, it’s down to the invigorating spa where you’ll immediately be lulled into a sense of relaxed fulfillment. It’s worth indulging in a couple of treatments, but make sure you include the algae wrap where seaweeds and essential oils cocoon you to a very warm and fuzzy state of serenity. www.stokepark.co.uk

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THE SPREAD | WEEKENDS

Marylebone Hotel, London Whilst the Capital is chock full of spa facilities, very few capture the essence of total relaxation. Fortunately, the Marylebone does, and how. Situated in a great location for a quick Friday dash from work, the hotel whisks its guests away from the buzzing streets outside into a hazy wonderland of gentle breezes on foreign shores. With a cool, contemporary edge, the hotel drips with money, but pitches its spa offering just right, with complete emphasis on calm relaxation. For a perfect weekend of indulgence get a ‘One For All’ spa experience, and follow up the treatment with dinner in the award-winning restaurant. www.doylecollection.com

Lucknam Park, Wiltshire Nestled neatly into the Chippenham countryside lies a stunning country retreat, Lucknam Park. Set into 500 glorious acres of sculptured gardens, the house shines like the palace of decadence it really is. If you’re getting there late on a Friday, the real treat you’ll experience is the sunlight streaming through your windows in the morning, and the breath-taking vista that opens up for you. For the ultimate experience try the herbal pumice stone treatment and let the stresses of work drift away, (although if you can stay awake for more than ten minutes of total relaxation then you’ll do better than us). www.lucknampark.co.uk

Hotel Verta, London For a spa treatment with a difference, Hotel Verta in Battersea offers a genuinely different detox option; fasting. The process is completely controlled by the trained team, who’ll be there to help you leave solids behind and instead drink a formulated lemon syrup which provides nutrients and wash out the toxins from your body. Meanwhile, as the bad stuff leaves you, you can lie back and enjoy the good stuff as the spa treatments take over and relax you completely. The best treatment is the black sand scrub, which sees sand oils from Tahiti sweep away dead skin, before a phyto-aromatic body massage awakens your senses again. www.hotelverta.com

Titanic Spa, Yorkshire For relaxation-hunters willing to go further for quality, you can find a gem nestled deep within the natural landscape of Pennine Yorkshire. A beautifully restored textile mill offering state-of-the-art health and well-being facilities, Titanic Spa possesses a wealth of renewable energy sources, to ensure a genuine eco-offering. For something a little bit different, not to mention a little more sociable than individual treatments, book a two person mud chamber where you’ll both be covered in organic mud to exfoliate your skin before herbal steam fills your own private chamber before a tropical rain shower washes away your worries (and muddy second skin). www.titanicspa.com

October 2011 | THE EXCHANGE | 61

THE SPREAD | CUISINE

Class-ique Cooking the knowledge hungry Tired of coming home after a long day in the City to a microwave meal or yesterday’s takeaway leftovers? Are your dinner parties the talk of your friends, but for all the wrong reasons? Or have your kitchen utensils simply turned into expensive ornaments, idly gathering dust? If so then The Exchange has the perfect solution: a back to school series of cooking classes. Televised cookery shows have re-ignited people’s passion for cuisine, meaning that hundreds of culinary courses are now available for those wanting to try their hand at upgrading their kitchen skills. For a truly special experience, however, there are a few courses on the market that stand head and shoulders above the rest:

course and the new Chocolate Heaven course, students are given a hands-on opportunity to develop their culinary skills in a practical and fun environment. Dates and prices of the full range of courses can be found here and descriptions are below. Cookery course prices start from £335 per person Courses are both residential and nonresidential, so students can indulge and unwind in one of the luxurious bedrooms in the hotel and feast on the hotel’s renowned cuisine either as inspiration for the coming day, or as a treat following an exciting and eventful day at the Cookery School. www.manoir.com

Raymond Blanc Cookery School – Le Manoir aux Quat’Saisons

Food writer, broadcaster, consultant and former chef to the rich and famous Angela Gray has opened a cooking school at Llanerch Vineyard in South Wales. She offers an exciting programme of courses, including one and two day courses covering topics such as cooking with seafood and patisserie. Taster courses at the cookery school and host events including cookery demonstrations are also available, as are private dining functions and corporate events encompassing a number of challenge days.

Llanerch Vineyard Cookery School

The Raymond Blanc Cookery School is the only ‘school’ in the world to offer visitors the chance to watch, learn and practice in the kitchens of a two Michelin starred restaurant. Budding chefs can learn the tricks of the trade under expert guidance of Head Tutor, Mark Peregrine. With a variety of courses on offer such as the Learn to Cook in One Day, the Seasonal Dinner Party course, the Garden to Plate

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The vineyard and accommodation has being transformed and has just re-opened, offering daily vineyard tours and wine tasting. www.llanerch-vineyard.co.uk www.angelagray.co.uk The European Alternative

For those looking to venture away from the UK, culinary courses are on offer all over Europe and even further afield. If a trip overseas with a cooking twist appeals to you, then the place where you’ll find what you’re looking for is Viator (www.viator.com). The online event directory provides tours and experiences in over 150 countries around the world, including various cookery classes and foodie based tours. Our favourites currently available through the site are: • New Orleans Cookery Class –

Located in a renovated molasses warehouse in the French Quarter, the course aims to teach the secrets of Creole and Cajun cooking with tips for creating the best of dishes from New Orleans, including Gumbo, Jambalaya and Pralines. • Small Group Cooking Lesson in Rome – Beginning with a trip to Rome’s

central market where the group learn how to pick the freshest ingredients, the lesson then moves into a fully kitted out kitchen where the group learn how to make fresh pasta and main meals, all accompanied by a selection of the finest local wines. • Greek Cooking Lesson and Dinner in Athens – Sofia’s Place, a cosmopolitan

brassiere on Athens’ trendy Valaoritou Street, hosts this Greek cookery course that aims to teach the students how to create traditional Greek dishes whilst understanding the significance the food plays in Greek culture. • Caribbean Flavours Small Group Cooking Class – Located in Rouseau

in Dominica, the course teaches students how to create traditional Dominican and Caribbean cuisine at home. • Small Group French Cooking Class in Paris – Beginning with a trip to Paris’

local markets where the group learn how to pick the freshest ingredients, the lesson then moves into a fully kitted out kitchen where the group learn how to make a typical threecourse Parisian banquet. www.viator.com

