NO ED V IT 14 IO N The e-magazine created especially for active spread bettors and CFD traders
Issue 34 - November 2014
SBM Oil Special Opportunities at the bottom of the barrel?
THE UK’S ONLY FREE ONLINE FINANCIAL MAGAZINE! “NAKED TRADER” ROBBIE BURNS ON SHORTING OPPORTUNITIES
ZAK MIR INTERVIEWS DAVID PAUL OF VECTORVEST
THE BEST OF EVIL KNIEVIL’S DIARIES
CURRENCY CORNER – WHY THINGS DON’T LOOK GOOD FOR GERMANY
AND MUCH, MUCH MORE - PACKED FULL OF TRADING IDEAS FROM ALL OUR CONTRIBUTORS!
Feature Contributors Robbie Burns aka The Naked Trader Robbie Burns - The Naked Trader has been a full-time trader since 2001 and has made in excess of a million pounds trading the markets. He’s also written three editions of his book, “Naked Trader” and the “Naked Trader Guide to Spreadbetting” and runs day seminars using live markets to explain how he makes money. Robbie hates jargon and loves simplicity.
James Faulkner A true stockmarket anorak, James Faulkner began investing in the stock market in his early teens. James is a devotee of the PEG-based growth investing model pioneered by Jim Slater in his seminal book, The Zulu Principle, while also being t1ps.com’s resident economic ‘guru’. James is an Associate of the Chartered Institute for Securities & Investment and holds the CISI Certificate in Investment Management.
Jim Mellon Entrepreneur and former fund manager, Jim Mellon, is worth an estimated £850m according to the Sunday Times Rich list. With a substantial international property portfolio and interests in a variety of companies Jim is a highly experienced and successful investor.
Samuel Rae Having completed his Economics BSc Degree in Manchester, Samuel Rae quickly discovered that the retail Forex industry was for him. His personal trading style combines classic candlestick analysis with a simple, logical and risk management driven approach to the financial markets - a strategy that is described and demonstrated in his best selling book, Diary of a Currency Trader.
Alpesh Patel Alpesh Patel is the author of 16 investment books, runs his own FSA regulated asset management firm from London, formerly presented his own show on Bloomberg TV for three years and has had over 200 columns published in the Financial Times. He provides free online trading education on www.alpeshpatel.com.
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Editorial List EDITORIAL DIRECTOR Richard Gill
Foreword It can probably be said quite fairly that whatever most traders did during the month of October, they would not have regarded it as a particularly easy or pleasant period to have been operating in.
EDITOR Zak Mir CREATIVE DESIGN lee Akers www.cfdmedia.co.uk COPYWRITER Seb Greenfield EDITORIAL CONTRIBUTORS Alpesh Patel Robbie Burns Filipe R Costa Simon Carter James Faulkner Samuel Rae Dave Evans Patrick Callaghan Jim Mellon Maria Psarra
Disclaimer Material contained within the Spreadbet Magazine and its website is for general information purposes only and is not intended to be relied upon by individual readers in making (or refraining from making) any specific investment decision. Spreadbet Magazine Ltd. does not accept any liability for any loss suffered by any user as a result of any such decision. Please note that the prices of shares, spreadbets and CFDs can rise and fall sharply and you may not get back the money you originally invested, particularly where these investments are leveraged. In comparing the investments described in this publication and website, you should bear in mind that the nature of such investments and of the returns, risks and charges, differ from one investment to another. Smaller companies with a short track record tend to be more risky than larger, well established companies. The investments and services mentioned in this publication will not be suitable for all readers. You should assess the suitability of the recommendations (implicit or otherwise), investments and services mentioned in this magazine, and the related website, to your own circumstances. If you have any doubts about the suitability of any investment or service, you should take appropriate professional advice. The views and recommendations in this publication are based on information from a variety of sources. Although these are believed to be reliable, we cannot guarantee the accuracy or completeness of the information herein. As a matter of policy, Spreadbet Magazine openly discloses that our contributors may have interests in investments and/or providers of services referred to in this publication.
For instance, courtesy of factors such as Ebola, the pain in the German and French economies and general world economic growth fears, it did appear that the bears were looking at a slam dunk shorting opportunity. However, against this there was once again the Federal Reserve and the Bank of England riding to the rescue of the bulls with the by now familiar fudge, spin and squirming, doing anything not to call time on the ultra low interest rates environment. Even better, just as the Fed was admitting that QE3 was set to end (but not the weapon of QE), the ECB waded in with its own particular brand of QE huff and puff. The conclusion as October ended was that while easy credit may well past its sell by date, anytime that the markets shake, the financial authorities blink and stocks rebound. All of this reminds us that while it may be attention grabbing to be an ultra bear or an ultra bull, just sticking to your guns is not necessarily the best strategy. This is particularly the case in the macho world of finance where not only is there a chasm between the winners and losers, but also between the “smart” and the “dumb” money. For instance, as crude oil approached $80 a barrel in October it was possible to read in the financial press how “dumb” bull options money was leaving the commodity. This was the cue for the “smart” money to go long. Unfortunately, there are times when the “house” wins as volatility spikes and even those who correctly anticipated the next move in the market are unable to ride out the price action. On the matter of oil, this issue of SBM looks at a number of opportunities we see across the sector, despite the recent price fall. Back to the macro scene and a particular bee in my bonnet tends to be the assumption that being a bear of the stock market is the professional and intelligent stance to have, something which is a cut above the private investor, who as well as being less cerebral, is doomed to be downed by the vagaries of the economic cycle. The argument which helps the bears is that markets fall quicker than they rise. This may be true. But while bears can indeed be on the right side of such rapid tumbles, I would venture to suggest that most would have been caught out not only by the snapback to the upside in the second half of October, but also by similar “end of the world” traps seen in January and August. At least, Ebola notwithstanding, it is to be hoped that after a traditional autumnal shakeout, we will see the customary end of year rally starting by the end of November. Happy Trading. Zak
Spreadbet Magazine Limited Spreadbet Magazine wishes to advise that Mr Richard Jennings has offered his resignation as a director of the Company with effect from 3 November 2014. The Board has accepted his resignation and wishes him well in his future endeavours. Burnbrae Media Limited Burnbrae Media Limited wishes to advise that Mr Richard Jennings has offered his resignation as a director of the Company with effect from 3 November 2014. The Board has accepted his resignation and wishes him well in his future endeavours.
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Three small cap oil stocks looking cheap James Faulkner of t1ps.com looks at three trading ideas in the small cap oil arena.
44 Currency Corner
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Samuel Rae, author of the best selling book “Diary of a Currency Trader”, on why things don’t look good for Germany.
Zak Mir Interviews Dr David Paul Zak Mir talks to the trader and Managing Director of VectorVest UK, Dr. David Paul.
The Best of the Evil Diaries Highlights of what infamous short seller Simon Cawkwell (aka Evil Knievil) has been trading and gambling on in recent weeks.
Robbie Burns’ Trading Diary The “Naked Trader” Robbie Burns looks at the mechanics of going short.
Alpesh Patel on the Markets Fund manager Alpesh Patel asks if there is still a place for the human brain in the high tech financial world.
Mellon on the Markets
Andre Minassian on the Markets
Read the latest thoughts and trading ideas of multi-millionaire investor and entrepreneur Jim Mellon.
Andre Minassian, CEO at www.clevergamesuk.com, makes his SBM debut.
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Zak Mir’s Monthly Pick
SBM editor Zak Mir takes a technical and fundamental look at Xcite Energy.
Chris North, CEO of GamCrowd, discusses the rise of crowdsourcing.
Sporting Index’s Autumn Sports Preview The ATP World Tour Finals and Autumn rugby internationals provide some great sports spread betting opportunities. Read more here.
The Global Oil Outlook
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James Faulkner of t1ps.com looks at the current macro-economic situation in the oil industry.
Dave Evans of binary.com examines trading opportunities in the US dollar, euro and yen.
School Corner - Protecting Profits Maria Psarra, Head of Trading at Prime Wealth Group, looks at how to preserve your gains in the second of her trading education articles.
Technology Corner SBM’s resident technology specialist, Simon Carter, takes a look at the upcoming release of Windows 10.
Markets In Focus The major markets movements in October.
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Zak Mir Interviews
ZAK MIR INTERVIEWS
DR. DAVID PAUL
This month Zak interviews Dr. David Paul, Managing Director of VectorVest UK and South Africa.
Zak: Legendary, late, great, entrepreneur Victor Kiam said he liked his shaver so much, he bought the company. Your experience with VectorVest seems to echo this story. David: I nearly fell off the seat when I first saw the VectorVest system being demonstrated in London in 2010. The founder of VectorVest Dr Bart DiLiddo had managed to combine the technical position of a share and the fundamental position into a single number called VST (value, safety and trend). He then rated all of the stocks on the London market by descending VST - and that’s where the winners are. I had spent the prior 25 plus years trading the markets technically and quite simply I found that by combining the technical’s and fundamentals in the VectorVest way I was correct in my market calls more often. In the early days I had a go at using William O’Neil’s CANSLIM system but found that keeping the fundamental information up to date was a massive task and even then I had only the time to follow a few shares. After a five week trial of the product I was so impressed that I opened up VectorVest in South Africa where the program now has a large following. That business is managed by my son Mike who is based there full time. Based on this success VectorVest asked me to take charge of developing the product in the UK.
Zak: In a world full of software packages could you provide an idea of the unique aspects of VectorVest? For instance, can it be used as a black box trading system and would you recommend such an approach given an environment of Black Swans such as Ebola? David: VectorVest combines the technical position of a share with the fundamental position of a share and then combines both with the technical position of the overall market. In essence we wish to accumulate shares that are undervalued and are growing their earnings both aggressively and safely, that are going up when the general market is going up. When all three are in unison then the trader or investor can simply make better decisions and thus in no way is the product a “black box”. The interaction of fundamentals and trend analysis of both share and overall market increases the hit rate and very importantly pushes up the risk to reward ratio. The result is a trading system with a high expectancy, which in simple terms means it makes a lot more when it’s right that it loses when it is wrong.
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Dr. David Paul
“vectOrvest cOmbines the technical pOsitiOn Of a share with the fundamental pOsitiOn Of a share and then cOmbines bOth with the technical pOsitiOn Of the Overall market.”
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Zak Mir Interviews
Investors can use the product to find shares that suit their investment profile via a unique search tool called Unisearch, while traders can incorporate their favourite entries to capture high probability short term profits. There is always systematic risk and each and every day the program calculates a stop loss for each share in the market. The stop is engineered to stay out of the short term noise of the market whilst still protecting capital. This is accomplished by again incorporating the fundamentals into the calculation in an effort to allow the trader to let profits run in shares that have strong growth potential.
