List of Best Trading Books

In this section is a list of my personal best trading books, useful to improve your trading psychology, trading strategy and to learn from other people’s experience. Furthermore there are book that are fundamental for all traders to read.

Trading Books for Beginners:

I feel this the the essential list for all traders that are just beginning and would like to get into trading.

Trading for a living – Alexander Elder
Trade your way to financial freedom – Van K Tharp
Trading in the Zone – Mark Douglas
Market wizards – Jack Shwager
New Market wizards – Jack Shwager
Candlesticks – by Steve Nison
Technical Analysis Of The Financial Markets by John J. Murphy
Intermarket Analysis by John J. Murphy

Trading Books for the more experienced traders:

Trading System and Methods – Perry J. Kaufman
Trading Encyclopedia of Chart Patterns by Thomas Buwolski
Bollinger On Bollinger Band – John Bollinger
Technical Analysis for the Trading Professional by Constance Brown
The Complete TurtleTrader – The Legend, the Lessons, the Results by Michael Covel
Elliott Wave Principle by Frost and Prechter Elliott Wave Principle (Applied to Forex Market) by Robert Balan
Japanese Candlestick Charting Techniques, Second Edition by Steve Nison
The Definitive Guide to Point and Figure: A Comprehensive Guide by Jeremy du Plessis

I will add to the list also books recommended by others

Scalping tips

You have decided you adopt a scalping trading style. Here are scalping tips to keep in mind.

Before starting to scalp:

1) Close down all programs running in the background. If your press ctr+alt+del the task monitor open up and it will tell you what programs are running. You can kill these from this window.

2) Ensure your connection is stable and fast. For those using wireless, it would be even better if you are connected with your cable directly into the router.

3) Ensure you are using a broker that does not delay the execution, as execution is fundamental in scalping. At times you will need to get in and out of a price in less than 30 seconds.

Scalping Tips:

1) Execution

Get used to your spread betting brokers trading platform. There are platforms you can customize so that you can organize your charts, your current profit and loss and your order execution buttons so that you have quick access to entering and exiting an order.

Practice a little before trading Big. Most of scalpers loose money in the first month due to execution errors.

here is an example of enlarging the trading buttons in :

2) Controlling Your Costs

First of all when Scalping, it is important that you keep costs under control. Scalping is all about taking or giving small profits. If you start letting your costs run these could eat up your profits. What I mean by costs, is not being decisive or convinced on a certain about a trade and you enter a trade to quickly close it. In this situation you have paid the spread. These little costs can add up.

3) Know the market sentiment and trend

You must be prepared when entering your trade. Do your homework before trading; know the general sentiment of the market. Know the direction of the main trend and of the medium term trend. At the beginning it is advisable to stick to the trend. Once you get the necessary experience you can also counter trend.

Below are Forex Spread betting examples of an hourly graph and a 5 minute graph. As you can see in the hourly, you can see the big picture.

*if you want to read more on Forex spread betting example

4) Emotions – Controlling your urge to overtrade

This is the hardest part in scalping but also applies to all styles of trading. Do not over trade. Many traders that start off and maybe never make it, is because they overtrade in the beginning and they start making a lot of little losses to soon find their account so low or in the red that they cannot be impartial in their trading. Therefore it is essential that from the beginning you take control of your trading urges. When you start off scalping you can also play it safe, that is, even if you miss a couple of trades do not feel you are missing out, but see it as market experience. You are currently learning. The market won’t go anywhere.

5) Emotions – Discipline to be patient and stick to your trading Plan

Choose a strategy that suites you and your trading hours. Write it on paper and stick to it. With time you will perfect it but at the beginning this will help you be disciplined to stick to rules. Ensure that the trading strategy you adopt at the beginning of your scalping or spread betting career has a high probability and positive expectancy. Even if at the beginning this means more sitting on the side lines, well being more patient and taking fewer trades. If you trade in the evening you might end up trading only 3 to 4 times.

6) Study or have an understanding of basic technical analysis

It is also important to have a basic knowledge or understanding of technical analysis. The pros and cons of using various indicators; what are their strengths and weaknesses. This will give you a good understanding of your trading system and when it will and will not work.

7) Adjust to market conditions/ Volatility

If volatility increases you need to adjust the size of your trades to cater more for these volatile moves. This is why it is important you know well the average range of the markets you are trading in that time frame. So in case the market starts moving twice as much as the usual you can halve your sizes.

When scalping, volatility is also necessary. Trading a market that is very quiet or dead will not give you much opportunity. Many spread betters resort to Forex as there is movement in the Forex market. Scalping is about trading little and lots. Taking lots of profits.

