Nick Leeson gives his guide to spread betting, and shares more hard-won wisdom on the subject of avoiding big debts. He was once played in a film by Ewan McGregor, you know – but he doesn’t like to talk about that.
So much for perfecting the way that I play poker! I was in Jamaica last week talking at the annual Business Leaders Awards dinner and used the nine hours flying time there and back to do a bit of background reading and play a bit of poker. Got back to Ireland a couple of days ago and promptly wiped out my stake on three consecutive days. They used to call me lucky when I was in Singapore, but I seem to have lost the knack!
I can’t wait for Euro 2004 to start. Like any red-blooded Englishman, I like to think that I know a thing or two about the game, and I’m willing to put my money where my mouth is. Not that I’ll be betting on England, mind you. My heart has led my head once too often to the detriment of my bank balance and I won’t be doing it again. Anybody who fancies betting with their heart should try England to win Euro 2004, Tim Henman to win Wimbledon and the English cricket team to go through the summer undefeated. It’s not going to happen!
I looked at the spread betting markets a few months back, and told you what I think, but really I’m waiting for the slightly more unusual markets to start being listed. As the Japanese markets were falling in 1994 and the losses were mounting at Barings, my one successful trade of the year was in the total number of goals scored in the world cup. We bought the total number of goals scored at about 120 and saw it finish up around the 150 mark. Markets have got tighter and tighter since then and football tournaments have got more and more difficult, with everybody doing their utmost not to lose in the opening round of games. I can’t pick out a whipping boy, so dependent on the quote will be looking to sell the total number of goals scored.
Sports betting is all very well, but financial spread betting is where the real thrills are. It’s the closest thing to the futures markets that I used to trade on, and can plug the man in the street straight into the sheer buzz of trading the world’s greatest financial markets.
All of the major spread betting firms offer markets on the financials. They are regulated by the SFA and offer a fantastic alternative to the more traditional stockbrokers, with whom you have to lock up large amounts of capital. You can trade on any individual share that you like. The major indices – the FTSE, Dow Jones and so on – are a popular wager and commodities, currencies, bonds and interest rates are always quoted.
The absence of capital gains tax, stamp duty, brokers fees and commission all make these attractive ways to play the stock markets, but a word of caution should always resound in your ear – and I’m perhaps the person best qualified to give it.
As well as the chance for some serious gains, you can lose your shirt and more in a relatively short period of time. Picture Ewan McGregor playing me in the movie Rogue Trader, looking into the mirror and announcing to himself that he had just lost $50 million in one day. Remember that it was one of my better days and the level of risk that you’re undertaking will never be forgotten.
Many a trader or gambler will tell you that there is a ‘gut feel’ to some of their trading. That may be the case, but more often than not you’ll end up with egg on your face, if that’s the way you trade. If you’re thinking of trading on any of these markets the best thing to do is purchase a software package that enables you to look at the charts of the various stocks and indices, and teaches you how to decipher them.
Most ordinary investors (those not doing it professionally) enter a market after it has already rallied 30% and then exit equally as poorly. The edge is with the financial institutions, but you can blunt this by empowering yourself with these charting tools. Markets are obviously subject to the economic and political climate of the time, but they all seem to be stuck within tightly defined ranges at the moment. There is an air of uncertainty around and it’s difficult to see a sustained break to the upside. Pick out those ranges successfully and you can trade away to your heart’s content. Any breakthrough to the up- or downside needs to be consolidated with an increase in market volume for it to be significant.
Many of these spread betting firms advertise that you can take a position on credit, subject to status. I wonder what the chances are them letting me have a credit account – about 862,000,000/1, probably!