Zak: I first became aware of David Paul when you teamed up with Spreadbet Magazine contributor Tom Hougaard, in what at first seemed to be a somewhat unlikely double act, if only in temperament! This double act was a live trading room, one of the first and the best. What I noticed in particular was your cool, calm and collected approach in terms of trade selection on the main FX crosses at the London open. Something which also stood out was your almost military style discipline in terms of your approach, as well as the way you taught traders. In your view, is there only one way to win in the markets, and is this the reason that over 90% of short term traders fail? David: There are many ways to make money in the markets but they have one thing in common. Over a campaign of trades they need to have a positive expectancy. The expectancy is a function of hit rate, risk to reward and of course commissions and spreads. Many high hit rate systems are losing systems. To advertise the high rate, the stops need to be opened so wide that all of the profit from the winners is given back in the losing trades. The robot that gets it right 99% of the time but to do so needs a 500 point stop is a good example.
Once a system has been developed then the next and major task is to stick to that system through the inevitable bouts of drawdown. It’s our job as traders to execute each trade with precision like winners in every other sphere of business and sport. Dentists, heart surgeons and golfers to name a few, focus on perfect execution of the process. With that done, the cash will take care of itself. For me, a centering process to keep my mind focused on what’s happening NOW is critical and that’s how Tom and I first met. I was doing a seminar on that very topic around six years ago and from that we became good friends and started the WhichWayToday trading room together. It was a great experience and I still help when Tom needs a day off.
“Once a system has been developed then the next and major task is to stick to that system through the inevitable bouts of drawdown.” Zak: Would you actually say that it is more difficult to be consistently profitable when operating in a live trading room, with the pressure of the audience, than it is in private? Can a live trading room end up simply being a rod for your back? David: I found the pressures of trading in the room very difficult at the outset and although “clusters” of bad trades are a feature of even the best system some customers felt they were paying for 100% success. Once I developed a thick skin to some of the more anal comments, all was fine. Again I practice being “present” each and every day and that helps in all aspects of life from dealing with difficult people to being stuck in the traffic. Zak: As well as my perception of your “military” approach, your CV actually includes a Doctorate in Mechanical Engineering and lengthy spells at the top levels of rugby. Would you suggest that both the skill sets acquired in these pursuits have influenced and improved your approach to trading? Is it the case that those with significant high level achievements in other areas which require application and discipline will tend to do better in trading and investing?
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Dr. David Paul
David: I had a flair for engineering and the mathematics of the course and research work. I suppose it has helped with some of the testing and statistics that I have run over the years. I have an academic way of looking at problems and probably make things far too difficult. My trading is based on several simple and easily quantified rules and VectorVest has helped with that greatly. With the material I use and teach, two traders looking at the one chart will come to exactly the same conclusions. I have few regrets in life but if I was 30 years younger I would be a professional rugby player today. Zak: You have attended and participated in hundreds of U.S. trading conferences over the years. What are the main differences between U.S. and UK trading education, and is it true to say that this country is still many years behind those across the pond? David: I have certainly been to many conferences in the US and did my first course with the inventor of the popular stochastic indicator in 1984. I don’t think we are behind in the technical aspects of trading but there is a much wider and mainstream appreciation of the stock market in the US where its use, to build wealth, is a part of the schooling process. Zak: As well as being involved with private traders and investors via VectorVest in recent years, you also are involved in advising institutions as far as training their employees. For instance, Investec and Nedbank are among the many which have used your services. Given the casino banking of the financial crisis and the fallout, would you say that it is a pity more institutions did not adopt the David Paul approach?! David: I have met and mentored many great traders at the institutional level and have never seen much sign of the so called casino mentality. I suppose that by definition those who were interested in what I offer would be those who have similar thoughts and beliefs about the trading process as I do. On occasion I have tripped over the “stops are for buses” mentality but rarely are they attracted to my focus on weaving technical/fundamental analysis and the psychology of trading together to achieve consistency. Zak: What are the main differences in the type of training you give to institutional traders versus private traders, and is there any reason why the latter should not be as, or more, successful if they have the correct approach?
David: I teach the same techniques to everyone. The biggest difference between retail and institutional traders is that risk management and position sizing and drawdown are strictly managed at the institutional level. The retail trader can face the ultimate paradox. After days of study they conclude that ABC is going to move strongly. If it’s going to move strongly then why not have a big bet. Mark Douglas in his book “Trading in the Zone” talks about getting your mind around the concept that technical/fundamental analysis predicts the future over a batch of trades very well, but over one trade has no predictive power. The temptation to have a big bet on what seems like a sitter is the downfall of many retail traders. Douglas’s book is required reading for all who have a goal to be consistent in this business. Zak: Do you ever know straight off the bat whether someone will be a good trader? Are there some people who you respectfully advise not to trade as they are unlikely to be able to do this profitably? David: I firmly believe that the ability to be “present” is the number one characteristic of a good trader but it’s hard to measure at a distance. Some traders are quiet and present and many are loud and present. It’s a mental state common to all winners from Roger Federer to my friend Tom Hougaard.
VectorVest is the only stock analysis and portfolio management system that analyses, ranks, and graphs over 23,000 stocks for relative value, safety, and timing. VectorVest gives a buy, sell, or hold recommendation on every stock, every day. VectorVest gives you the tools you need to make Faster, Smarter, Better stock market decisions for better profits. VectorVest has already done the work for you. With VectorVest you don’t have to spend hours trying to pick the right stocks. And VectorVest is the system you can trust to keep you on the right side of the market.
For a 60 day trial to VectorVest for the special price of £5.95 CLICK HERE www.vectorvest.co.uk/masterinvestor
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The Best of the Evil Diaries
THE BEST OF THE
The man the Daily Mail dubbed “The King of the Short Sellers”, Evil Knievil (aka Simon Cawkwell) is Britain’s most feared bear-raider. He mostly famously exposed the fiction that were the accounts of Robert Maxwell’s Communication Corporation, an event which helped to earn his pen name.
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The Best of the Evil Diaries
A big man with a bigger reputation, Evil Knievil famously made £1 million by short selling shares in Northern Rock during its collapse. He also uses his knowledge and experience to buy shares, often resulting in the same devastating effect. Three times a week Evil provides his thoughts and musings on the markets only at theevildiaries.com. He doesn’t just deliberate about the financial markets on The Evil Diaries, but also comments on politics, current affairs, which horses/sports bets are his latest favourites, with the occasional film and book review thrown in for good measure.
6th October 2014 Mothercare (MTC) continues to astonish by its held up price. Bowleven (BLVN) is surely a buy down here at around 33p. All that is required to put a net cash sum vastly in excess of the current price is a signature from the Cameroonian government. Why on earth would that be withheld?
Here we take a look back on the highlights of Evil’s diaries in the month of October.
The scourge of the bollox disease is spreading again. This time it has popped up on BBC news with the advice that a woman who gave birth last week “had had a baby boy”. Well I never! Anyone would expect her to have spawned an OAP.
1st October 2014
8th October 2014
Audioboom (BOOM) went BOOM and, I am told, will go on doing so. Do not ask me why. Now 17p, apparently the target is well past 20p.
Rare Earth Minerals (REM) is now coming more into line with reality and is still a cast iron sell above 0.75p. Now 1.1p.
I bought Ilika (IKA) in a placing at 60p about seven months ago. This has 30% or 18p knocked off for EIS relief. The stock is now trading at 117p. This could be a real ten bagger in that Ilika purports to be on the cusp of revolutionising lithium batteries for mobile phones - amongst other projects. I cannot even begin to think how to assess whether Ilika is gaining traction but the market clearly dreams that it is.
I sold Worthington (WRN) short at 90p. This company has got announcingitis in spades. This cannot be sensible. Finally, London Mining (LOND) has announced its death. One of the reasons is the incidence of Ebola in Sierra Leone - and there are a host of others. African Minerals (AMI) has declined in sympathy and is headed the same way. Now 12p.
3rd October 2014 I long ago lost count of the earnest reassurances that all is well with a company only for them to be abruptly followed by the advice that the company in question is in deep trouble. I therefore read Enegi (ENEG)’s RNS yesterday that “the directors know of no reason” (for the decline in the share price) with mixed feelings. However, this time I have elected to believe them and I paid 2.75p. I do not know what the target price is now. Certainly it is not the 200p that I offered about two years ago! But the residual (i.e. post Newfoundland write off) portfolio is still worth many many times the current price if all goes to plan. A big IF though. I closed out of Audioboom (BOOM) at 16p and was rewarded with the swift assurance that I am a mad coward. I’ll go along with the “mad” bit since, as the Bard remarked, discretion is the better part of valour.
10th October 2014 I just had to short London Mining (LOND) at 1.5p since I reckon people do not enjoy throwing their money away on completely bust companies I shouldn’t do it but I bought Audioboom (BOOM) again at 13.9p yesterday afternoon. My informant in this matter tells me that it is a gimme. And I remain short of Mothercare nil paid (MTCN) which stands ex rights at around 170p. I simply cannot see these going up.
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The Best of the Evil Diaries
But I can see rights holders declining to take up new shares and constantly dribbling stock on to the market. It’s a helpful cash dividend for sellers and a cap for me. Orosur (OMI) is disappointing at 11.5p. But I cannot possibly bring myself to sell. This is a silly attitude for a gathering bear market. However, we really are due a gold bull run which is bound to drag up cash flow positive miners.
15th October 2014 I changed my mind and shorted Rare Earth Minerals (REM) again - this time at 0.98p - because the great lithium bull market looks to me to have blown over. It’ll be a long time before positive cash flow will change this attitude.
20th October 2014 Perhaps this is the time to pick up again on a longstanding short of this column. It is of course Nu-Skin (NUS on NYSE) and again reviewed by John Hempton of Bronte Capital. Your China play awaits at $43. Plenty of borrow. I believe Nu-Skin is a scam and will surely collapse in due course. It reports on
5th November Yesterday’s Mail on Sunday and its Midas column visited Rare Earth Minerals (REM) which I had decided I was done with - Rare Earth had closed last week at 1p which was almost shortable if not quite. But the MoS whacked them up this morning and I was able to short again. The MoS may be a populist rag but one should be thankful for small mercies. Rare Earth is eminently shortable at 1.15p and more.
22nd October 2014 Concha (CHA) this morning came out with its results to 30th June 2014 and announced a placing of 100m shares at 4p. This was a surprisingly high level given that the board a couple of months ago said that the share price was too high. (I do not blame them going for a fund-raising - who would not in these circumstances?)
17th October 2014 Tanfield (TAN) has been sitting down at 18p or so for many months. However, if I understand matters correctly, the great Smith Electric Vehicle prop to the price is now revived: could this be the blast off? I do not know but if Tanfield were even to smell like Tesla goodness knows where the Tanfield share price would go. The chart service suggests that a junior gold miners bull market is very shortly upon us. This might change sentiment for Orosur (OMI). It certainly ought to at 12p.
However, as at 30th June, there were c. 1.3bn shares in issue and net assets of the order of £2m. Given that there is still no concrete news of business developments (merely failures) it is astounding that the share price, now 4.4p, stands where it is. A clear short.