THE SPREAD | SWEEET SUITES

Sweet suite#4:

The Bridge Suite, The Atlantis Resort, The Bahamas When you have to wait five years to get into a hotel room, you’d hope it’s worth it. When you then find out you’ll have to pay $25k a night, and you’ll have to book a minimum four nights, you’ll be expecting rather more than a Premier Inn. The good news is that, for those who can afford it, the world-famous Bridge Suite at the Atlantis Resort in The Bahamas is definitely worth it, and you can expect a little more than you’ll find at Lenny Henry’s hotel of choice. Parked precariously between the two

64 | THE EXCHANGE | October 2011

imperious towers, this presidential suite has ten rooms over nearly 5000 sq ft, more staff than you’ll know what to do with, unparalleled views, and a kind of luxury that few will ever experience. Oh, and gold. Lots of gold. If it’s in the room, there’s a fair chance it’s covered in the yellow stuff. Get yourself on the list now if you can handle the wait and, in the meantime, don’t go expecting any jobbing Eighties’ comedian to be doing the TV ads for it any time soon. www.atlantis.com

TRADING THE EURO IS EASY? BULL .

Forex is tough. It takes skill to avoid being gored by the unpredictable. Can you handle volatility when it charges?

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Trading off-exchange foreign exchange on margin carries a high level of risk and is not suitable for all investors. Running of the Bulls, Pamplona, Spain

THE SPREAD | TRAVEL

Mighty Lights: According to a recent â&#x20AC;&#x2DC;Bucket Listâ&#x20AC;&#x2122; poll, seeing first-hand the majesty of the Northern Lights is amongst the the top ten sights Brits dream of witnessing before they depart this life. But how special an experience is it? Mark Southern investigated. 66 | THE EXCHANGE | October 2011

THE SPREAD | TRAVEL

The Arctic Circle, it turns out, is chilly. Actually, it should probably be pointed out at the beginning of this article that the Arctic Circle is really very cold indeed. I first discover this upon landing in Tromso in northern Norway when the icy wind whips into you straight after you take your first step off the plane. I’m here to (hopefully) set my eyes upon one of the world’s most incredible natural phenomena, the Northern Lights - the strange occurrence when the electrically-charged particles collide over the Earth’s magnetic poles, and create glorious colours in the sky. I say ‘hopefully’ as it can be hit and miss as to whether you’re lucky enough to be there when the Lights come out and, knowing my luck, I feel sorry for the others on the trip for unwittingly choosing to come on the same trip as me. The tour is being arranged by the excellent adventure travel company Transun, they meet me plus the thirty or so other Light-seekers and transfer us across the Swedish border to Kiruna, passing the frozen fjords en-route. We arrive at the only hotel in the small town, the Davvi Arctic Lodge - a modern split-level place, with comfortable rooms and a sociable

“everyone is staring upwards at the sky, hoping to see something, anything, that resembles the famous Aurora Borealis”

communal bar - where we’re given our very own thermal snow-suits and boots, and then it’s the first trek up the hill to see the Lights. The first thing you notice whilst being in the wilderness of the Arctic Circle is the quiet. Absolute silence fills the frozen air, whilst the two foot carpet of soft, spongy snow surrounds you flattening the landscape in every direction. But it’s not the ground we’re now looking at, everyone is staring upwards at the sky, hoping to see something, anything, that resembles the famous Aurora Borealis. However, what these

poor people hadn’t taken into account was that I was also there acting as the bad-luck charm, and the sky stayed still. The following day, when the light returned to the small Swedish village, it was to the SUVs and to a nearby reindeer camp. The Sami tribes still use reindeer on a daily basis for both food and clothing, and also for getting around, so we learn how to ride a reindeer as well as how to lasso a passing animal. Useful stuff, I’m sure you’ll agree. The afternoon is snowmobiling, which is just about the most fun you can have in a remote village in Lapland. We set off on snow safari in convoy as the tour leaders guide us around the barren landscape, stopping here and there for a breather. The snowmobiles reach speeds of 30mph, and the sensation of the cold across your face is wonderful. Then it’s back to the lodge for dinner and to prepare for the second of our Northern Lights hunts. As the darkness begins to envelope the night sky, it’s into our thermal suits and out into the cold again. This time we lie back on the comfy mattress of snow and stare upwards, willing something to happen. But of course, thanks to me, nothing does.

October 2011 | THE EXCHANGE | 67

THE SPREAD | TRAVEL

The following day we set out to learn to dogsled, with the help of half a dozen husky dogs each. Sitting on the sled with the dogs leading the way is remarkable, and really helps to accentuate the difference between ‘normal’ life in London, and this unique experience. But, as incredible as the huskies were, we didn’t come all this way for that, and there’s only one thing on everyone’s minds as we once again climb into the thermal suits for the final night. This time, however, we’re taking the snowmobiles out on our search, and the convoy of machines glides along the white surface like a shining snake of headlights, burning into the blackness. We stop in the middle of an ice plain, and look hopefully upwards, but still nothing. We repeat this at the next stop, and still my bad luck ruins the experience for everyone else. We clamber aboard again for the final stopping point before returning to the lodge, and it’s hard not to feel disappointed to have travelled so far, only to miss seeing the spectacular Lights. We arrive at the final viewing area, climb off the snowmobiles, and gaze, ever hopefully, up above.

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And then, it happens. From far, far away, a dot turns into a circle, which turns into a glow, which turns into a shape, which turns into a breathtakingly electric light show in the sky. Colours whirl throughout the night sky, great clouds of the rainbow jostle with each other for supremacy as the night becomes alive. Vast splashes of green, purple and red, as big as London itself, dance around as far as the eye can see, whilst the humble human viewers below stare open mouthed in amazement. For thirty minutes the show continues to build, and then, it disappears. As quickly as that. We arrive back at the lodge later in a state of euphoric awe, and the chat in the bar is over just one topic. The distance we’ve travelled seems a minuscule movement across a map, and there is no doubt as to whether the trip was worth it. The following day we return to London, but there are some sights in your life that you know will stay with you forever, and this is undoubtedly one. It just leaves time to reflect on the notion that, whilst most polls you read about are spurious nonsense, this bucket list one should definitely be listened to.