8 ) Last rule – Don’t hang onto losers – Stick to your trading style.

If you are scalping you must have no open positions overnight. Don’t hang onto loosing trades waiting for them to recover. Learn to take a loss. This is a numbers game. It is fundamental that your winning odds are greater than your loosing odds.

I hope these scalping tips have helped. click here to go back to the top Scalping Tips

spread betting scalping strategies

Royal Bank of Scotland Spread betting example

After the recent news we have had in the banking sector, here is an example of spread betting RBS (Royal Bank of Scotland).

Three days ago the news came out JPMorgan Chase acknowledges $ 2 billion trading loss. You strongly feel that this is a big story that will affect the banks, as JPMorgan Chase is the largest bank in the United States, and this would be a big loss of its own money. The news came out on the 10th May after hours, you decide to take a short trade the following Morning.

The Night before RBS was trading at 23.20. You wait for the market to open the next morning. RBS opened at 22.90 and starts moving lower:

You decide you would like to risk 150 pounds and look to take profit of 300 pounds. You look at the charts and you want to place your stoploss above Thursday’s high of 23.30. And you would like to take 300 Pounds profit. You calculate that the distance from the current price of 22.80 to the stoploss level of 23.50 is 0.7. You divide 150 GBP by 0.7, and you get your stake of 215 Pounds a point. Then you are looking for a ration of 1:2, you would like a limit (Profit) of 300 GBP with a distance of 1.4 points. You place your limit at 21.40.

As you can see from the Spread betting examples of Royal Bank of Scotland the trade went in your favour, You took a profit of 300 Pounds. If Instead it had gone against you, you would had lost 300 GBP

If you want to read a bit more on risk, you can see the section on Money Management

Summary:

Other examples of trading the banking sector: Spread betting example of Barclays shares

Return to the Spread Betting Example section.

Scalping with Bollinger Bands

In this Spread betting strategy we I will show you how to scalp using the Bollinger Bands. You will need a bit of practice before you master the art of scalping and master one of the strategies that you pick. To Learn to scalp takes time and discipline, and lets not forget a lot of patience. This is one of the biggest errors traders do, they become in patient when there are no trades. Well Lets get started. I have picked the EURUSD as it is one of my favourite pairs, but you can choose a pair that you know and like.

Before we move on, here are tips on How to Scalp: Learn one strategy and dominate the technique. Learn one or two pairs and know every characteristic movement of your pair. Know what affects your market

Below I have used the EURUSD in our example as I like it as the average movement it does in a 15 minute time range is about 15 to 20 points, which is well within my risk tolerance. If you want a more volatile Forex spread betting pair, you can choose the GPBJPY or the EURJPY. they have more volatility, more action and at the same time more risk.

Bollinger Band Scalping Strategy:

Pair: EURUSD
Time Frame: 5 Minutes
Indicator Bollinger Bands: 20 moving average with 2 standard deviation (Default settings)
Time: Evening

This strategy can be applied in both sideways markets and trending markets:

1) Scalping with bollinger bands in a Sideway Markets (Mean Reverting):

The very first thing is to Identify if you are in a trending market or a sideways market. If you master one currency pair you will know when the move is over and you are in a sideways market or a certain times most markets repeat their behaviours. I have taken the EURUSD after market hours, as to accommodate people that work. This strategy is a simple concept: When the moving average is at a flat angle, and the bands are getting smaller (squeezing), this is the ideal moment to trade. Trade in the direction of the previous trend. When the price reaches the top of the band sell it and wait for it to return (mean revert) to the middle of the band. When the prices reach the bottom of the band buy the instrument and wait for it to return to the middle of the Band.

Stop loss is 10- 15 points above or below the bands:

Below is the same spread betting strategy applied to Rio Tinto. This to show how the same strategy can be traded in different markets

2) Scalping with bollinger bands in a trending Markets – Scalping the Pull Back:

On the other hand there has been strong news in the market you are trading it has started trending, (Note the trend is under way already), In this scalping strategy you trade the pull back. When the EURUSD moves up or down in the direction of the trend. You wait for the price to pull back to the centre line, the 20 day moving average, then you buy or sell in the direction of the trend. In the spread betting example below when the prices pull back to the centre line, you buy with stoploss below the bottom band / line and with the take profit or target when the prices reach the top band again.

Below is the same spread betting strategy applied to Rio Tinto. This to show how the same strategy can be traded in different markets.

I hope You have enjoyed this scalping strategy. If you would like more ideas you can go to the scalping strategy section. Or you can return to the spread betting example.

Gold Pivot Point Strategy

Pivot points are a very old way of calculating support and resistance points in a chart. The calculations is very simple as it was widely used in the commodity pits and these calculations were done mentally while traders were deciding to or not take trades.