24th October 2014 Given the tens of analysts devoted full-time to studying supermarkets it is probably a bit unwise to make any comment on Tesco (TSCO). However, it is worth noting that its 8bn shares at 175p capitalise Tesco at £14bn. The 23rd August 2014 balance sheet shows net assets at £13.5bn. But it is worth bearing in mind that goodwill is shown at £4bn and Property, Plant and Equipment is in the books at £24.5bn. Strike these two out and Tesco has a very substantial deficiency with which to cope. No wonder there is talk of a rights issue.
For a free one month trial to access all of Evil’s Diaries, sign up via the advert to the right.
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Robbie Burns’ Monthly Trading Diary
ROBBIE BURNS’ monthly trading diary Why not go short?! I wrote this article in mid-October when the markets were tumbling. And this made me consider writing about shorting – and why traders/investors who have spread betting accounts still mostly go long. A lot of people with spread bet accounts never go short. I suspect there is some kind of psychological barrier which stops many people from shorting. Perhaps they are scared of it. I can see why. We’ve kind of been brought up to only go long. It’s a bit weird going short, hoping something goes down to make money. However, if you don’t go short during a market sell-off, you miss two opportunities. One, of course, is to make money on the downside, and the second is to hedge part of your long portfolio. For me, shorting during a down-move brings in some money which covers any short-term paper losses on some long-term holdings. On shares that I’m pretty certain will come back up and then bust higher because they are really strong companies, I feel I can keep hold of them more easily – thus saving all the costs and time and hassle involved of trying to time an exit and re-entry.
But my major way of making money during a tumble is simply by shorting the FTSE. And, again, this is fairly simply done using FTSE down bets to pretty big stakes. My recent idea to go short, which I did at just under the 6900 level, was very simple.
“I suspect there is some kind of psychological barrier which stops many people from shorting. Perhaps they are scared of it.”
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Robbie Burns’ Monthly Trading Diary
Just take a look at this FTSE chart from 1997 to mid-October this year. You can easily see it topped out every time at 6,900, and the chances of it happening again seemed pretty good. So I lumped in on the shorts.
If the FTSE had sailed up and over 6,900, I set stops at 6,950. If the worst happened, I would have lost 50 points. But that wouldn’t matter much after all because my longs would have covered that by going up. Once the FTSE started to tank, controlling the bets became simple. I kept trailing my stops down around 150 points away.
This was to ensure my profits would get locked-in when I was out, should a reversal happen and the index start to move up again sharply. So, for example, when the FTSE hit 6,300 my stop became 6,450. Which would have locked in a nice profit of over £25,000. Of course, in the meantime, some of my longs – even on my good companies – had gone down a bit. But the FTSE short was bringing in money to cover.
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Robbie Burns’ Monthly Trading Diary
I don’t think there is any need to pay extra for guaranteed stops on FTSE bets given that it trades for 24 hours except at weekends. Your stop will get hit – maybe even in the middle of the night.
Best ever short
Using this method, shorting Carpetright at just above 700p was easy. As you can see from the chart, it hit 700p at least three times during 2013. And the share price was way too high, trading at a massive market premium compared to its small profits and poor outlook.
If you’re looking to short single companies, keep an eye out for a triple top – that is a share which knocks up against the same price three times or more over a period of time.
“when the FTSE hit 6,300 my stop became 6,450. Which would have locked in a nice profit of over £25,000.” November 2014
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Robbie Burns’ Monthly Trading Diary
Carpetright turned out to be my best short ever as it tumbled over the months to just over 300p, and, at the time of writing, I am considering banking a massive profit of over £30,000 on this trade, even though it has taken me nearly two years for it to come down that far.
On the downside…
As with the FTSE, I simply kept gradually lowering the stop loss. There is no better feeling when you’re in a winning trade and you keep lowering or raising a stop that is in profit, knowing at some stage you’re pretty sure of banking a profit.
But you can protect shorts just as easily as protecting longs. If you’re short of a company you think might get bid for, you could use a guaranteed stop on it.
Indifferent on an industry? Sometimes it can be a good idea to short a sector. For example, when the Ebola virus hit the headlines, money could be made from going short of travel companies. But which one? Better to short a basket of them, and many firms offer a spread bet on a sector such as travel and leisure. In this case, you’re betting on a whole sector going down rather than trusting to luck with one particular share. And, of course, once the worries about the sector have gone away (say Ebola fears were unjustified), you can switch and go long of the sector.
People often say they are warned against shorting because “losses are unlimited”. I don’t buy this. Of course, with a long you know your loss is limited to whatever the loss is if the company goes bust.
One point to remember with shorting is you have to pay the dividend out if your short goes ex-dividend. So expect cash to come out of your account to pay the dividend. That happens on ex-dividend day.
On the upside… So, what I’m trying to say is if you have never shorted before, think again. At some points over the year the market has a crash. And when it does, and you are sitting on a massive short, you can allow yourself a bit of a smile! happy trading! robbie
Before you go, why not get the latest copy of my book the naked trader, which has just been published! You can get the naked trader 4 only from my website and also from Amazon. The book updates the naked trader 3 which I wrote in 2011 – a lot has happened in the market since then and I cover all the changes. There are tons of ideas, trader stories, psychology, biggest trading mistakes and 20 trading strategies to make money. It’s only £14.99 and the first 500 who order it get a free pack of Naked Trader T bags made from only the best tea! To get The naked trader 4, click the link at my website www.nakedtrader.co.uk
22 | www.financial-spread-betting.com | November 2014
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Alpesh on the Markets
ALPESH ON THE MARKETS
COMPUTERS NEED NOT APPLY Given recent technological innovations in finance you might think that computers run all trading, with there increasingly being no space for us humans. More brokers than ever now offer algorithm based automated trading systems, or â€˜crowd-sourcedâ€™ follow the trader systems. Some vendors might even argue that you can now outperform Warren Buffett and every UK fund manager with a simple piece of software which can data mine more companies than a human ever could.
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Alpesh on the Markets
â€œI can say for sure that you need the human touch when trading because even the most powerful computers cannot replicate what the brain can process.â€?
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Alpesh on the Markets
So is there any room for human trading? Should we even bother, or just give our money to a machine? I can say for sure that you need the human touch when trading because even the most powerful computers cannot replicate what the brain can process. The brain, in certain tasks, is faster than any Intel processor. Take trading forex or indices for example. You can now, through your iPad, see live quotes and decide to ‘buy’ or ‘sell’ instantly. The human brain can process information quickly and make a decision over whether you should buy or sell after bad news. Other factors are also analysed such as profit levels, stop losses, and if you should add to a position, subtract from it, or reverse it. Quite a lot to take in but all adequately managed by the brain. Of course it takes some simple rules and experience to add speed to our brain based decision making. But it would take a computer programmer of amazing abilities to input those into a machine. Sure you could programme a machine in many scenarios – but nothing beats real experience in the markets. I could not programme in a year all the subtle nuances I see in the financial markets. There is and remains room for the human brain – its ability to process and remember things makes it better than any coded algorithm for certain tasks. And just as in any business you have to find out which tasks humans can do best and which ones to leave to the machines. Take the example of GBP/USD falling in September, despite people thinking it would rise after the Scottish referendum. This was an unusual event – for which no one could make a special trading code. Let alone one which could assimilate, analyse and comprehend tons of news. With my own personal experience I was able to tell my Twitter followers (@alpeshbp), as the currency pair rallied before the result announcement, that we should short the trade. Why?
Because since there was a rally we should follow the old saying ‘buy the rumour, sell the fact’. So if the Scots had left, cable would fall of course, and if they stayed then ‘selling the fact’ would be the way to go. Either way, shorting cable just before the result turned out to be the right thing to do. How good are humans in the age of quick fire trading, with so much instant news? The proof is in the pudding. This human was right 78% of the time over the past year – www.investingbetter.com – better than any computer we know that did a comparable number of trades.
“Sure you could programme a machine in many scenarios – but nothing beats real experience in the markets.” And that is another problem with brokers offering programmed trading – the best results are often based on a handful of trades. It’s like saying I think a coin will always land on heads because it did the last five times. In my view, the best way to get experience is to trade with small live stakes, a few pence per pip, on the one minute intra-day charts. Why? Because the price patterns are the same as daily charts, but provide lots of trading opportunities - of course because they are one minute bars. Also, the price reacts immediately to news on the one minute charts, whereas on the daily charts you are often left bemused as multiple pieces of news are incorporated into one day’s bar. So for trading the future is definitely bright for humans. Computers need not apply.
Alpesh B Patel Alpesh is a hedge fund manager who set up his asset management company in 2004. His Sharescope Special Edition has outperformed every UK company’s fund manager over the past decade, as well as Warren Buffett. He has written over 200 columns for the Financial Times and presented his own investment show on Bloomberg TV for three years. He is a former Visiting Fellow in Business & Industry at Oxford University and the author of 18 books on investing. Find out more at http://www.investingbetter.com and http://www.inter.tradermind.com
26 | www.financial-spread-betting.com | November 2014
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Mellon on the markets
MELLON ON THE MARKETS
THE EMPERORâ€™S NAKEDNESS IS ABOUT TO BE EXPOSED Entrepreneur and financier Jim Mellon is a regular in the Sunday Times Rich List, with an estimated fortune of ÂŁ850m in 2014. With a substantial international property portfolio and interests in a variety of companies, particularly in the alternative energy and biotech sectors, Jim is a highly experienced and successful investor.
28 | www.financial-spread-betting.com | November 2014
Mellon on the markets
After being becalmed for a large part of the summer, markets have begun to swing like there is a wind coming. But from which direction? Suggesting that something is afoot, the VIX index of volatility (below) has been on an upward trajectory and we have had most markets exhibit more whiplash than the British insurance industry sees in a year.
VIX 1 year chart. Source: www.cboe.com
But the fact is, after a good start to 2014, markets have been treading water, and indeed the UK market is actually down. The US market, measured by the S+P, is marginally up, but it is sobering to remember that an estimated 75% of US earnings growth is now accounted for by share buybacks. This repurchase exercise is leaving corporate debt levels at more alarming levels than seen for some time. And of course, that total indebtedness is rising at a time when economic momentum globally is slowing, deflation is the worry du jour and junk bonds are defaulting at a brisk pace. This is a good time to be a “swing” trader, taking nicks out of daily moves, but it is dangerous to be positioned strongly one way or another – though my bias is short. In a world of uncertainties, it is always good to try and find things that are a bit more certain, and this is what I am trying to do...
