Financial Betting
For many decades, men (and women) have traded in stocks, shares, commodities and indices. The principal being to buy and sell things that one does not own - to make a wager based on the future value of something rising or falling. These traders wear interesting blazers and stand in various stock exchange locations around the world yelling and waving their arms about whilst wagering millions of pounds of somebody else's money.
The good news is for the 'amateur' investor that it is now possible to do the same from the comfort of your own home, without a blazer and with a mouse and keyboard to replace the wild gesticulating. Sites such as www.finspreads.com offer an advanced trading platform from which to trade everything from the FTSE100 to the price of orange juice.
Although this site is primarily focused on sports betting, and in particular horse racing, the author also derives a good chunk of income through this (tax free)* form of investment.
I mostly trade the DOW JONES index. I tend to be cautious about individual shares and things like pork bellies because I would be guessing on the latter and the majority of institutional traders have far more information at their fingertips on individual companies and unless you have a very thorough day to day understanding of a particular companies or share, then you are taking a bigger risk than is sensible. The other reason, is that all shares are subject to market conditions and so a carefully chosen share bought as a short term investment may outperform its sector but still lose a lot of value if the market as a whole drops. By trading a major indices, I find it much more suitable to a mathematical / statistical approach which relies much less on 'inside info' etc.
Before placing any financial bet, it is vitally important to understand the risk of your investment. All such investments are regulated by the FSA which does a sterling job in ensuring the industry is run in a fair and transparent way. It also restricts the selling of 'tips' or advice and I will not be advising any financial bets as part of my services. Financial bets that I do have will be logged on the Spread Betting Diary page for information purposes only.
The other necessary factor before placing a spread bet is to determine wether you are playing a short, medium, or long game. Short term trades may last a few minutes, buying and selling an index many times throughout a session. The long term game may involve placing a bet and leaving it for many years, although the bet will require closing and re-opening up to four times a year.
I tend to focus on a medium game if I am buying and a short game if I am selling. Overall, the DOW JONES has of course risen over the past 60 years. If you look at the past 60 years on a graph it appears that it has never dropped at all! Therefore, if buying this index it seems reasonable to expect a profit on our investment at some point in the future. If we are selling, we need to be much more cautious as we are betting against the general direction of the long term trend.
So, how to determine a bet? As I said before, I am not in the city and so although I subscribe to Reuters etc any business news I get is already in the public domain. I therefore adopt a pure mathematical strategy and I focus one one index - the American DOW JONES (DJI). This is preferable to the FTSE100 because it varies by a bigger percentage with slightly more dramatic peaks and troughs than the FTSE, and the FTSE tends to reflect what has happened on Wall Street in the previous session.
I am in the process of checking the performance my system if used on the index since 1928. This will take me a few hours and test my Excel skills but I will post the results on here and if the system works over this extended period I will detail the theory and add the spreadsheet to those available for purchase.