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A new spread betting strategy
http://spreadbettingbeginner.com/Forum/viewtopic.php?f=6&t=27
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Author:  SB_Beginner [ Wed Nov 24, 2010 4:47 pm ]
Post subject:  A new spread betting strategy

I thought it might be fun if we try and develop a new spread betting strategy together. You can add whatever parameters to the strategy you like as long as they don't conflict with anyone else previous entries.

I'll start the strategy with,
Only buy when price is above 200 day EMA (Exponential moving average)
Only sell when price is below 200 day EMA

Ok who wants to add the next parameter?

Author:  edswifa [ Wed Nov 24, 2010 8:38 pm ]
Post subject:  Re: A new spread betting strategy

The 200 day ema should be pointing in the direction of your intended trade.
i.e up for a long trade and down for a short trade.

cheers
Andrew

Author:  offthelip [ Wed Nov 24, 2010 9:10 pm ]
Post subject:  Re: A new spread betting strategy

Only buy if the Volume and the price have decreased on two sucessive days
" Off the lip"

Author:  SB_Beginner [ Thu Nov 25, 2010 9:53 am ]
Post subject:  Re: A new spread betting strategy

Thanks to Andrew and Off the lip for the replies. Both good suggestions. I have to say I have no experience when it comes to volume so excuse me if I come across a little dense.

So we would buy if the volume and price have both decreased for two successive days. What would the volume have to do for a sell? I would assume we would say the price has increased for two successive days but would volume also increase? Sorry if it's a stupid question.

The overall aim for this forum topic is to be educational, I know I'll be learning something new since we will be using volume in the strategy.

Again thanks for the replies, It's appreciated as always.

Author:  SpreadBettingTrader [ Thu Nov 25, 2010 10:20 am ]
Post subject:  Re: A new spread betting strategy

What about only buying shares whose RSI(14) is in oversold territory <30.
This generally means there is potential for an upturn in price once selling stops.

Author:  SB_Beginner [ Thu Nov 25, 2010 10:58 am ]
Post subject:  Re: A new spread betting strategy

Ok this is good. Thanks to all for participating.

So we have,
Buy criteria:

Price > 200 day EMA
200 day EMA rising
RSI(14) < 30 (oversold)
Volume decreased for two successive days
Price decreased for two successive days

Sell criteria:
Price < 200 day EMA
200 day EMA declining
RSI(14) > 70 (overbought)
Volume increased for two successive days???
Price increased for two successive days


I've added the ??? to the sell criteria for volume as I'm not sure if this is correct. Maybe someone with more knowledge than me help me out here.

Author:  offthelip [ Thu Nov 25, 2010 11:24 am ]
Post subject:  Re: A new spread betting strategy

My intention for the condition was only for the buy side, I am not sure about the sell side, but if anything it should be volume DECREASING! the idea is that there is fading interest in the direction that the price is currently moving, e.g. when it moves down there are fewer sellers entering the market, any panic selling is over. This might well work for going up, so lets change the condition to just : Volume decreasing on two successive days for buying and selling

Author:  offthelip [ Thu Nov 25, 2010 11:29 am ]
Post subject:  Re: A new spread betting strategy

Are you planning to back test this strategy when it is finalised?? I ahve written a whole lot of back testing software, so if the conditions are reasonably easy to program, I am willing to run some back tests on the strategy!!

Author:  lotontech [ Thu Nov 25, 2010 1:55 pm ]
Post subject:  Re: A new spread betting strategy

I'm reluctant to participate directly as I already have a strategy defined in my book, but having devised that strategy (and others) I can make some constructive observations:

1) When you specify criteria for 'selling' you need to clarify whether you mean "close an existing long position" or "go short" or both.

2) A complete strategy requires more than just buying and selling criteria. How much will you stake (i.e. position sizing)? Will you increase (pyramid) or decrease your stakes according to some criteria? How will you know when the strategy is working, and not? Will you stick with it (or give up) if it draws down more than 50%? Will there be a limit on how many positions you will hold? What about risk:reward ratio, and stop placement (if any)?

I hope this is constructive, as too many "trading systems" are merely lists of buying and selling criteria with little or no attention paid to money- and risk- management.

Tony Loton (Position Trader)
www.lotontech.com/positiontrading

Author:  SB_Beginner [ Thu Nov 25, 2010 2:43 pm ]
Post subject:  Re: A new spread betting strategy

Thanks to Tony for joining the discussion, and thanks for the constructive feedback. I'll come back to that in a minute.

I want to go back a few steps to offthelips posts. So we would want volume to Decrease for both buying and selling. (Told you I was dense about volume, still we live and learn, hence the reason for this forum topic).

When we complete the strategy if you want to back test it feel free. I've not done much back testing myself so I may take a look at trying to do it as well. I would be interesting to compare results to see how well I did with my back testing. Anyway I think we are getting ahead of ourselves.

So we have,
Buy criteria:
Price > 200 day EMA
200 day EMA rising
RSI(14) < 30 (oversold)
Volume decreased for two successive days
Price decreased for two successive days

Sell criteria:
Price < 200 day EMA
200 day EMA declining
RSI(14) > 70 (overbought)
Volume Decreasing for two successive days???
Price increased for two successive days

Coming back to Tonys comments. I agree with all the points you make.

Basically if we use the What's required to develop a spread betting strategy? forum topic as a guide we need to consider:

• Setup
• Entry triggers
• Stop placement
• % of funds to risk
• Position size
• When to move stops
• When to exit the trade
• Length of the trade
• Trade parameters to log

At the moment I think we are just getting to grips with the setup for our trades. The rest will come after we are happy with the setup.


Thanks to everyone for participating, it's turning out to be an interesting exercise. Hopefully others will find it of some use.

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