On the continent... Number one certainty, trumpeted at my Master Investor speech and every other opportunity, is that the Eurozone isn’t getting any better. Even Germany – and remember its principal trading partners are the ailing Eurozone countries – is beginning to slow. As for France, Italy etc. they are the walking dead. Italy, astonishingly, has had NO GDP growth for nearly 15 years now, in a period when the UK has grown by 25% in real terms. So much for “Il Sorpasso”, the moment when Italians trumpeted their overtaking of the UK economy. Perhaps we should have our own little national celebration as the British supercars leave the Fiats in the dust! But that’s digressing. Without serious QE in Europe (and buying corporate debt isn’t that), the Eurozone is heading to further deflation, indebtedness, unemployment and all the other nasties at which it so excels.
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Mellon on the markets
In which case, the whole experiment may well end up on the floor, with Greece possibly providing the first horse to bolt the stable. Seeing Greek debt soar to 9% recently is hardly reassuring in this respect. Germany provides the key to all of this, and its Finance Minister doesn’t seem to be budging. Pleas from the French and Portuguese to allow leniency on budget deficit targets are met with corresponding demands to tighten the corsets further. Germany isn’t yet ready to back up Mario Draghi’s comments that he would do whatever it takes to keep the Eurozone together – and, sooner or later, the Emperor’s nakedness will be thus exposed.
This means that either way, Europe, to put it bluntly, is screwed. At least in terms of the value of its currency. The euro is on a relatively steep slope back to at least 1.20 to the dollar (it has fallen about 8% since Master Investor). With Japan trying to export deflation by weakening the yen, and with Germany as Japan’s leading export rival (machinery, cars, chemicals etc.), it behoves Europe to devalue the euro as fast as it can also, with or without QE.
1 YEAR EUR/USD CHART: SOURCE WWW.XE.COM
This trade, short euro against the USD, remains our best one. Sure, plenty of people are in it, but that doesn’t mean to say it isn’t good. It is hard to think of one reason why the euro will go up. – Interest rates rising? No, forget it.
– Wise words from Mr Draghi? As devalued as soon the currency itself will be. Now, if the Europeans were to introduce big scale QE, a la Japan, that might have a positive effect on the equity markets – and a negative one on bond markets – for a while, but probably a short while.
– A sudden improvement in economic performance? Fantasy.
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Mellon on the markets
The problem is that the Eurozone isn’t the only area in a deep bind. The commodity countries such as Australia, Russia and Brazil are in various stages of unravelling, and China is massaging its hard landing before it has even landed. The UK and the US are the only standouts, with Canada, Mexico and smaller Asian markets looking OK in the second row. But all of those will be affected if, as appears likely, we get further knocks to global growth.
“i am still lOng the nikkei, but fOr dOmestic reasOns rather than glObal.”
So, what, if anything, to buy? I remain cautious on bond markets. I mentioned the flattening of the curve trade in USTs last time. We closed this out at a decent profit and I suggest you do the same. I would be short Bunds here, as well as JGBs out of Japan. I am still long the Nikkei, but for domestic reasons rather than global. Stocks to note that look interesting: almost none. Finally, Al Chalabi and I have included a portfolio of future technology stocks in our new book, Fast Forward, which is now available to order and will be available for Christmas! This is a long-term portfolio and, if I were you, I would put in limits on all the stocks mentioned, say 10% below here, expecting, as I do, further softness in markets between now and the next Master Investor Show on the 25th April 2015. And if you want to be short, there is no finer exponent of the art than Evil Knievel, to be found on these pages also.
Master Investor is going to be something else. We have a really big surprise for attendees. I hope you get your ticket requests in (free to readers) as it’s going to be packed!
Jim Mellon will be headlining the Master Investor 2015 show, to be held on Saturday 25th April in Islington, London. To pre-book your FREE ticket for next year’s Master Investor Conference as an SBM reader CLICK HERE
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32 | www.financial-spread-betting.com | November 2014
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ANDRE MINASSIAN ON THE MARKETS Andre Minassian is CEO at www.clevergamesuk.com, which provides a serious alternative view of trading in the stock markets.
34 | www.financial-spread-betting.com | November 2014
â€œIf we go under 16,000 and stay there for more than one week we might as well start shorting the Dow and make a serious amount of money.â€? Since the beginning of January 2009 I have said over and over again in my updates - and later on my website www.clevergamesuk.com - that the Dow Jones Industrial Average would hit 17,000. I always believed that this was the figure we were heading towards and, even more strongly, that we will not stop for any extended period of time at 11,000, 14,000 or 16,000. I have insisted since January 2014 that after we hit 17,000 we will see the Dow at 20,000 and also the S&P at 2,200 before we consider the prospect of a serious correction. And by serious I mean a fall of anything between 15-30%.
The key for me with the Dow is the 16,000 level. If we go under 16,000 and stay there for more than one week we might as well start shorting the Dow and make a serious amount of money. We already dipped under this level intraday in mid-October, which is a scenario I proposed would happen. But the market quickly bounced back in a very determined way. So if the market remains above 16,000 then the only way for me is a journey towards 20,000 plus, with the S&P moving towards 2,200 plus.
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Is my view based on company fundamentals ? No! Is it based on charts and all kind of technical analysis? No! It is based on geo-political, macroeconomic agendas. It is based on people who are pushing the buttons and knowing what their intentions are. But, as I discuss in my courses/seminars which I have started to run (next available spot 30th November in London), how do I know if I am right? I know in the same way I knew back in 2008 that we would eventually see the Dow reach 14,000. The same way I knew (and I mean I knew!) that 17,000 was the journey after that. You see, entire markets can be moved by just a handful of players. In order to control a living cell you do not have to control every molecule and atom of the cell. You just need to control a few major parts and the rest of it will follow.
The other thing is that since the beginning of doing this, even my most avid supporters and my adversaries have had a problem believing that geo-political and macroeconomic agendas could have such a significant role to play and difficulty absorbing the fact that the markets can indeed be driven by just a few players. To this day they look for bits of news here and there and make their decisions, as they believe itâ€™s all supply and demand and this and that. This broker said this...and that one said that! But you know what? I have been correct for the last six years and they have not been right. Let me put it this way...money has nowhere else to go at present , except for equities.
The thing is, if you know where the S&P and Dow Jones are going you can pretty much assume what the general trend for European indices will be.
If you wish to attend one of my seminars/training courses the next available spot is on 30th November and itâ€™s pretty reasonably priced (surprisingly reasonable). CLICK HERE http://www.clevergamesuk.com/training.html We have small groups of people at a time and will not sell you anything! We will only help you become a successful trader and help you to make your fortune in the stock markets. You really can!
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The global oil outlook
THE GLOBAL OIL OUTLOOK BY JAMES FAULKNER OF T1PS.COM
38 | www.financial-spread-betting.com | November 2014
The global oil outlook
If anyone needed further proof that the global economic outlook has taken a turn for the worse of late, then they need look no further than the oil price, which has fallen to lows not seen since 2010, when the world was only just beginning to recover from the financial crisis. The recent slowing of the global economy, culminating in the IMF’s recent downgrade of its global growth forecast, has left >$100 oil prices indefensible for traders, who were already beginning to unwind the risk premium attached to the oil price due of the possible expansion of Islamic State and the Ukraine troubles. Throw in a supply-side shock from the unprecedented growth in US production on the back of the shale boom, and it appears that black gold may have lost its lustre - at least for the time being. It has been evident for some time that the global economic recovery was becoming more anaemic by the day, although the equity markets - which were evidently more interested in second-guessing the actions of central bankers - took some time to pay attention (efficient markets hypothesis, anyone?).
China’s economy, which had been a major driver of demand growth for hydrocarbons, has slowed significantly and looks unlikely to return to its erstwhile breakneck pace of growth. Europe appears poised to enter another crisis as deflationary forces grip the continent and growth remains illusory. Meanwhile, although the US remains the poster boy of this recovery, its economic performance is by no means exceptional by historic standards. So while geopolitical concerns have focused the minds of traders in the short term, it was only a matter of time before hard economic reality struck home for the oil price.
“while geopolitical concerns have focused the minds of traders in the short term, it was only a matter of time before hard economic reality struck home for the oil price.”
OIL PRICE CHART
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The global oil outlook
Supply side shocks As indicated above, the demand-side picture is a pretty straight-forward one of softening global demand. However, the supply-side picture is altogether more interesting. The major development on the supply front in recent years has been the growth in US output spurred on by the shale boom (see chart), which has ushered in a “new era of energy abundance”, according to the CEO of Exxon Mobil. US oil production grew by 15% in 2013 and the world’s largest consumer of oil is set to become the world’s largest producer by 2015, according to the IEA. What’s more, this momentum shows no sign of slowing down, with the latest survey from global oil services company Baker Hughes reporting that the number of oil rigs in North America has reached its highest ever, at just over 1,600.
The supply situation in the US is now so positive that President Barack Obama is said to be considering whether to lift the restriction on crude exports, which has been in place since the 1970s.
“US oil production grew by 15% in 2013 and the world’s largest consumer of oil is set to become the world’s largest producer by 2015.”
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The global oil outlook
While there has been much talk of weaker oil prices being the symptom of a weakening global economy, we must remember that a lower oil price puts money into the pockets of consumers. For example, a one cent decline in the retail price of gasoline for a year amounts to $1.2 billion in savings for US consumers, according to Moody’s. US consumers are already feeling the benefits of this, with the average price at the pump plummeting by nine cents in October, to $3.11 a gallon. Petrol prices are also falling here in the UK, although the fall in the wholesale natural gas price, which is linked to the price of oil, has yet to be passed on to households. Meanwhile, according to research from Reuters, the lower oil price could add $80 billion to the European economy in 2015 if current prices hold. So while a lower oil price may indeed be the symptom of a weaker economy, it might also prove to be a balm.
The big question on everyone’s lips is whether OPEC will now reduce output in an attempt to raise prices, or allow prices to fall in the hope of retaining market share and possibly putting some of the marginal producers (including some shale operators in the US) out of business. While a definitive answer won’t be forthcoming until next month’s OPEC meeting in Vienna, it appears that the Saudis have already made up their mind that OPEC’s long-standing de facto strategy of holding crude prices around $100 must be abandoned. According to Reuters, Saudi officials have indicated that the kingdom is ready to accept oil prices below $90 per barrel, and perhaps as low as $80, for as long as a year or two. This should help curb investment in the more marginal oil plays, and lay the foundations for higher revenue in the medium term. Whatever the outcome of next month’s discussions it appears that, for the near to medium-term at least, there are significant pressures holding back the oil price. In order to minimize risk, investors should therefore look to producers and explorers offering a high margin of safety (see my three small cap ideas one page 44 for some of those). However, lower oil prices could also offer a long-term opportunity to pick up strategic assets on the cheap, as many petro-states are already feeling the pinch (see chart overleaf).
While this is all good news for consumers, it is also a potential source of friction between the US Government and the OPEC cartel, led by key US ally Saudi Arabia. The huge growth in US production threatens a major shift in the balance of power, which OPEC has largely held in place since the 1970s. The fall in the oil price poses a significant risk to the economies of petro-states like Saudi Arabia which rely on oil exports as a major source of public revenue. While some like Saudi Arabia have built up substantial foreign currency reserves in order to ameliorate this threat, others face a more precarious situation. Russia and Venezuela in particular are two petro-states that are already facing home-grown economic problems, which are now being compounded by the low oil price.