Transun offer the Arctic Spirit Northern Lights break on a 3, 4 and 7 night basis from January to April. Prices start from £749 and include direct flights, transfers, full board accommodation and activities. Activities include a Northern Lights Forest Trek, Snowmobile Safari, Call of the Wild Husky Safari and Reindeer Camp experience – other optional excursions are also available. Transun’s Northern Lights breaks fly from Gatwick, Manchester, Bristol, East Midlands, Glasgow and Leeds Bradford. For more information or to book your own Northern Lights experience, visit www. transun.co.uk or call 01865 265200.

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IN THE CLOSE... COSMETICS WHO’S WHO GLOSSARY KILLA VILLA

World Cup set for dramatic climax The big news from the sports world this month is the conclusion of the rugby World Cup, with the final set to be played at Eden Park on 23rd October. And despite the slow the slow start to the competition, the upcoming quarter finals is where the action (on both the field and the sports books) is sure to heat up. That’s because after Ireland’s heroic victory over Australia in the biggest upset of the tournament to date the expected quarter final line-up (at the time of writing one round of games in the group stages are still to be played) has suddenly made the betting very interesting. Australia, South Africa and New Zealand will all be in the same side of the draw, meaning that one of the six nations

teams is guaranteed to make it through to the World Cup final. And not only is that great news for England, Wales and Ireland fans hoping it will be their heroes holding the Webb Ellis Trophy aloft on 23rd October, sports spread bettors with dough on the home nations will also be licking their lips as prices continue to tumble. All we need now if for Australia or South Africa to upset the hosts in the semi-finals and we can all go home happy.

October 2011 | THE EXCHANGE | 71

THE CLOSE | COSMETICS

Trading fac As the recession bites and jobs become less secure, City slickers are turning to a new form of self-presentation to upgrade their personal image, keep their jobs and improve their lives; cosmetic surgery. Mark Southern has been investigating the INCREASED PRESSURE for City workers to keep their face on-trend.

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Next time you look in the mirror, give something a go; think of it as therapy - it might just save your career. Take a deep breath, stare at your reflection, and dispassionately count all the things you’d change if you could. Be honest with yourself, and tot up the flaws you‘d like improving. Well, what did you end up with? If you came up with zero to three then you’re either a supermodel reading this on a Lear jet to Paris Fashion Week, or you’re just kidding yourself. Get to four to nine and you should congratulate yourself on your excellent self-esteem - but then you’ll probably be pretty pleased with yourself already. However, get to ten flaws or above and, far from being out on your own, you’d be in the esteemed company of 70% of London’s City workers who also share your many body hang-ups that they’d change if they could. After witnessing the numbers of City workers who undergo cosmetic surgery rising by over 1000% in some Harley Street clinics, TEM conducted our own research and discovered that the average number

THE CLOSE | COSMETICS

ces of hypothetical body and face changes that City boys and girls would make is ten. And that’s just the ones confident enough to talk about their looks. But, ‘so what?’ you might say. ‘What relevance does that have to my work life?’ After all, it’s well documented that unrealistic media images give everyone an impossible physical ideal to aspire to. Surely there’s nothing more sinister to it than that, right? Well, no, actually. There is more to it than that, and your close attention right now could just help your future career. You see, image matters. cratch that; image really matters. In these austere days, when profits are down and people have to be let go, your physical appearance can be the factor that tips the scales in the right (or the wrong) direction. For while your past-performance is the biggest influencer for both recruiters and efficiency managers, in cases where two candidates are evenly matched, both admit to having their decision swung by a more attractive, well-

presented individual. That’s right, it turns out the sharper the look, the less cutting the dreaded redundancy sword will be for you. We told you appearance matters. Indeed, it’s estimated that more than 70% of communication is non-verbal, and how you look is an essential part of this version of yourself you present to the world. Dr Dai Davies is a surgeon to the stars, and head of Cosmetic Surgery Partners, the UK’s leading cosmetic surgery provider. He’s witnessed the increase of City men undergoing plastic surgery, from minor treatments to major facial reconstructions, and admits it’s a broadly modern phenomena. “We have seen a very real surge across the cosmetic surgery industry of successful male patients wishing to change some of the physical aspects of their appearance that they are less than pleased with”, he said. “Whilst female patients still make up the majority of patients, the past decade or so has seen the numbers of men undergoing surgery multiply many times over.”

October 2011 | THE EXCHANGE | 73

THE CLOSE | COSMETICS

One such City boy taking the plunge to transform himself was City trader Simon Lane, who underwent cosmetic surgical procedures earlier this year. Lane explained, “Like most people, I’d always had issues with my appearance - in my case it was my unattractive nose - but it was only when hitting my mid-thirties that these seemed to worsen. I was working crazy hours but, unlike when I was in my twenties, all of a sudden I started to put on weight far faster than I could lose it. Gyms were attended, healthy eating was mostly adhered to, but I began gathering fat around my chin, particularly, giving me the impression I was lazy and slobby. Whereas prior to this I had always given off a positive, thrusting image, my new chinless wonder persona began to seep across all aspects of my life, and I felt I was being perceived by the management as lacking the cutting-edge I once did. I’d often thought about surgery to correct my nose and so, after much research, I took a consultation with Cosmetic Surgery Partners. Dr Davies spoke to me at length and took me through how I felt about my body issues to determine if I was of sound enough mind to go through with it, and I genuinely believed that he wouldn’t allow his clinic to operate on someone who hadn’t understood the consequences of what they wanted done. After our chat, Dr Davies discussed with me what options I had, and recommended a rhinoplasty operation to resolve my nose issues, alongside a treatment of liposuction under my chin, and a complex jaw augmentation operation to bring forward my chin and create a stronger jawline. He explained how my nose would be broken from inside the nostril to avoid any scarring, and reset using keyhole surgery. My jaw would then be broken, and reset a few centimetres forward, which would heal quickly and give me the jawline I’d always wanted but could never achieve as age caught up on me. Meanwhile, fat would be sucked from under my chin using lipo. Using state of the art technology, he then took photos of me, and manipulated the images to show me how my new face would look post-surgery. He warned that no surgeon could guarantee an absolute look but, with his skill, he could get as near to the image on the screen as possible.