This is the Pivot point Formula: P = (H + L + C) / 3. (P= Pivot Point, H = High L = Low). Then you have your resistance R₁ = P + (P − L) = 2×P − L and Support S₁ = P − (H − P) = 2×P − H levels. To learn more about pivot points you can read further in the technical analysis section: Pivot Points.

Getting back to the strategy. As we said this is a strategy to adopt not when you expect very strong news but on quiet or normal (Non news rich) days, or at least adopt with caution. During high volatility is when this strategy can stop you out.

As you can see from the graph above, there are various support and resistance levels. Normally you have R1, R2, R3 and S1, S2, S3. The further out the support and resistance the less likely you will be filled. But you can trade the various support and resistance levels according to the volatility.

I prefer to trader S2 and R2 and I have less risk tolerance and more patience. If you trade R1 and S2 you will get more trades and be stopped out more often, and on the other hand, S3 and R3 you might not get a trade.

Well let me explain How to trade this Gold Pivot Point strategy. This is a mean reversion strategy, that means you place your order to buy and sell on the support and resistance levels and when your order is filled you want the price to return to the pivot, or the middle. The pivot is also considered the average level. At this point is where you close out your trade, and take profit. A Practical Example 1. You believe that the trend is going up, so Ideally you would place your order to buy on the support 2 level(the green line), with your stoploss just below S3. You wait for an unexpected change in trend (temporary in nature) to drop to the support then bounce off this level and move back up in the direction of the trend. Once it reaches the pivot you take profit.

A Practical Example 2. Another example would be, you believe that the trend is moving up, and News has just come out that has pushed the trend further up. You believe that R3 is far over done and therefore your decide to place your order to sell at at R3, looking to take profit on the retracement down to R2 level. This is a riskier trade as you are going against the trend, but it is important that you manage your risk.

Another tip on pivot point trading: If the support and resistance levels coincide with another strong technical indicator, example a 50 day moving average, this level become even stronger.

Now these are very simple strategies to execute what you got to know or have the feel is of the actual Gold market and the fundamental news that is coming out that day.

if you have any questions email me, or if you believe I have left something out. Click here to return to the main menu simple spread betting strategies or if you you want to go back to Gold trading strategies

Gold Break Out Strategy

Lets get straight down to the strategy. This strategy is a very simple concept but it is important you manage your risk. You must also know your risk tolerance as you may have a few false break outs and when you give in that is when the break out will occur. So as simple as the strategy might seem, be prepared have your risk well planned out. Here is a tip on how to calculate the average risk.

As we said earlier in the gold trading strategy post a break out will occur when the market has gone quiet and you are anticipating news of data that could move the market. In this you calculate the range of Gold and draw a line above the resistance and one below the support. You will place a break out order just above or below these two lines. Again your risk is if traders do a false break out, that is they test the support or resistance lines, but fail to break these.

As you can see from the picture above the prices stay in the range and try to break it a couple of times. Until there is a break. This break continues until it finds the next support and resistance level.

As you can see form the above scenario this strategy can be quiet profitable and tradable.

On the other hand here is an example of a sudden movement that is completely unexpected. This was during Ben Bernanke’s testimonial in front of congress, as investors were waiting for Bernanke to do more quantative easing, he disappoints investors. By Bernanke not pledging for more stimulus traders ad investors started taking their money out of the safe haven and inflation hedge, “Gold” and started moving their money into more riskier assets. As you can see in the graph below Gold was building up towards a pledge of more stimulus. It had been moving up from the 20th of February, but at the hearing it suddenly dropped 5% after Ben Bernanke’s comments. This had been the biggest drop in 3 years.

In this scenario a Gold Break Out Strategy

would have been very profitable. This was a scenario when you know that Bernanke is expected to speak, you draw your break out lines and you place our order. But Be carefull you are not caught on the opposite side of the trade. Your stop loss could get slipped.

Next Strategy I will discuss is the Gold Pivot Point Strategy

or you can return to Simple spread betting strategies

Gold trading strategy

Well Now that you have just gone through the Gold spread betting example , I will now show you two different Gold Trading strategies. Gold like many commodities are still traded using Pivot Points.

There are two types of strategies one can use to trade gold. They are both commonly used but the trick to success is know what kind of market you are current in. Well I guess this applies to all strategies. Let me elaborate further, If there has been strong news in the market regarding inflation, prices on commodities or about the economy not doing to well, many will find refuge in Commodities, as especially gold, is seen as a safe have. In this case Trading a commodity break out strategy would be beneficial. You could expect to trade a Gold break out strategy even if there is economic data or if Ben Bernanke is speaking and you expect the data or Bernanke to speak about quantative easing. This will probably affect the gold market. In this case you are anticipating a dramatic move in the Gold market and thus can use the Gold Break out trading strategy. As you can see from the Graph below, this would mean taking advantage of sudden movements like the one below.