“Saudi officials have indicated that the kingdom is ready to accept oil prices below $90 per barrel, and perhaps as low as $80, for as long as a year or two.”
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The global oil outlook
Source: Deutsche Bank
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Three small cap oil stocks looking cheap
THREE SMALL CAP OIL STOCKS LOOKING CHEAP BY JAMES FAULKNER OF T1PS.COM
44 | www.financial-spread-betting.com | November 2014
Three small cap oil stocks looking cheap
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Three small cap oil stocks looking cheap
Sterling Energy (SEY) Sentiment in Sterling Energy (SEY) hit rock bottom when the firm’s Bamboo-1 well in Cameroon was plugged and abandoned after it failed to find a commercial discovery. Given that this came on top of an abortive foray into Kurdistan, it is perhaps understandable that investors have lost interest. Obviously the market is taking a very dim view of the firm’s prospects given the poor track record, but we believe market pessimism has gone too far. As at 30th June 2014, Sterling Energy was sitting on cash of $110.9 million (c.£69 million) and had no debt. The current market capitalisation of Sterling Energy is just under £50 million.
The most likely candidate for near-term newsflow is the Ambilobe PSC (Sterling: 50%), where Sterling is carried for the acquisition of a 3D seismic programme, up to a maximum of $15 million, by partner Pura Vida. The PSC covers approximately 17,650 square kilometres of the Ambilobe Basin, a large under-explored area where both Cretaceous and Tertiary leads have been identified. Next up is the firm’s 30% non-operated working interest in the Ampasindava licence, where the firm sits alongside Exxon Mobil, the world’s largest listed oil company. Ampasindava contains the Sifaka prospect, which is independently assessed to potentially hold gross best estimate prospective resources of 1.2 billion barrels, but is considered to be a very high-risk target. Again, Sterling’s costs here are carried up to a fixed amount, but the firm has indicated that it would seek to farm-out its share in the event of drilling due to the significant costs involved. In any case, success here could be truly transformational for Sterling given the size of the prospect. In addition to this the firm also holds stakes in exploration acreage in Somaliland and Cameroon.
Sterling already has a production base, albeit a small one, in Mauritania. In FY14, Sterling’s 8% share of production from the Chinguetti field netted Sterling 436 bopd (barrels of oil per day), enabling it to report a profit after tax of $1.7 million on turnover of $9.1 million. This also means that Sterling is cash generative at the operating level (+$3.2 million in FY14), so barring any acquisitions, farm-ins or exploration activity, we believe the firm should be able to maintain and possibly even grow the cash position. We also believe it is too early to write Sterling off as an exploration play. Sterling holds interests in a large acreage position in northwest Madagascar in the Ampasindava and Ambilobe Blocks. These blocks are located in one of the largest, undrilled, deep water provinces offshore East Africa, spanning the Majunga and Ambilobe basins. Exploration activities on both blocks were suspended in 2009 due to an uncertain political situation in Madagascar; however democratic elections in December 2013 resulted in the election of Hery Rajaonarimampianina as the new President and his government is now in place. Experts believe that Madagascar could be sitting on as much as 20 billion in untapped oil reserves, and the change in political climate could be the catalyst to see it begin to be exploited.
“success here could be truly transformational for Sterling given the size of the propect.”£50,000 What’s it worth? At the current price of 23p, shares in Sterling Energy represent an asymmetrical risk/reward trade. In our view, the current valuation is more than accounted for by the net cash position and existing production base, which offers investors ‘option value’ over the potential success of any one of the firm’s exploration plays. Interestingly, Bamboo was a 450 million boe prospect and accounted for 105p (risked) of broker Westhouse’s 141p valuation for Sterling (prior to the drilling of Bamboo-1). Westhouse’s current target price for the shares is 35p, which currently attaches no value to the firm’s 30% stake in Ampasindava (a 1.2 billion barrel prospect) given that “there is no clarity on when a well might be spudded”.
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Three small cap oil stocks looking cheap
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Three small cap oil stocks looking cheap
Global Energy Development (GED)
In any case, the company said it remains “very optimistic” that oil can be produced at commercial rates.
Another explorer swimming in cash is Latin America focused Global Energy Development (GED). On 14th October, the firm announced the sale of its producing assets within the Llanos Basin in Colombia for a gross consideration of $50 million in cash. The deal was part of the company’s strategy to refocus its efforts on developing its oil reserves in the Bolivar Block and the Bocachico Block located in the Middle Magdalena Basin. In March and May 2014, GED entered into farm-out agreements in respect of the Bolivar and Bocachico assets as part of this policy.
Given that Llanos sold for $50 million but only held 2P reserves of 5.6 million barrels, it is not hard to see the value potential here. While the Llanos sale deprives GED of a source of regular cashflow, this has to be viewed against rising cost pressures at Llanos in recent years, and the relative maturity of the asset. The Magdelena assets are more technically challenging, yet they offer the potential to transform the company’s prospects. GED is free-carried for five wells at Magdelena, but the cash pile offers the potential to accelerate the development of the firm’s assets, should it so wish.
The first of these was a farm-out agreement with Everest Hill Energy Group, which took a 50% interest in the Bolivar Association Contract Area leaving GED with a fully carried interest on three wells, comprising re-entry and fracking of two existing wells and completion of one new exploitation well. Boliver is situated at the northern end of the La Luna/Northern Middle Magdalena area, which has been subject to a lot of activity by major oil companies such as Exxon/Mobil, Shell and the state-owned Ecopetrol of late. Bolivar contains 1P reserves of 32.2 million barrels, 2P of 55 million barrels and 3P of 184.3 million barrels, making it a potentially very valuable asset for GED. Bolivar was followed up with another similar deal with Everest, this time for the Bocachico Association Contract, also located in the Magdalena Valley in Colombia. Bocachico has 1P reserves of 11 million barrels and 2P of 40.4 million barrels.
“the company said it remains “very optimistic” that oil can be produced at commercial rates.”
What’s it worth? Investors took fright in August after an operational update on the Catalina-1 well on the Bolivar block reported low productivity of oil due to “an emulsion substantially blocking most reservoir fluids from reaching the wellbore.” However, the market seems to have overlooked the likelihood that fracturing itself seems to have caused what is at any rate a short-term problem. Indeed, with the Simiti formation apparently having massive natural fracturing, it is likely that hydraulic fracturing in future wells will not be necessary and project costs will be reduced as a result.
With the usual caveat that oil company valuations are esoteric at the best of times - and oil exploration companies even more so - one research house has a pretty punchy valuation for GED. Based on the NPV to market ratio established by the cash deal for Llanos, Equity Development puts the risked valuation for GED at 557.3p per share - including 78.3p per share in cash. At the extreme end of the scale, the unrisked valuation of 2,937.7p illustrates the blue-sky upside potential. At the current share price of 54.75p, GED is trading at a significant discount to net cash, which offers downside protection as well as free option value on the potential success of a free-carried drilling campaign.
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Three small cap oil stocks looking cheap
“At the current share price of 54.75p, GED is trading at a significant discount to net cash.”
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Three small cap oil stocks looking cheap
Chariot Oil & Gas (CHAR) Chariot Oil & Gas (CHAR) is another bombed-out oil explorer that has gone from hero to zero since 2010. Having ascended to highs of more than 300p in 2011, the shares plunged twice in 2012 after it drilled two wells on its Wildcat prospect offshore Namibia, both of which proved to be dusters in what had been a highly anticipated programme. While this was a major setback for shareholders, it should be remembered that this is frontier territory where explorers are only beginning to scratch the surface. In fact, the company’s first wildcat well, Tapir South, was only the second well ever to be drilled in the Namibian basin. Furthermore, Chariot still holds a large swathe of under-explored Namibian offshore acreage with some eight blocks in three basins. Gross unrisked prospective resources have been put at 19.4 billion barrels or 11.9 billion net to Chariot.
The key to successful investing in oil exploration companies is to invest when the odds are in your favour - or at least when the downside is limited. With that in mind, at time of writing Chariot is trading at 10.75p per share, which capitalises the company at just over £28 million. At the end of June, the company reported an unaudited cash balance of $37.5 million with no debt. Throw in the $15 million raised in a recent placing, and we’re looking at a net cash position of c.£32 million - well in excess of the current market cap. Moreover, there is more cash on the way, as a recent farm-out in Morocco will result in up to $13 million of back costs to be received in 2015. This is evidence of the hidden value in Chariot’s extensive portfolio, which encompasses much more than the Namibian assets.
“The key to successful investing in oil exploration companies is to invest when the odds are in your favour - or at least when the downside is limited.”
Chariot sensibly used the cash it managed to raise at premium prices on the back of all the Namibian excitement to diversify its portfolio, adding acreage in Mauritania and Morocco, both countries that are enjoying renewed waves of investment. This strategy played off in August 2013, when Cairn Energy paid $26 million to buy a 35% stake in the firm’s Mauritanian block, which, according to Chariot, may have leads with resource ranges similar to the analogous 300 million boe (barrels of oil equivalent) Banda field. As part of its wider Atlantic margin strategy, the company also holds acreage offshore Morocco and in the shallow waters off north eastern Brazil, which it hopes will mirror the giant discoveries being made on the other side of the Atlantic in Cote d’Ivoire and Ghana.
Although short-term upside is likely to be tempered by the lack of visibility on future drilling, a clearer picture should emerge in Q1 2015, when the company should have progressed at least one of its four advanced prospects towards drilling stage. Meanwhile, the Cairn Energy deal provides a reminder that there is potential value in the portfolio waiting to be unlocked, and management’s goal to achieve zero cost exploration should help underpin the cash balance going forward. The current share price effectively attaches zero value to what broker Northland refers to as “Chariot’s portfolio of potential company makers”. With that in mind, patient investors may wish to explore an investment in Chariot.
50 | www.financial-spread-betting.com | November 2014
Three small cap oil stocks looking cheap
“The current share price effectively attaches zero value to what broker Northland refers to as “Chariot’s portfolio of potential company makers.”
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Donâ€™t miss out!
52 | www.financial-spread-betting.com | November 2014
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Zak Mir’s Monthly Pick
ZAK MIR’S MONTHLY PICK Buy Xcite Energy (XEL): Above 35p targets as high as 60p Recommendation Summary
Along with Gulf Keystone (GKP), where we may finally be seeing positive developments, it is possible to say that there are few stocks on the AIM market which inspire and frustrate in equal measure than Xcite Energy. The hope is that there will finally be a farm out to allow the company to realise the potential of one of the giant North Sea prospects, the Bentley Field. Given that it was first discovered in 1977 this really has been a slow burn.