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“I felt I was being perceived by the management as lacking the cuttingedge I once did”

The change looked so exceptional that, after a cooling off period in which I was advised to really think about the whole thing, I decided to go for it, and made the call that would transform my face forever. After a second consultation to get further measurements and x-rays taken with CSP’s jaw expert, Dr Caroline Mills, I booked a surgery date and waited until the big day. My appointment was first thing in the morning, and I’d be lying if I said I wasn’t a bit anxious as I arrived at the Welbeck private hospital near Harley Street. However, the Cosmetic Surgery Partners team were very friendly and calming, they relaxed my nerves and helped me into my private room. Dr Davies and Dr Mills both came in to see me prior to the surgery, and then before I knew it I was being taken down to the operating room. Then came the general anesthetic, and then blackness.

THE CLOSE | COSMETICS

Three hours later, I was woken in the recovery room, and taken back to my private room. The doctors had told me repeatedly of the severe bruising and bandaging I would suffer due to the procedures in question, but It was here in my room that I first saw my immediate postoperative self, and had to double-take. My face, covered in bandages and plaster for protection, stared back, with black eyes visible, and a jaw that could barely move. As for swallowing, I’d lost all control of my throat, and felt dizzy from the anesthetic. However, with the excellent help from the CSP nursing team, I was helped through that first 24 hours and the following day, still feeling pretty dreadful, I was able to be picked up by a family member. The next week was difficult, but not as bad as I had expected, and slowly every day I saw my condition improve. Seven days after the operation I returned to

CSP and had the bandages removed, where I then saw my new face for the first time. To say I was taken aback was an understatement. I’d felt almost as anxious at seeing the results for the first time as I did when going in for the surgery and, despite CSP’s first class reputation, it was impossible to completely forget about the trashy ‘When Surgery Goes Wrong’ TV programmes I’d seen before. However, as the nursing team carefully removed the bandaging, I saw all the things I hadn’t liked before had disappeared, and been replaced by a whole new face. A face I was proud of.

Sure, it took another week or so for all the swelling to clear, but the instant transformation was so incredible that I felt like a different person. The funny thing was though was that I didn’t look like a new person; I just looked like a much more attractive version of myself. After my two week holiday from work, I prepared for my return a little worried that my new face was going to create sarcastic comments from colleagues, and was advised to get a haircut and a new suit, and walk in with the air of confidence I always used to project, but seemed to have forgotten. Monday morning came around, and I marched into the foyer at work, only to be caught in the lift with the Chairman of the company. I could almost feel his eyes burning into me, and my first thought was he was appraising my new face but he simply said, “Good to see you back in the office, Simon. That holiday must have done you the world of good - I haven’t seen you looking this sprightly since the nineties!” The Chairman’s positive comments were an omen for the rest of the week as people continually commented on how refreshed I looked, and how I seemed back to my best. And the great thing was I did feel different; I felt like me, but on a really good day - in fact, how I used to feel in my early twenties.” “Simon’s story, and subsequent confidence boost, is similar to many others in the City”, Dr Davies explained. “It’s a hard time to be working in the City, and the stresses and strains can bring anyone down. One of the great things about this job is hearing about the number of our patients who report a genuine rise in their personal confidence levels after surgery, and it’s so pleasing to be a part of that.” The final word, though, should go to Simon, who three months after his surgery not only survived a redundancy cull, but has since been promoted. “I feel like a new man”, he said, smiling broadly. He shakes hands and walks away from our meeting with his shoulders back, full of purpose. He no longer fears the mirror; do you?

If, like Simon, you want to reinvent yourself check out www.cosmeticsurgerypartners.co.uk today. It just might be the thing that reignites your career. October 2011 | THE EXCHANGE | 75

THE CLOSE | INFORMATION

WHO’S WHO Whether you’re new to financial markets or just looking for a better deal, The Exchange has all the info you need.

ETX CAPITAL ETX Capital is the trading name of Monecor (London) Limited. The company joined interdealer broker Tradition in 2000 and in 2002 Monecor became the retail derivatives arm of Tradition. In 2007 Robin Houldsworth and Peter Shalson acquired Monecor for an undisclosed sum from Tradition UK. The name ETX Capital was adopted in 2008. What’s their pitch? ETX Capital provides institutional, high net-worth and retail customers with multi-asset dealing capability through contracts for difference and financial spread betting products. It seeks to offer high levels of customer support and guarantees total client confidentiality. ETX offers spreads from just 1 point and margins from 1%. Anything for newbies? ETX Capital provides up to £250 cover if the client is not in pro to within the first 10 days of trading. Contact www.etxcapital.com 020 7392 1430

PROSPREADS ProSpreads is a Gibraltarincorporated division of London Capital Group. What’s their pitch? ProSpreads’ advanced trading technology provides the same functionality as direct market access, delivering execution in a fraction of a second, extremely

76 | THE EXCHANGE | October 2011

tight spreads and no re-quotes. It offers speculators a unique trading platform with direct market access functionality to trade the major indices, commodities and currencies. Anything for newbies? Clients can open an account with £1,000 and take advantage of the same technology used by direct market access brokers and futures traders. Account holders have access to a complete package of trading tools and a number of education options, including a demo account allowing them to test trading strategies. Contact www.prospreads.com 0800 804 8772

GEKKO GLOBAL MARKETS Used to be known as VDM, the company now styles itself Gekko Global. We are not sure quite why. Users rate the speed of execution and the simple-to-use platform. What’s their pitch? They claim to have highly competitive spreads (1 point on the UK 100 through the day and up to 8pm), low initial deposits, low minimum trade sizes, a userfriendly platform, free guaranteed stops and cutting edge technical research. Anything for newbies? You bet. A cash bonus of 25% of your initial stake up to a maximum matched amount of £500. That’s the most generous offer out there. Contact www.ggmarkets.com 020 3326 2131