Gold Break Out Strategy

Gold Pivot Point Strategy

Instead if on the other hand there is no news expected in Gold, or the market has already made a drastic move and the commodity is currently retracing, You can use a Gold retracement strategy, Using Pivot points to trade Gold.

Next: Gold Break Out Strategy

Gold Pivot Point Strategy

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Spread Betting in Gold

Spread Betting Example in Gold

Well as you all have seen overnight gold has had a substantial move overnight. This has proven to show how spread betting in gold could be attractive, but at the same time dangerous. A small summary of what happened, on Wednesday gold was trading in the region of 1780 USD, after Fed chairman Bernanke failed to reassure the market of further quantitative easing there was a 5% sell off in Gold. Why was this? Briefly, Quantitative easing is printing money, which is inflationary. So many will turn to gold as safe have to protect the devaluation of their money.

Charts: Gold

Now let’s get back to our gold spread betting example. I Have split this post in two parts – First a simple spread betting example how to trade gold, Second – Going one step further calculating your risk.

A) Spread betting example – how to trade gold

When Spread betting a new product the first question to ask your self is:

1) What is a point value in Gold?

You are eager to trade Gold, and you ask yourself, what is the Pound per point value? Is it 1 GBP for every cent or for every dollar movement in gold? To find this out, I have a screen shot of an IG account. In the ticket below, you look for the decimals to understand the value of your trade. When spread betting you always trade the numbers to the left of the decimal place. Therefore, you are trading 1 Pound for every big number movement. Therefore if gold goes from 1712 USD to 1713 USD this is one point movement.

2) What is the minimum distance of my stoploss? as you can see from the ticket above the stoploss has to be at least 2 USD away from the current market price.

3) What is the deposit I need to put down? Lets bring the Info Box. As you can see below, the deposit factor is 14. This means you need to multiply your stake by 14. So let’s say we are doing 1 GBP a point, you will need to place a deposit of 14 GBP.

Now let’s go straight to the calculations. Let’s put this all into a very simple graph.

I have brought to you 4 different scenarios. I will explain one of these more in depth and leave the rest for you to read.

In the spread betting example above, You decide to go long Gold. You are currently at point A in time and Gold is trading at $1,710. You place £1 a point. You will immediately need to deposit £14 pounds, as the deposit factor is 14 * your stake. The value of your trade is £1 * 1710.
Now Gold moves up reaching 1750 and you decide to close your trade selling at 1750. Therefore you have made £1750 – £1710 = 40 points time £1 a point = £40 Profit.

The following example you also take out a long trade but the market moves against you, and instead you loose 40.

The next two examples. You decide to short the market, the first trade goes in your favour the second moves against you.

Short Selling – For those that are unsure what shorting is. The concept is easy but takes a bit of time to grasp. the question many people ask, how do I sell something that I dont own. Think of it this way, you start off by loaning the brokers gold assets. So you go into the market and you sell Gold (that is not yours). When you want to close your trade, you go back to the market and buy gold back and give it back to your broker that has leant you the asset. So I will guide you through the first example.

You decide to want to short Gold, (Hypothetically you borrow it the assets from IG) and you sell it in the market at 1750. Now you are currently at short Gold at point A at $1,750. You have deposited £14 pounds, in order to open the trade, as the deposit factor is 14 * your stake. The value of your trade is £1 * -1750.
Now Gold moves down reaching 1710 and you decide to buy it back and return it to IG. Therefore you close your trade buying it back at 1710. You have made -£1750 + £1710 = 40 points time £1 a point = £40 Profit.

As you can see above you can have 2 different outcomes in 4 different scenarios. Unless your stoploss is hit.

B) Spread Betting Example – calculating your risk.

Now let’s go one step further in trading this commodity product and apply this example to your style of trading or your spread betting strategy. My personal style of spread betting, is I risk just under 1/3 of a day’s movement and try capture about 2/3 to 1 full day’s movement.

Calculating your risk:

1) Know your risk: know how much money you want to risk in any given trade. This will determine the distance of your stop loss.

2) Know your reward: Know where you want to get out of the trade in Profit. This will be your profit taking area.

For this example, we have an account of 2000 GBP and we would like to risk a maximum of 3% and looking for a reward of 6-8%.

We will risk, 60 GBP and we are looking for a profit of 120 – 160 GBP

3) Calculate the average range in Gold.