There have been challenges in terms of the charting picture and price action at Xcite Energy over recent months. This is said even within the context of what is a fiendishly difficult stock to analyse. However, few would disagree that the latest leg to the downside for the shares - in the wake of the loss of major 60p zone post-March support - was particularly hard to anticipate.
The problem is that most private investors are by nature looking for quick results and on a “ten bagger scale.” So far Xcite has rather offered the opposite experience. But just in case the impression given is that this is a bear situation, we do finally seem to be getting near the finishing line in terms of what could be a 700m barrel resource lasting until 2050. To this end it could very well be that 2015 is a pivotal year and that recent share price weakness renders Xcite Energy a compelling opportunity.
But perhaps the decline of almost exactly one third from the major support does makes sense both in terms of the Fibonacci / percentage perspective as well as the likely decline to the floor of a falling trend channel, which can be drawn on the daily chart from the end of March at 39p. This would lead us to believe that while there is no end of day close back below the 2014 price channel floor we could be treated to at least an intermediate rebound. The favoured target in this respect would be the former initial October support at 52p – 4p below the present level of the 50 day moving average at 56p.
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Buy Xcite Energy (XEL)
â€œit could very well be that 2015 is a pivotal year and that recent share price weakness renders Xcite Energy a compelling opportunity.â€? November 2014
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Zak Mirâ€™s Monthly Pick
However, we would really have to see a weekly close back above the old floor before being able to call Xcite Energy back into full blooded bull mode. Even then, the history of the stock over past year is that of an accelerating downtrend, one which will be difficult to snap.
This would be the clearance of the October resistance through 59p. Of course, in reaching this zone the shares would already be offering traders considerable upside from current levels â€“ the essence of the charting buy being identified for November.
Those who are cautious on the shares from a technical perspective would most likely be waiting on a higher low above 40p â€“ which we may already have for October, as well as a higher high.
Recent Significant News October 20th (Stockmarketwire) Xcite Energy subsidiary Xcite Energy Resources has entered into a Memorandum of Understanding with Baker Hughes Limited that sets out the principles for the provision of oil field services for the Bentley field and which are likely to include the supply of drilling and completion services, well engineering, electronic submersible pumps and reservoir engineering.
Baker Hughes will work with all the key stakeholders in a collaborative manner to develop innovative, field specific technical and commercial oil field services for Bentley, which maximise the economic recovery from the field and the economic return for all stakeholders.
56 | www.financial-spread-betting.com | November 2014
Buy Xcite Energy (XEL)
September 10th (Motley Fool) A subsidiary of Xcite Energy has entered into collaboration with Statoil and EnQuest (LSE:ENQ). The deal will see Xcite Energy Resources - which is 100% owned by Xcite - share field-specific technical and operational information with Statoil, and vice versa, on the Kraken, Bentley and Bressay fields in the North Sea. August 14th (Stockmarketwire) Xcite Energy’s H1 pre-tax profit collapsed to £0.47m, from £8.3m. Its total assets totted up to £301.9m, from £269.5m. Memorandum of Understanding signed with Aibel AS, further enhancing the industry service provider partnership for the development of the Bentley field, which already includes AMEC Group Ltd., Ove Arup & Partners Ltd. and Teekay Shipping Norway AS. Collaboration Agreement signed with Statoil (U.K.) Ltd. and Shell U.K. Ltd., for the sharing of technical and operational information to evaluate potential synergies and collaboration in the development of the Bentley and Bressay oil fields. US$ 140 million raised through the issue of senior secured bonds and issue of new equity share capital, and repayment of the US$ 80 million of unsecured loan notes.
“the long game looks to be nearing its natural conclusion and hence Bentley’s value could about to be unleashed.” Upgrade in 1P, 2P and 3P oil reserves for the Bentley field to 203 MMstb, 257 MMstb and 317 MMstb, respectively, effective 31 December 2013 and based on an initial 35 year production period. June 25th (Edison Investment Research) Xcite Energy has announced a $140m financing package, the majority in the form of two-year senior secured bonds. This provides a stable platform on which it can conduct its ongoing negotiations with service providers and potential farm-out partners to fund the Bentley development.
We view a closer working relationship with Shell and Statoil as positive overall, confirming the value of Xcite’s Bentley well data. Our core NAV remains broadly flat at 146p, with a farm-out still the main driver of potential upside.
Fundamentals Alongside such companies as Gulf Keystone (GKP) and Range Resources (RRL) in the exploration space, or of course switching sectors, Quindell (QPP) the outsourcing group, Xcite Energy (XEL) is a private investor favourite. As such it may be quite cruelly suggested that fans of this company have to cope with the vagaries of it being a “bulletin board hero”, a perennially falling share price and a somewhat open ended timeframe in terms of when the promised land of sustained profitability will be reached Of course, it may be that the fundamental conundrum here is a familiar one in the sense that Xcite is sitting on the Bentley Field, one of the largest undeveloped resources in the North Sea. The “only” issue here is that while Xcite may have a licence to print money, the field needs cash to deliver its bounty. But the situation is far from bleak. Xcite has signed Memoranda of Understanding with AMEC, Arup and Teekay to develop Bentley, so that 37 years after it was discovered shareholders should not have to play the long game anymore. Production is due to start in H2 2015 and is expected to offer up to 57,000 barrels of oil a day until 2050. If this pans out as expected it could very well be that Xcite’s sacred cow status among its loyal fans is more than justified. Indeed, they would be justified in easily brushing off the latest news that profits have fallen from £8m to just over £0.5m. What is difficult to deny is that the board of Xcite appear to be steering this particular story in a slow but steady fashion. As Edison Investment Research remind us, the main hope for upside here is the prospect of a farm out agreement with one of the majors. This is something which the current cash in the kitty of some £40m should ensure is forthcoming, with Xcite not feeling unduly pressured in the meantime. Ironically, it is probably the case that most private investors simply do not understand the nature of Xcite’s softly, softly approach, with the data deals and the well tests and drilling. Their view is likely to be that the company simply “gets on with the job.” Luckily, for them after years of waiting, the long game looks to be nearing its natural conclusion and hence Bentley’s value could about to be unleashed.
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The week the Bank of Japan lit the fuse under the dollar rocket By Dave Evans of binary.com
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The last week of October was always set to be a busy one, with the US Federal Reserve formally ending its Quantitative Easing activities. As it turns out, this benchmark moment was superseded by other events, not least the Bank of Japan upsetting the apple cart with a major round of asset purchases.
A major market mover was the hawkish Federal Open Market Committee statement accompanying the confirmation of easing policies coming to an end. This, along with better than expected US GDP figures, were two significant factors in the dollar index pushing to its highest levels since June 2010.
Dollar Index Daily Chart:
They werenâ€™t the only factors though, as a number of other events combined to create the perfect storm for a sustained US dollar rally. Currencies of course do not operate in isolation and for the US dollar index to rise with such assurance, there needs to be corresponding weakness in its main exchange partners.
Euro soft and getting softer The first of these is the euro which itself had a week to forget. German individual state inflation data came in softer than expected, an issue compounded by country wide inflation also dropping below expectations. We also saw a below par German CPI flash estimate and German retail sales that slumped more than anticipated.
Meanwhile, the epic Greek saga entered another chapter, with Hellenic bonds getting crushed. Part of this was in reaction to the Fed, but other factors included concerns over 2015 presidential elections and renewed rumours of a removal from the Troika bailout scheme.
â€œfor the US dollar index to rise with such assurance, there needs to be corresponding weakness in its main exchange partners.â€?
60 | www.financial-spread-betting.com | November 2014
The Euro Dropped To Revisit Recent Lows. Eur/ Usd Daily Chart:
“Forex funds are now flowing firmly in the direction of the US dollar, especially with sustained weakness in the euro and yen.” Forex funds are now flowing firmly in the direction of the US dollar, especially with sustained weakness in the euro and yen. .
With the ECB still yet to fully activate its own Quantitative Easing plans, there could be further downside from here for the EUR/USD especially with the euro’s main power house - Germany spluttering.
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The long term monthly chart of the EUR/USD below shows how it still has some way to go until the 2000 lows are tested. We’ve been a long-term seller of the euro for some time and see no reason to reverse this outlook now, especially in light of recent institutional activity.
A good way to play this could be a LOWER binary trade on the EUR/USD, predicting that it will close below 1.2000 in 200 day’s time. At the time of writing this returns 349% if successful. Or put another way, betting that the EUR/USD will drop and close below 1.2000 in 200 days could return £44.85 for every £10 staked.
USD/ JPY Rockets Higher on BOJ Plans
The yen has been another big mover after the Bank of Japan surprised many by announcing an aggressive round of easing activities. This move sent yen pairs shooting higher, with the USD/JPY rising to its highest level in six years. Another move, less widely reported, was the approval of new allocation targets for the largest government pension fund in Japan.
The plan aims to inject more money into the Japanese stock market, and more importantly aims to increase holdings in overseas equities and bonds by up to 21.5 trillion yen ($195 billion). This move alone would be enough to shift further funds away from the yen and mostly into the US dollar. Not all of this movement has been reflected in our view, giving more upside potential for the USD/ JPY despite it already surging at a rapid pace.
62 | www.financial-spread-betting.com | November 2014
USD/ JPY daily chart:
A good way to play this is a HIGHER binary trade predicting that the USD/JPY will close HIGHER than 114.00 in 90 days time. At the time of writing this provides a potential return of 195% if successful. Or put another way, betting that the USD/JPY will be above 114.00 in 90 days could return ÂŁ29.56 from every ÂŁ10 staked.
Disclaimer: This financial market report is intended for educational and information purposes only. It should not be construed as investment or financial advice and you should not rely on any of its content to make or refrain from making any investment decisions. Binary.com accepts no liability whatsoever for any losses incurred by users in their trading. Fixed odds trading may incur losses as well as gains.
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Autumn Sports Preview
autumn Sports Preview BY PATRICK CALLAGHAN
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ATP World Tour Finals With the season’s eight best players set to line up, the ATP World Tour Finals can rightly lay claim to being one of the finest tournaments in the tennis calendar. Unsurprisingly, it’s Roger Federer that holds the record for the most wins in the male end-of-season showpiece. The Swiss maestro has taken the title six times, as well as reaching the final on two further occasions. But at the age of 33, without a win in this tournament since 2011, and indeed with only one Grand Slam win since 2011, Federer may not be the force of old. However, spread bettors shouldn’t dismiss the old boy out of hand. He was a clear second in the current race to London at the time of writing, having won two Masters Series titles and reached the final of Wimbledon this season.
Andy Murray rather lost his way after making history when becoming the first British male since the great Fred Perry in 1936 to land Wimbledon last year. However, he’s been playing catch-up to even make London this year.
