The Malcolm Pryor Interview - author of The Financial Spread Betting Handbook: The definitive guide to making money trading spread bets talks to Kenny of www.tradersdaytrading.com
Financial Spread Betting is an extremely flexible way to trade short term and long term traders. It can offer a very cost effective means of trading for serious investors, or it can also be a fun way to take a position in the markets.
Malcolm Pryor is a very well respected speaker and author of a number of publications focusing on Financial Spread Betting. Kenny talks to Malcolm in The Malcolm Pryor Interview.
Kenny: Hello Malcolm, thank you for talking to Tradersdaytrading.com. Before we begin, please give our visitors a little bit of an insight into your background. Who is Malcolm Pryor?
Malcolm: I am a trader, a trading coach, the author of 3 books and 2 DVDs on spread betting and the editor of www.spreadbettingcentral.co.uk. I run seminars on trading, both independently and for third parties. I am an active member of the Society of Technical Analysts in the UK.
Kenny: Much of the information and strategies in your books is equally applicable to traditional trading methods through regular stockbroker accounts, what got you interested in Financial Spread Betting in particular as a means of tradimng and investment?
Malcolm: I started off by taking responsibility for my own pension decisions (having seen what a poor job had been done by advisors), then branched out into a range of other trading activities. I started spread betting in 2001. In the pension I use CFDs FX accounts and on line broking accounts, outside the pension I only use spread betting these days.
Kenny: What do you see as being the top 3 benefits associated with trading and investing with Financial Spread Betting, over traditional trading methods?
Malcolm: Tax advantages (if you win over a certain amount per year); the ease of going short on stocks in bear markets; the ability to trade so many instruments types in one account.
Kenny: So what are the main disadvantages. What are the issues that we should consider before deciding whether Financial Spread Betting is right for us as an individual. Is there anyone that it is never going to be suitable for?
Malcolm: Since 85% or more of spread betting customers lose, the tax advantages for most people are an illusion; the leverage is a double edged sword and without appropriate risk control customers can lose not only their original stake but much more in addition; anyone who thinks spread betting is an easy route to riches is almost certain to lose
Kenny: One of the main 'complaints' that I hear voiced from traders is that it sometimes feels as though the Spread Betting Companies 'target' their Stop Loss levels, before the market reverses to move in the direction that they wanted it to move in. What are your thoughts on this:
a. Do the Financial Spread Betting companies really want us to win?
Malcolm: This depends on how much they hedge, which varies by firm. A firm that doesnt hedge at all is like a bookie that doesnt lay off their book, they will lose if the customers win. By the way this doesnt bother me at all, it wont affect any of my individual bets.
b. Are there underhand practices that go on that can move a whole market to where my stop loss is before reversing again?
Malcolm: When I first started spread betting there was quite a lot of press comment on certain practices which were seen as "close to the edge". Unusually large spreads for short periods of time, which had the effect of taking out stops was one press theme; another was requoting, where you were not filled at the price that had been quoted on the platform, and got an alternative new quote, almost always worse. My belief is that these kinds of things are largely a thing of the past. I trust the firms I use and they have also have excellent help desks.
c. What are the main things that individuals can do to protect themselves from getting stopped out of perfectly good trades at the market extremes?
Malcolm: Many traders lose by using too tight a stop, so their stop will get hit by random price movements even though their trade direction was called correctly. In addition, you should avoid the most obvious stop loss points because the underlying market makers (not the spread betting firms) gun for them. As an example for a day trader, 1 tick above the
high of the day or 1 tick below the low of the day is where there are thousands of stops and are natural targets for the market makers.
Kenny: What are the Malcom Pryor top tips for how to become consistently
successful at spread betting?
Malcolm: No different from what is required for successful trading in general; you need to have a detailed plan and clear trading objectives; you have to have at least one trading strategy which has a positive expectancy, actually it is better to have several each of which works best in a different market type; you have to be able to execute the strategies flawlessly; you have to manage risk; you have to develop the right psychological framework for trading/
Kenny: What are the main pitfalls, the most common reasons why spread
betters who fail to become successful, lose money?
Malcolm: The 3 biggest reasons are 1) trading with no edge, there is no long term positive expectancy in what they do so in the long run they lose 2) wrong bet size, so they might have a positive expectancy strategy, but they lose their funds before the long term edge can come into play 3) lack of discipline, so they might have a positive expectancy strategy, but then they do something else.
Kenny: Congratulations on the publication of your new book The Financial SpreadBetting Handbook 2nd Edition. What can readers learn from it, and what makes it different from other Financial Spread Betting manuals that are available?
Malcolm: It is now 4 years since the first edition came out and in 4 years the spread betting markets have moved ahead quite a bit, plus I as a trader have moved ahead. As a result I have updated the Handbook quite a bit. My focus is on practical trading issues rather than theory. I think I have 400 trading books in my library and I hope some of the learning from them and from a decade of spread betting have found their way into this second edition.
Kenny: Malcolm, thank you once again for talking to us today, and good luck with your new book.