Here I have attached the average 5 day range of the last two weeks:

As You can see from the average range 5 day range, gold would move on average about 20 USD from bottom to top in a day, before Wednesday. After Wednesday the average 5 day range increased to 37USD. This is because the range on the 29/03 was 105 USD movement in gold, and this has brought the average up. If, instead you look at the range on the 2/03, after the markets calmed down. You can see Gold returned to it’s average 20 USD range. Putting this into our Gold trading example. I would put a stoploss of maximum 6 USD, trying to capture at least 12 USD movement. In this case I am risking 60 GBP in a 6 USD movement, therefore my stake would be around 10 Pounds a point. Let’s look at this in Practical terms:

Practical Terms:

A simple strategy I use is a Price Action Spread betting strategy. I look for the recent peaks or troughs and trade in the direction of the trend with a stoploss respecting my Risk Ratio Reward of 1:2 or 1:3. Looking at the Gold commodity cart below, on the 1/03 Gold had reached a peak of 1724. This was the high of the previous day, and the trend had moved lower after Ben Bernanke’s speech. We now place an order to sell just below the recent high at 1724, with a stop loss at 1730 (6USD distance -respecting the 1/3 day’s movement, and to avoid false break outs of recent highs). Profit target would be recent supports of 1711 or 1706. These numbers fall perfectly within our risk calculations above.

Our stake is 10 GBP a point. This because as we stated earlier 60 GBP is the most we want to risk, our logical stoploss is 6 USD, therefore the stake would be 10 Pounds a point. 60 GBP / 6 points = 10 Pounds a point . If my logical stoploss tells me to place a wider stop, my stake would be smaller. In this Gold continued to trend lower and reached 1712 the target of 12 USD movement x 10 GBP a point = +120 GBP. If it had gone the other way it would have loss –60 GBP.

I hope this brief explanation has helped you understand how to spread bet gold, and applied practically.

For more spread betting strategies in Gold or spread betting example

Good News from Bernanke

There has been a lot of good news, as main indices top 2008 highs. Overnight we had China’s manufacturing PMI came in slightly better than expected at 51. Shows China’s manufacturing is growing.
In the Forex Market for those EURUSD spread betters, Technically, EUR/USD seems to have made a top after Bernanke’s speech. We might see a return to the downside. The Sterling is less clear, even though we saw BoE Weale ease on his Dovish stance. Over the next couple of days, we will see favour in the Dollar
Fed Chairman Ben Bernanke was less downbeat on the macroeconomic outlook. He highlighted that the pace of ‘the expansion has been uneven and modest by historical standard’, but he states growth in the coming quarters will likely be better than last year’s second quarter.
He also acknowledged the positive developments in the job market across all industries and acknowledged the decline in the unemployment rate over the past year. He did not hint to any QE3, as some were expecting.
In All in the US Manufacturing activities improved steadily throughout the nation. Nonfinancial services ‘remained stable or increased’. Consumer spending was ‘generally positive’ and sales in the near term seem to be ‘mostly optimistic’. The Job market had mixed signals but hiring increased slightly in various districts.

In Europe, Greek parliament approved the pension and health care spending cuts 213-58 votes. Papademos seems to be on target to meet most of the conditions the EU demanded in order to hand out the EUR 130b second bailout. EU finance ministers meet today in Brussels.Swiss GDP rose 0.1% qoq in Q4, above expectation of -0.1% qoq.
Happy Spread betting. Look through our examples for tips on various strategies

Spread betting News Tues Feb 28

Asian Market were up overnight as Crude retreats. Easing the possible threat of a global economy stricken. Copper was up 0.3% . Monday had a Rally after good US Data, Pending Home Sales came in much etter than expected at +1.9% (expected 1.1%) vs prev –1.9%. FTSE close down 19.58 points, or 0.3 percent at 5,915.55, after a late rally broke above 5900. Banks were down. Miners made a late rally. Banks are still in focus as the ECB to conduct a longer term refinancing operation on Wednesday. ECB expected to allot 500 billion. Greece’s debt concerns still remains an issue as S&P downgraded the country’s long-term ratings on Monday. Germany’s Bundestag lower house approved the 130 billion euros. On the other hand Portugal is likely to have a positive assessment for its economic reforms and cost-cutting efforts from the EU.

GLOBAL MARKETS-Asia shares edge up, ECB and oil in focus

* US STOCKS-Falling oil lifts Wall St to highest since 2008

* FOREX-Yen off lows as exporters buy in month-end trades

* TREASURIES-U.S. bonds supported by strong oil, ECB

* Gold hovers below $1,770; ECB funding to support