“without a win in this tournament since 2011, and indeed with only one Grand Slam win since 2011, Federer may not be the force of old.” Titles in China and Austria recently have taken the former world number two into the final qualifying position, but it’s set to go down to the wire with David Ferrer, who Murray beat in the final of the Vienna Open on 19th October, breathing down his neck. The 27-year-old Murray has reached the finals every year since 2008, but three semi-final appearances is all he has managed. Rediscovering his form at the close of the season could see him improve on that record, though. Milos Raonic and Grigor Dimitrov are others in with a shout of qualifying. The Paris Masters, which concluded at the weekend, will have decided the final standings. World number one Novak Djokovic has landed six titles this year, and will arrive in the capital looking for a hat-trick in this event. It’s not original, but the super Serb has to be the call with question marks surrounding all his rivals.
Rafael Nadal has won every major competition there is – except for this one. Persistent knee troubles have meant the 14-time major champion has missed two of the last six editions and, although he has contested two finals, there’s a feeling the Spaniard is rarely at his best at this stage of the year. He is someone spread bettors might want to oppose – particularly if he draws the most difficult pool.
With just a year to go until the Rugby World Cup, the excitement is growing, and the Autumn Internationals will be the last time the Northern Hemisphere sides will face their Southern Hemisphere rivals before the big event. The annual curtain raiser at Twickenham sees a strong Barbarians side take on an improving Australian team, who heartbreakingly lost a thrilling Bledisloe Cup encounter against New Zealand last month, with a converted try scored after the 80 minutes were up.
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Autumn Sports Preview
Steve Hansen’s New Zealand side went 22 matches unbeaten, before South Africa pulled off a thrilling 27-25 victory on the 4th October – a first defeat in two years for the world champions. They will still be favourites for every game in the series, but it may be worth selling their supremacy at lofty quotes. Last year they failed to beat their handicap against England, Ireland and Wales, while narrow wins against South Africa and Australia, coupled with that loss to the Springboks, suggests their air of invincibility has slipped. England, ranked third in the world by the IRB, open a challenging autumn campaign against the top ranked All Blacks on the 8th of November, followed by South Africa a week later.
POPULAR RUGBY SPREAD BETTING MARKETS Supremacy A prediction of one team’s dominance over another expressed in points. Sporting Index might quote England over Australia with a Supremacy price of 3-6. England would need to win by seven points or more to return a profit for buyers. Sellers at three would need England to lose, draw or win by only two points to make a profit. Total Points A prediction on the number of points scored in the match. Team Points A prediction on the total number of points scored by one team in the match. Total Tryscorers numbers A prediction on the aggregate total of each player’s shirt number who scores a try in a match. Four tries in a match by players wearing 18, 14, 6 and 3 would therefore make-up 41.
November the 22nd sees a hard-tackling Samoa team welcomed to Twickenham, before Stuart Lancaster’s men wrap up 2014 with a visit from fourth-ranked side Australia. England fans will be pleased to see the Aussies, as the Red Rose have won three of the last four meetings against their old rivals. Ireland kick-off the first of their three matches by welcoming South Africa to Dublin on the 8th of November, hoping for a victory as they build towards the World Cup in a year’s time. The Springboks’ visit is followed by European Rugby’s perennial ‘next’ side, hard-hitting Georgia, whom many believe will seriously worry Six Nations sides Italy and Scotland. Following Georgia, the Irish will meet Australia on the 22nd of November in Dublin, in their final outing before February and the start of the 2015 Six Nations.
Wales, Scotland, France and Italy all have packed November diaries full of intrigue and excitement, including Argentina’s visit to Murrayfield on the 8th of November. The Argies will arrive fresh off the back of their maiden Rugby Championship victory against Australia in Mendoza. The Pumas, a side certain to make a mark on the Rugby World Cup in 2015, head off to Paris to bring the curtain down on France’s autumn series on the 22nd of November. Les Bleus also face Australia and Fiji to prepare for a packed 2015 schedule. Wales has a particularly difficult month ahead at the Millennium Stadium, with improving Australia, unpredictable and exciting Fiji, as well as powerhouses New Zealand and South Africa all going to Cardiff in November. It could be a miserable month for the Welsh.
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PROTECTING PROFITS By Maria Psarra - Head of Trading at Prime Wealth Group
This is the second in a series of educational articles on the best habits of winning traders and investors, the most common mistakes traders make, and practical ways to avoid them. I have heard this situation one too many times from both investors and other traders, ‘’I was making so much money in this trade, but then the market turned against me, and I ended up exiting, making very little profit or even a loss.”
I saw what winning traders did differently and over time started doing the same myself. Hopefully, after reading this article, you will have learnt a bit about how you can protect your profits too.
Here’s an example... You have made a good trade and are looking at a healthy profit. Let’s assume that you are holding £10,000 worth of company X stock and are already 5% up on the trade. Following the announcement of results which are way above analyst consensus expectations the stock rallies by another 15% on your initial buying price. You are now looking at a 20% profit, translating into £2,000. Not bad. Now what?
Now I am no saint. I have ‘sinned’ myself in this way many times as a beginner, spending hours and days cursing and pitying myself about what could have happened. However, I learnt from it.
You tell your partner, your friends, your colleagues, jump happily up and down, and leave it at that. After all, you are such a good trader/investor, your trade selection is immaculate, and the company only reported today. So what could ever go wrong tomorrow?
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The new day dawns and around 9.30am the news hits the market. The company’s CEO has voluntarily resigned as he has just been formally accused of repeatedly bribing foreign government officials in order to ensure favourable treatment of the company’s environmentally harmful activities. The stock price has plummeted, and you, the ‘’savvy’’ investor, are now looking at a loss as opposed to standing on a 20% profit. You curse the departing CEO, the company, the institutional investors that sold their stock holdings early (as they surely knew long before you did), and think of how great it would have been if only you had cashed in your profits yesterday. Sounds familiar? Well, we have all done it at some point, and suffered the consequences. In short, losing traders rejoice in their success, appraise themselves and their ego for their exceptional trade selection abilities and stop exactly at this point.
“losing traders rejoice in their success, appraise themselves and their ego for their exceptional trade selection abilities and stop exactly at this point.”
Now what do winning traders and investors do differently? It is simple. They protect their profits. How? They move their stops higher in order to ‘’lock in’’ the profits from successful trades. In our example above the trader would have brought their stop loss up to lock in at least 10 percentage points of the total 20% profit they were making on the day of the company’s results. This way, assuming the stop is executed successfully, they end up exiting the trade with a 10% profit. They do not assume that what is here today will be here tomorrow. They do not believe that they are owed anything by the market because they are great traders. On the contrary, they thank the market and themselves for their existing profits, and ensure they keep them. They take what the market gives them, then walk away looking to make money elsewhere.
As you return to your trading, try to remember the old adage, ‘’what the market gives, the market takes away’’, and the only person responsible for protecting your profits is you. The market does not owe you anything, the same as you do not owe anything to the market. Winning traders understand this, and ensure that when they have a profitable trade, no matter what happens from that moment on, they walk away making money. Winning traders understand that the reason for being involved in the markets is making money, not deriving excitement, boosting their ego, or proving to the world what amazing traders they are. This however is a subject, or rather a number of subjects, that we will discuss in more detail in my next articles.
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“you don’t need to be perfect to make money in the markets, you just need to follow simple rules which allow you to be better than the losing traders around you.”
As a famous trader once said, you don’t need to make all the profit you could make from just one trade in order to make money in the markets. You just need to make more money than you lose over a number of trades and over time. So don’t let your winning trades turn into losing ones. The truth is that you don’t need to be perfect to make money in the markets, you just need to follow simple rules which allow you to be better than the losing traders around you. I hope you enjoyed reading this article, and until next time... Happy Trading!
For now, just remember that ‘’the trend is your friend until the trend ends’’, and that moving your stops to protect profits ensures that you will be out when it does (end).
Maria Psarra is Head of Trading at Prime Wealth Group (PMW), supervising a team of experienced brokers, and advising High-Net-Worth Individuals on suitable investment strategies. Maria employs different investment styles in order to construct personalised portfolios best suited to the risk and return preferences of PMW’s clients. Typical portfolios primarily comprise of UK and European Equities and Equity Indices, and to a lesser extent Commodities and Fixed Income exposure.
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WHY THINGS DON’T LOOK GOOD FOR GERMANY By Samuel Rae
While I primarily base my trading approach on the technical side of things – in particular, candlestick charting – I will generally form a fundamental bias around the currencies I trade and incorporate this into my discretionary entry system.
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Why things donâ€™t look good for Germany
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Simply put, if I form a bearish bias on a particular currency – the euro for example – I will generally only look for short entries in the EUR/USD. I find that doing this helps me to filter out some of the “random” price action we often see during shorter timeframes. The aforementioned bearish euro bias is one that I hold at present, and one that I’ve held for the last few months. Further, it looks as though this bias stands to play an important role in my trading until at least the beginning of 2015.
Here’s why… I initially decided that short was the way to go on the euro way back in March. The tensions in Ukraine, coupled with waning output in a number of the leading Eurozone entities, had global markets calling for extreme measures from Mario Draghi and his ECB colleagues – measures that we saw, to some extent , implemented in early June, with the announcing of a negative deposit rate.
This rose to 48% in 2010, 51% in 2011 and 52% in 2012. Last year’s figure of 51% bucked the trend, but not by enough to alter the suggestion that Germany’s reliance on foreign capital is accelerating.
“Germany has long been considered one of the Eurozone’s strongest and most reliable constituents, and many onlookers still believe this to be the case today. I do not share their opinions.”
This action, it was believed, would serve as a disincentive for European retail banks to hold deposits with the ECB and stimulate lending as banks sought a return (rather than a tax) on their capital. While we are yet to see any reports that offer direct insight into the efficacy of this action, there are situations in which attempts to stimulate interbank lending through monetary policy of this fashion have failed miserably in the past – look back to June 2012 when the ECB deposit rate hit 0% and you will see what I am talking about. In short, I was pretty pessimistic about Draghi’s policy back then, and this remains the case today. However, my bias has been strengthened of late by one particular Eurozone nation – Germany. Germany has long been considered one of the Eurozone’s strongest and most reliable constituents, and many onlookers still believe this to be the case today. I do not share their opinions. Yes, Germany is – and has been for a considerable amount of time now – a strong manufacturing nation and one that has experienced controlled inflation and sustainable growth over the past decade or two, despite the trouble in which its neighbouring counterparts seem to have found themselves. However, Germany’s strength is also very much its weakness. What do I mean by this? Well, Germany relies very heavily on its exports to maintain output growth. Further, over the past five or six years, this reliance has been steadily increasing. In 2009, exports constituted 42% of German GDP.
So why is this a bad thing? Well, it is not always a bad thing. When a particular region or nation booms, countries such as Germany that derive large proportions of their output levels from external revenues benefit substantially. When the US and Europe was expanding during the first half of last decade, Germany reaped the benefits. When the US and Europe contracted at the end of last decade, Germany suffered but attained a quick recovery because China was booming. And therein lies the problem. Germany will continue expanding so long as somewhere across the globe a major economy is growing and has freely available foreign direct investment that it is willing to transfer to Germany. Take a look at the global economy now, and you see why I believe Germany is headed for a contraction over the coming quarters.