CANTOR INDEX Cantor Index is a financial spread betting company, established in 2000. Part of the global Cantor Fitzgerald group, Cantor Index is open 24 hours a day, and offers bets on a wide range of markets from shares and indices to bonds and commodities. What’s their pitch? Cantor Index has a comprehensive data service which allows clients access to detailed market reports as well as news from third-party sources, and state-of-the-art stock screening tools. With specialised forex and commodity pages, as well as an economic and company diary, the data service has detailed financial information available free to all account holders. Anything for newbies? Cantor Index offers new clients a £50 account opening bonus. To qualify for the offer clients simply have to fund at least £250 and have placed a minimum of two non-equity bets (each with a stake of at least £2 per point) within 1 month of account opening. The offer is available until the 30th November 2010. Contact www.cantorindex.co.uk 0207 894 8040

Selftrade Selftrade is one of the UK’s largest execution-only stockbrokers and is a trading name of Talos Securities Ltd, a subsidiary of Boursorama, one of Europe’s

leading online stockbrokers and part of the Société Générale Group. We operate a CFD and Spread Betting service in association with City Index. What’s their pitch? Customers can trade thousands of markets worldwide including indices, equities, currencies and commodities either through a CFD or Spread Betting account or both via one platform. Selftrade firmly believes in educating investors who are new to these products and therefore offers educational guides, webinars and a four week demo account. Customers can also start Spread Betting from 50p a point via the Trading Academy. Anything for newbies? Keep an eye out for offers. Previous offers have included a £200 risk management offer and a £100 trading bonus. Selftrade also operates a Refer a Friend scheme, where existing customers can introduce friends and receive a cash bonus. Contact 0845 356 0160 www.selftrade.co.uk

SPREAD CO The Spread Co group of companies, with offices in London and Singapore, is a specialist provider of retail derivative trading products worldwide. It provides the facility to bet on CFDs, forex and the usual range of spreads. What’s their pitch? “The Spread Co trading platform is the simplest and most user-

THE CLOSE | INFORMATION

SPREAD BETTING

friendly CFD platform I’ve seen,” says Alpesh Patel, a professional trader. Anything for newbies? A new account funded with £300 or more allows the client, once having placed four qualifying trades, the opportunity to take on Head Trader Rajesh Patel in a one day, head to- head challenge. If the client beats him, Spread Co will double the client’s profit by up to £150. If the client happens to lose on the trade, but still fares better than the trader, the company will refund losses on that trade up to £150. Contact www.spreadco.com 01923 832 682

FINOTEC Offering forex, commodities and CFD trading, Finotec serves serious retail as well as institutional clients. The minimum contract sizes on forex, for example, underline that this is a site for the more committed trader. What’s their pitch? The Finotec Trading Platform offers one of the most diversified range of products in the industry, including currencies (at least 32 pairs), options, commodities and CFDs on all major indices. New products are regularly added and the platform is regularly upgraded. The level of trading capital and volume generated through Finotec allows it to negotiate inter-bank conditions with liquidity providers. Forex can be

FOREX

traded with margin requirements of up to 0.5%, and up to 5% for CFDs – among the lowest available in the market. Anything for newbies? The Finotec Demo Account enables clients to simulate trades and spread bets in real market conditions. Clients can trade with $100,000 in virtual money and learn how to use trading tools and real-time charts. Contact www.finotec.com 0207 398 0170

WORLDSPREADS WorldSpreads was founded in 2000. It offers a range of services to retail clients, specifically spread trading and CFDs. The WorldSpreads head office is in Dublin, and it has offices in London, Paris, Frankfurt, Stockholm, Copenhagen, Madrid and Kuala Lumpur What’s their pitch? WorldSpreads offers zero – you read it right, zero – spread on a range of 10 instruments with plans to bring more on stream. It aims to provide high quality financial trading services to a global audience. Services offered include trading of contracts for difference and spread betting. Anything for newbies? Clients opening new accounts with a minimum deposit of £500 can receive up to £300 in cash back against realised losses. Good deal. Contact www.worldspreads.com 0207 398 5220

CFDs

ODL Markets / FXCM Originally founded in 1994 as an options house, ODL Securities was bought by FXCM Holdings LLC. It has 200,000 live trading accounts and over 700 employees worldwide. Voted Best Retail Platform by FX Week last year. What’s their pitch? ODL allows clients to spread bet on forex, oil, gold and global stock indexes. Functionality is a strong suit; you can trade in one click, and direct from the chart you’re looking at. The software works on all manner of smart phones and mobile devices. Anything for newbies? ODL requires a minimum deposit of £300 for all new accounts. Also, should everything go south, there’s a no-debit deposit guarantee, so you can’t lose more than your deposit. Contact www.odlmarkets.com 0207 903 6550

MF GLOBAL SPREADS MF Global Spreads provides the opportunity to trade in forex, futures and options and to spread bet. What’s their pitch? MF Global Spaces offers news and views throughout the day as a guide to the client’s trading decisions. Clients are able to monitor the markets and stocks they want by creating watchlists in My Markets. Subscribers to MF’s My Markets Product will

FUTURES

soon be able to access content via iPhone or other mobile devices. Anything for newbies? New clients will be given a £2 free FTSE index bet with a 1-point spread, a year’s free access to technical analysis worth £300 and access to a special discount book club. Contact www.mfglobalmarkets.com 0207 144 5678

DELTA INDEX Delta Index was founded in 2001 by Joint Managing Directors Conor O’Neill and Technology Specialist Micheal O’Shea. The team is led by non-executive Chairman, Dermot O’Donoghue, former Head of Treasury at AIB. What’s their pitch? Delta Index seeks to provide transparent and tight pricing throughout its range of markets, whether trading through its online trading platform XDeal or speaking to its traders over the phone. Clients can trade commodities, shares, forex and indexes. “Where the traders trade” is their tagline. Anything for newbies? The offer of one-on-one training beats anything the rest of the pack offers, like videos or tutorials. You can also sign up for the Trading Ideas service which will send you info like buy and sell signals. Contact www.deltaindex.com +353 1 664 8500