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Why things don’t look good for Germany
Data released in early October revealed a 5.8% decline in German exports on a month over month basis, and, as the Chinese growth we have become so accustomed to over the past decade starts to decelerate, we can expect this figure to increase.
So what does this mean for the Eurozone? Well, Germany is widely considered to be the “engine room” of the Eurozone.
With nations suffering around it, the Eurozone has looked to Germany for support on both a fundamental level (i.e. maintaining output and retail activity in order to avoid deflation) and a financial level (i.e. providing financial support for institutions that find themselves in trouble in the Eurozone countries). Very soon, Germany will not be in a position to provide such support on either of these fronts. At that point, the Eurozone could be in deep trouble.
New SBM contributor, Samuel Rae, is the author of the best-selling book “Diary of a Currency Trader”. Sam’s personal trading style combines classic candlestick analysis with a simple, logical and risk management driven approach to the financial markets – a strategy that is described and demonstrated in his “Diary of a Currency Trader”.
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Windows 10 Ten Things You Need to Know SBM’s resident technology specialist, Simon Carter, takes a look at what’s hot in the tech world.
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In late September, Microsoft unveiled its latest operating system (OS), Windows 10, slated for release in late 2015. The launch had all of the glitz, glamour and spin we’ve come to expect from tech events and raised some interesting points.
Wait, where’s Windows 9?
Good question! The quick answer is that nobody actually knows. Rumours abound suggesting that Microsoft wanted to bring their numbering in line with Apple (whose latest OS is named ‘X’), or that they were playing on their reputation for having one good OS followed by a bad one by simply skipping the bad one, or even that programs designed to run on Windows 95 or 98 would get confused by the ‘9’. All hearsay, obviously, but Microsoft themselves don’t really offer a convincing alternative theory saying that when you “see the product in its fullness, I think you’ll agree it’s an appropriate name for the breadth of the product family that’s coming”, and that “we’re not building an incremental product.” Still confused?
“Despite a release date scheduled 12 months from now, you can grab hold of a beta version of the OS right now. For free.” 3 Do I get my Start Menu back? One such reward could be the return of the beloved Start Menu. Like the disappearance of the File menu in Microsoft Office 2007 (do they ever learn?) the removal of the Start Menu in Windows 8 provoked despairing howls from outraged users throughout the world. Microsoft have listened, presumably rolled their eyes at this sentimentality for a twenty year old feature, and reinstated it in Windows 10.
4 What other features have made a comeback?
When can I see Windows 10?
Despite a release date scheduled 12 months from now, you can grab hold of a beta version of the OS right now. For free. The catch? Well anybody who has ever experienced how buggy Microsoft’s retail releases tend to be will probably shudder at the thought of a beta version, but if Windows 10 manages to iron out the mistakes made in previous releases, being an early adopter could have its rewards.
Those of you hankering for Minesweeper or ‘Clippy’ the Office Assistant will have to keep, erm, hankering, but Microsoft are willing to entertain any ideas that early adopters may have. Top of the current list is the return of the ‘Aero Glass’ (the design effect that makes title bars and the taskbar semi-transparent) feature that first appeared in Windows Vista, stayed through Windows 7, and then was toned down in Windows 8.
How about new features?
As you would expect, many of the new features on display at the launch were largely cosmetic. However, there were several practical elements too. For instance, holding the Windows key on your keyboard in combination with the Tab key will open a ‘mission control’ type view that will allow you to cycle easily through open programs. Albeit similar to the tiled view the same shortcut has brought since Windows 7, you now have the additional option of adding a Virtual Desktop.
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“The ‘Modern App’, the name given to native Windows 8 programs won’t disappear, nor will it gain more promInence.” Virtual Desktops, as the name suggests, give you the ability to create different desktop views for different users or different scenarios (say one for home use, one for work, one for media) without having to go through the process of creating a new profile.
6 Will all programs now be ‘Modern Apps’? The ‘Modern App’, the name given to native Windows 8 programs won’t disappear, nor will it gain more prominence. There will, however, be more similarities between modern apps and traditional programs, such as the ability to run classic programs in full screen and ‘snap’ them, and the functionality to run modern apps in classic Windowed mode (partly introduced in Windows 8.1). In short, Microsoft are aiming for the best of both worlds.
7 Are Microsoft still pushing touch? Bad news for touch users – Microsoft don’t seem convinced. Where Windows 8 seemed designed to force touch screen laptops and PCs onto users (to a somewhat inevitable backlash), Windows 10 looks set to leave those early touch adopters with few new features. An admittance of defeat or an acceptance that we’re not yet at critical mass with touchscreen home computers? And if you’re a committed mouse and keyboard user, you should find the touch features less intrusive than before.
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8 Is it cross device compatible? Yes. Massively so. ‘One Product Family; One Platform’ is Microsoft’s mantra and everything that can run a version of Windows 10 (from the smallest device, to the Internet of Things, to the largest data centres), will run a version of Windows 10 with huge cross-compatibility between devices. And this is the rub. With Windows still the world’s OS of choice, but Microsoft falling behind Apple and Android in the tablet and smartphone race, if Windows 10 can deliver must-have features across devices, it could change the way we consume portable technology for the next decade.
How about Business Users?
Microsoft have promised that Windows 10 will be more intuitive, leading to instantly more productive users. On the subject of efficiency, it was also promised that “Windows phones and tablets support mobile device management (MDM) today, but with Windows 10, customers will be able to use MDM to manage all their Windows devices”.
“Microsoft have promised that Windows 10 will be more intuitive, leading to instantly more productive users.” And with cross-device compatibility at the forefront, the environment for developing tools should also be improved.
10 Did Microsoft really compare it to a car? Yes. A Tesla. Nope, we don’t know either.
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The rise of crowdsourcing
The rise of crowdsourcing and its benefits to businesses of any size BY CHRIS NORTH, CEO OF GAMCROWD
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The rise of crowdsourcing
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The rise of crowdsourcing
Globalisation, and with it technological advances, has changed the face of business forever. There are now almost three billion internet users , and amongst them is a huge, rapidly-growing online workforce who have turned to the web, either for full-time work or to supplement existing incomes. Crowdsourcing is already keeping many of these people in employment. At GamCrowd we envisage this process becoming the future for businesses across the world and an essential asset for the gambling industry. So much so that we are launching a crowdsourcing platform to run alongside our crowdfunding platform. Essentially, crowdsourcing is obtaining services, ideas and content by soliciting contributions from a large group of people, chiefly an online community rather than what we would consider traditional employees or suppliers. Recently, the United States Agency for International Development launched a crowdsourcing initiative for members of the public to design a new anti-contamination suit that will lower the risk of health workers becoming infected. There is a two-month deadline to submit designs and a prize of $1m for the winner. It’s the latest example of a major body looking to harness the power of the crowd, at a cost that’s attractive when compared to the process of using an existing research and development company. For example, in 2006 web giant Netflix offered a $1m prize to those who could create a new algorithm for customer generated recommendations. GamCrowd’s logo was designed by the crowd. A brief was put out with a budget, and our favourite design was bought for only a few hundred dollars.
Software has always been tested by either select companies or the public. Goliaths like Microsoft and also governments have offered rewards for years to people who can find flaws in their products and platforms.1
“crowdsourcing is obtaining services, ideas and content by soliciting contributions from a large group of people, chiefly an online community rather than what we would consider traditional employees or suppliers.” We believe that the benefits of crowdsourcing are numerous. Firstly, it offers incredible flexibility and scalability. Small businesses, particularly start-ups, will need different resources at different times. Typically founders are doing many different job roles at the beginning as they seek capital to develop. Financially it’s rarely viable to recruit dedicated professionals, even on short-term contracts, to get jobs done. And while larger companies may have resources across the globe which allow them to draw on international talent, start-ups generally don’t.
But crowdsourcing isn’t a new concept. Video games are beta tested by volunteers, whose job it is to find bugs and errors, ahead of the final release.
Crowdsourcing could knock down borders and open up a company to a huge pool of talent, with specialists from every corner of the globe.
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The rise of crowdsourcing
“The global gambling market is estimated to be worth over £270bn and is growing consistently year-on-year, providing fantastic opportunities for both businesses entering the market and crowdsourcers looking for work.” No matter the sector, online crowdsourcing is a hugely competitive market where those that deliver quality will be used time and time again. There’s no room for sharks in this pool – do the job to the agreed specification and budget and get paid. Failure to complete the brief to agreed standards will inevitably lead to conflict, negative feedback and loss of future work. The global gambling market is estimated to be worth over £270bn and is growing consistently year-on-year, providing fantastic opportunities for both businesses entering the market and crowdsourcers looking for work. GamCrowd has already harnessed the power of crowdsourcing, and crowdfunding, to introduce our platform. The crowdsourcing section will be ready to launch in the first quarter of 2015 and we have been busy recruiting sellers. A diverse crowd of gambling industry specialists from around the globe are ready to provide services to gambling industry start-ups. We have just launched the first start-ups, Betify and Fenway Games, on our equity crowdfunding platform. We believe that the introduction of this gambling industry-focused service allows innovation to thrive and gives start-ups a better chance to grow by pitching easily and directly for investment to a large network of potential backers.
Want to find out more about GamCrowd and how you can get involved, either in crowdsourcing or as a crowdfunding investor? Visit http://www.gamcrowd.com for more information. GamCrowd, as an Appointed Representative of Resolution Compliance, provide a platform for start-ups who are focused on the gambling industry to raise money through equity crowdfunding. They also allow the crowd to buy and sell services in its market place. GamCrowd also intend to offer a peer-to-peer lending service at a later stage, subject to obtaining regulatory approval. GamCrowd have written a number of white-papers on crowdfunding and crowdsourcing which can be viewed on their website.
Internet Live Stats, http://www.internetlivestats.com/internet-users Daily Mail, http://www.dailymail.co.uk/news/article-2788103/america-turns-web-crowdsourcing-fight-ebola-internet-hackers-try-cash-crisis-scam-emails.html?ITO=1490&ns_ mchannel=rss&ns_campaign=1490 Netflix, http://www.netflixprize.com//rules Computer Weekly, http://www.computerweekly.com/news/2240186490/Microsoftoffers-cash-rewards-for-security-bug-hunters Techcrunch, http://techcrunch.com/2009/09/29/facebook-spreads-its-crowdsourcedtranslations-across-the-web-and-the-world/ Wikipedia, http://en.wikipedia.org/wiki/Wikipedia:About Statista, http://www.statista.com/topics/1368/gambling/ (Estimate of €342 billion, converted into GBP using the exchange rate of 1 EUR = 0.790109 GBP accurate as of 23/10/14 at 14.00 GMT, subject to fluctuation)
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Markets In Focus
MARKETS IN FOCUS OCT 2014
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Markets In Focus
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Thank you for reading. We wish you a profitable November!
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