October 2011 | THE EXCHANGE | 77

THE CLOSE | INFORMATION

SPREADEX Spreadex was formed in 1999 by former City dealer Jonathan Hufford who was hooked on the sheer fun offered by spread betting and decided to set up his own company to make spread betting more accessible and user-friendly. What’s their pitch? Spreadex offers leveraged access to trade on a huge range of global financial markets including indices, shares, commodities, currencies, interest rates, bonds and exchange traded funds all via a professional yet simple-to-use trading platform. The firm offers a full suite of charting tools, tailored phone trading service, some of the most attractive margin rates in the industry and also provides credit, subject to client status. On the sports side of the business, Spreadex offers thousands of sports spreads and fixed odds prices on a range of sporting events with hundreds of markets offered in-play, all from one platform. Anything for newbies? New customers at Spreadex can qualify for up to £400 in offers and once signed up they can receive £50 for every friend they refer to Spreadex. On the financial platform, new clients can gain up to £200 cashback on net losses on trades in the first two weeks providing a minimum of five opening trades have been placed in that time. There are sports deals too. Contact www.spreadex.com 08000 526 570

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ShortsandLongs.com ShortsandLongs.com is an arm of Spreadex Ltd and was formed in October 2008 as a unique alternative from the existing spread betting firms. The aim was to make trading cheap, simple and hassle-free while also offering spread bettors much greater risk-control. What’s their pitch? ShortsandLongs.com has some of the tightest spreads in the industry on key markets such as the UK 100 daily, Wall Street daily, gold, light and Brent crude and major spot currency pairs. Anything for newbies? New customers can enjoy £100 of risk-free trading in their first 14 days with ShortsandLongs. com. Provided they have placed a minimum of two opening trades, any net losses in that period will be refunded up to a maximum of £100. Contact www.shortsandlongs.com 01727 895 140

CMC MARKETS CMC Markets started when Peter Cruddas put £10,000 into a firm he called Currency Management Corporation. In 1996 he launched the world’s first online forex trading platform, from where CMC Markets has evolved to become one of the largest financial spread betting companies, with over 26 million trades executed annually. What’s their pitch? CMC says it wants to become the world’s leading online retail financial services business,

constantly innovating to differentiate its content, services and products. “You bet in pounds sterling and you can keep your bets open as long as you like,” the company says. Anything for newbies? CMC provides demo accounts and the front-end is going to look familiar to anyone who’s done a lot of video gaming. That said, if you haven’t, it still looks slick and is easy to drive. There’s also a handy ‘Insights’ section which tells you essential trading details but also tells you what influences price and there’s a news feed too. Contact www.cmcmarkets.co.uk 0207 170 8201

INTERTRADER InterTrader.com says its aims are simple: to make the markets accessible to all, to make trading affordable and to provide a service that the client can trust. InterTrader.com is a trading name of London Capital Group. What’s their pitch? Clients can take their own positions on global markets. InterTrader.com covers a variety of markets from stock indices and FX to commodities, oil and metals to UK, US and international equities. Anything for newbies? InterTrader’s cash loyalty programme allows clients to receive a monthly rebate on trading costs of up to 10%, dependent upon the volume of trades. Also, sign up before the end of the year and they’ll add 10% to your

starting deposit, up to £500. Contact www.intertrader.com 0207 456 7677

CITYINDEX City Index was established in the UK in 1983 and is part of IPGL – a privately owned company with substantial shareholdings in the derivatives broker ICAP plc. The company has over 600 employees worldwide and offices in the UK, US, Poland, Singapore, China and Australia. What’s their pitch? CityIndex says it seeks to provide consistently competitive spreads (like 1 point on the FTSE) and margin access on thousands of markets worldwide including indices, shares, currencies, commodities, bonds, interest rates and more. Award winning mobile platform. Anything for newbies? There’s a four-week ‘Learn to Trade’ program where you can trade lower-than-normal value bets to get your eye in, like 25p per point on spreads. Contact www.cityindex.co.uk 0207 550 8500

FINSPREADS Finspreads offers access to thousands of instruments on the world’s financial markets. It claims to have pioneered fully interactive online spread betting in 1999. It is part of the City Index group. What’s their pitch? Finspreads sells itself on

THE CLOSE | INFORMATION

transparent and fair prices. It publishes the size in which it is prepared to deal at its quoted price, meaning what you see is what you get. Anything for newbies? New account holders are offered up to £100 in trading credit and while you’re learning the ropes you can trade as little as 10p per point for the first eight weeks of your account. After that, trades start as low as 50p per point. Contact www.finspreads.com 0207 150 0400

GFT UK GLOBAL MARKETS GFT Global Markets is a whollyowned subsidiary of the US forex and futures dealing firm Global Futures & Forex and a sister company to worldleading online forex dealing firm Global Forex Trading. What’s their pitch? GFT’s trading software, DealBook 360, is capable of handling virtually any kind of order. Except your lunch. DealBook is a software platform that streams data direct from the dealing desk to the client, allowing them to operate using the most up to date prices. Anything for newbies? GFT offers a 5% deposit matching scheme for all of its new spread betting customers, hoping to draw even more attention to the potential tax benefits offered to investors by way of spread betting. Contact www.gftuk.com 0207 170 0770

IG INDEX IG Index was initially established to give investors the opportunity to bet on movements in the price of gold, without having to actually buy or sell the physical commodity in the market. The IG Group now has over 120,000 clients worldwide, making more than four million transactions per month. What’s their pitch? IG Index has been responsible for pioneering several types of financial spread betting products, including the innovative Binary and Bungee Bets, which offer clients yes/no and bounceback propositions. All this is available on its PureDeal trading platform which features Price Improvement technology and one-click dealing. Anything for newbies? IG offers two types of account: the Limited Risk Account will cost a few points in terms of the spread, but it means you’ll have risk management in place and won’t lose more than your deposit. The Plus Account has tighter spreads and options on order types including Limited Risk orders and Trailing Stops. Contact www.igindex.co.uk 0207 896 0011

Guardian CFDs Guardian CFDs was established to fill a gap in the market by providing a traditional advisory stockbroking service specialising in derivatives. They are independent, privately owned

and able to offer their clients, impartial and honest advice. What’s their pitch? Very simple, there are numerous platforms and thousands of markets to trade from but can your current provider give you advice on what is best for you? Guardian start with a one to one assessment on how they can add value to your investment decisions. Then they provide you with an education package and the tools to trade the markets. They are always on hand to assist, from setting up your platform through to providing actual trade ideas. Guardian take great pride in the service they provide their clients, and would welcome you to contact them to discuss specific trading requirements.

to deposit only the maximum value of their stop-loss (plus 20%). This means that large sums of capital are not tied up funding the spread betting account. It also says it offers ‘extremely’ tight spreads and offers them for far longer than many of its competitors. Anything for newbies? A nice interactive tutorial, and a load of other learning tools: ‘take a tour’, user manual, FAQs section, free seminars plus the usual practice account stuffed with 10,000 practice pounds. Contact www.capitalspreads.com 0207 456 7020

Anything for newbies? Guardian are advisory stockbrokers which enable them to give specific advice which for newbies can be invaluable and prevent costly mistakes. Contact 020 7638 6996 http://www.guardiancfds.com

TRADEFAIR Linked to the phenomenally successful Betfair, Tradefair offers a wide variety of markets. The no-nonsense interface offers customers thousands of financial instruments with some of the tightest spreads on one of the most reliable spread betting platforms. What’s their pitch? Simple but sophisticated frontend with low spreads. Nothing much new there. The USP here is Autochartist, which can send signals about significant potential trading triggers as well as allow you to customise your own charts. Anything for newbies? Free subscription to info service ADVFN, plus £100 matching when you deposit and make a few trades. Contact www.tradefair.com 020 7456 7071

CAPITAL SPREADS Capital Spreads is another division of London Capital Group, providing the expectation of a solid platform and financial stability to the CS offer. What’s their pitch? Capital Spreads allows clients to trade in many financial products using one of the several major currencies from one platform. It also offers a limited margin policy, where clients are required

October 2011 | THE EXCHANGE | 79

THE CLOSE | GLOSSARY

TRADING GLOSSARY Welcome to The Exchange financial glossary. We’ll be updating every month and we welcome additions (decent and clean, please) – bottle of champagne for each issue’s best suggestion. contact@theexchangemagazine.com

ABS Asset-backedsecurities; ie. securitiesbacked by mortgage loansor suchlike which areobtainable if the creditor defaults. ACTUALS The physical assets behind commodity securities. ADR American Depositary Receipt. These are sharesof foreign companies listedon exchanges in the US. ALEXANDER’S FILTER A method that measures the rise or fallof a share price in percentageterms over a given period. Afast rate of increase suggestsa buy; the reverse, a sell. AMERICAN OPTION Can be exercised at any time during thelife of the contract. Europeanoptions, by contrast must beexercised on the expiry date. ARBITRAGE The action of profiting from the differencein price for similar securitiesin different markets.

BACK MONTH The traded future or option that is due to expire latest.

BEAR RAID The attempt to push down the price of a security, most often by SHORT SELLING. BEAR TRAP The belief that the market will start to fall having risen significantly, there by leaving short sellers trapped by increasing prices, forcing them to cover their positions by buying stock at higher prices.

BUCKET SHOP A brokerage, often from overseas, that sells shares with little underlying value at, by definition, elevated prices.

BED AND BREAKFAST DEAL A transaction where by stock is sold and subsequently bought back after the end of the tax year, allowing shareholders to register either or a loss or a profit for tax purposes.

BULL An investor who believes that the market will rise. So called because the raising ofthe head (denoting a command to buy a security) is redolent of the action of a bull raising its horns before attacking.

BELLS AND WHISTLES Feature sadded to a security put up for sale to attract investors or reduce the costs assumed by the issuer.

BULL MARKET A market where prices have risen significantly over a prolonged period of time.

BID/ASK SPREAD The difference between the price at which adealer is prepared to buy and the price at which they will sell. The spread between the best bid and the best ask (or offer) is sometimes known as the touch. BLUE CHIP COMPANY A longestablished company with a long and strong record of profitability and endurance. The term is taken from the most expensive chip on a poker table.

BACKWARDATION A situation within futures markets wherethe cash price is greater than the price for future delivery.Such a scenario often occurs when supply of a particular commodity is short but the futuresprice remains low because the expectation remains that further supply will come online in the near future. See Contango.

BOTTOM FISHING The practice of buying shares when they lie at a level the investor believes is unlikely to decline further. The same term is also used with respect to companies buying competitors that are cheap or failing.

BEAR An investor who is essentially pessimistic about the fundamentals of a given market. So called because a bear fights on its hind legs, moving its paws in a downward motion.

BOTTOM UP An investment strategy whereby investors pick stocks, rather than rely upon achieving a balanced weighting in each sector. Such a strategy is based upon the management of individual companies rather than market or economic trends. The opposite of Top Down.

80 | THE EXCHANGE | October 2011

BUFFER STOCK A stockof commodities held by an international entity, which seeks to buy and sell from its stockpile as a means of maintaining price stability.

CALL An option giving the holder the right to buy an instrument for a particular price within a set time.

CALLABLE Callable bonds give an investor the right to redemption at a set price on a set date. CIRCUIT BREAKERS When an exchange imposes the closure of trading after prices have fallen by a certain percentage- a move designed to restrict so-called panic selling. COCKTAIL SWAP A mixture of different kinds of swaps. Often used to spread risk on large deals. CONTANGO A situation in which futures prices rise progressively as the maturity date moves further away from spot. The increase reflects the addedcost of storage and insurance for commodities. Contango isthe opposite of backwardation and is the normal relationship between spot and future prices. CREDIT RATING The assumed creditworthiness of a company or sovereign

nation issuing debt securities and their ability to repay the investor. Credit ratings affect the ability of a government or company to secure financing from banks and also inform the price their securities might command on the open market. DEAD CAT BOUNCE A rise in a security or broader market following a sustained drop, followed by another precipitous drop due to a lack of change in the fundamentals of said financial instrument or market.

DISCOUNT A derivative that is trading below the current market price it is said to be trading at a discount. DOUBLE DIP A second drop in a market or economy after significantly dropping for first time. DUTCH AUCTION An auction in which the price is gradually lowered until a bid is secured. That bid then becomes the price at which the offering - such as US Treasury Bills - is then sold. The term is often synonymous with tenders.

E F

EXPIRY DATE The date at which a security matures. It can no longer be traded thereafter. FAIR VALUE The priceat which a security canbe expected to trade.

FALLEN ANGELS Bonds that have fallen below a previously held investment grade, becoming junk. FIBONACCI NUMBERS A mathematical phenomenon described by 13th century mathematician Leonardo Fibonacci, whereby the sum of any two consecutive numbers equals the next highest number. The system is used by technical

THE CLOSE | GLOSSARY

analysts to establish price objectives. FILL OR KILL An order to buy or sell stock at the particular moment that a security reaches a certain price. FOKs are usually initiated when an investor wants to buy a large chunk of stock at a particular price. FRONT RUNNING 1) The practice whereby a trader illegally deals on his own behalf prior to carrying out a client’s order to buy or sell a specific security when he knows the client’s transaction will likely move the price. 2) A brokerage’s trading in shares ahead of publication of its own research report.

GFD A term signifying that an order can only be filled on the day it islodged and will expire at the close of business. GUARANTEED ORDER An order that limits losses to anamount specified both duringand outside office hours.

HAIRCUT The difference in price between market value and the value o fthe collateral used in repurchasing agreements. (see repurchasing agreements) HEDGE FUND An investment fund, usually only open to wealthy clients, that seeks to produce high returns from short-term markets. They use a broad range of strategies but aim absolute returns, rather than returns benchmarked to an index or asset class. HEDGING A strategy whereby investors seek to minimize risk. Hedging often involves buyingassets in one market to offset potential losses in another. HIT Jargon for the acceptance ofan offer to buy or sell a security.

IN THE MONEY A term used to describe an option when the current price for the underlying security is above the exercise for price for a call and below the price for the exercise for a put.

KERB MARKET A term applied to trading outside official market hours.

LIBOR London inter bank offer rate.

LIMIT UP/LIMIT DOWN When an exchange imposes either a floor ora ceiling on a security price, closes or suspends trading in order to prevent extreme changes in price.

MARGIN The use of a margin allows an investor or a spreadbetter to trade without them being in full possession of the necessary funds. The margin is the part payment of costs to cover contractual obligations, thereby protecting the investor or better against unlimited losses. MARGIN CALL The call made by a spread betting company to a client whose account has fallen below the minimum requirement. MARGIN TRADING A process that allows investors to borrow funds from a brokerage at a particularrate of interest. The added gearing will however cost the investor more money should the market move in the opposite direction tothe way they had anticipated.

OUT OF THE MONEY When the current market price of an instrument underlying an option is below the exerciseprice for an option to buy and abovethe price for an option to sell.PPUMP AND DUMP A formof fraud whereby falselyoptimistic about a company’searnings are circulated aheadof their official publication with aview to pushing up the share price.PUT/CALL RATIO The ratio of thenumber of options to sell traded inrelation to the number of options traded to buy. The number is viewed as a gauge of market sentiment.

RED HERRING A term used for preliminary prospect uses for a new issue used to measure market sentiment for the in the security. The keyfigures on such an announcement, such as the profit forecast, will always be deliberately left blank. REVERSAL DAY A term used to describe the day on which a security makes a significant change of direction in terms of its price. The term is not applied until the security has made a significant change in the opposite direction to the previous trend. RSI Relative strength indicator. A technical indicator (see page

38) based on the momentum of prices in a preceding 14-period block. A reading above 70 (out of 100) is classed as ‘overbought’; a reading below 30 is deemed oversold. RESISTANCE The price level at which a security or index will tend not to rise above, either for technical reasons regarding the price or psychological ones, for example gold rising above $2000 per ounce.

SCALPERS Futures andoptions traders who switch their positions within a very short time in order to make money from small gains frequently. SHORT SELLING A transaction whereby an investor borrows stock from a shareholder for a fee and with a guarantee to return theequity at an agreed later date. In theory, the borrower is anticipating a decline in the share price, which will allow them to benefit from the differential between the price at which they sell the borrowed stock and the price at which they repurchase it. For spreadbetters, it is selling the hope that the stock will decline. The trade is then closed by buying – the‘long’ – to balance the book. SPOT The price of a security for immediate delivery. This is usually executed two days after the trade. SQUEEZE A short squeeze happens when investors buy shares to cover short positions. The term is also used when a particular commodity is in tight supply. STOP LOSS The level below the purchase price at which a spread better automatically closes their position. STOP ORDER The instruction to buy or sell below the current price of the financial instrument in question. STRADDLE An options trading strategy whereby the investor buys one call and one put option with the same execution and expiry date. This allows the buyer to take advantage of price movement in both directions. STRANGLE An options investment strategy, whereby the investor purchases a call and a put option with different strike levels but the same expiry date. The investor will then make a profit if prices break above

a set range. The strategy is basically a bet on volatility. STRIKE PRICE The agreed price atwhich an option can be exercised. SUPPORT The price level at whicha security or index will tend not to fall below, either for technical reasons regarding the price or psychological ones, for example gold falling below $1000 per ounce. SWAP A security, agreed between two parties, that seeks to offsetinterest rate or currency fluctuationsto match the parties’ assets to their liabilities. The security is basedupon cash flow rather than the underlying amount of fixed debt.

TOP DOWN An investment strategy whereby the investor seeks a balance by buying stocks in particular sectors. Such a strategy is basedupon historical and forecasted economic and market trends. TRIPLE WITCHING A quarterly event whereby stock index futures, stock index options and options of individual stocks expire. The event usually results in increased market volatility.

UP AND IN An option that is triggered when the price of the underlying security reaches a set level. The reverse of this isknown as Up and Out.

VANILLA BOND A bond with no unusual features. Such paper pays a fixed rate of interest and is redeemable upon maturity. VARIATION MARGIN The amount of money owed by a spread better when holding open positions and they are in a negative position. VARIABLE REDEMPTION BOND A bond, the redemption value of which is determined by a variable such as the exchange rate between two different currencies or perhaps the performance of a stock index.

W/I When issued.Trading in bonds can start in the so-called grey market as soon as the formal announcement of their issuance has been made but before they are delivered. Thisis also known as free to trade.

October 2011 | THE EXCHANGE | 81

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82 | THE EXCHANGE | October 2011

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