How many shares do you prefer to include into your portfolio?

[KiboR]

I used to own and trade shares but found betting on the index values themselves was much more reliable through lower volatility. I also found I disbelieve the diversity myth as told by salesmen.

How do you use it? As far as I can imagine you can't buy the index, you can buy the futures on the index and after that you just meet face to face to contango and must pay for it (contango is minus for buying and backwardation is a very big plus for selling). Is that right?

 

[tomorton]

How do you use it? As far as I can imagine you can't buy the index, you can buy the futures on the index and after that you just meet face to face to contango and must pay for it (contango is minus for buying and backwardation is a very big plus for selling). Is that right?

Yes but I'm in the UK and use spreadbetting to trade the index values themselves, long or short, with no time expiration necessary (though you can also spreadbet the futures). If I couldn't or didn't want to spreadbet, I could buy an index ETF which I hear is pretty much equivalent to buying all the shares in the index in the appropriate weighting, which not many sole traders can do. There are also negative ETF's available to buy I believe, so you would gain profit from a falling index.

 

[KiboR]

Yes but I'm in the UK and use spreadbetting to trade the index values themselves, long or short, with no time expiration necessary (though you can also spreadbet the futures).

What yearly yield is normal for you using this method including all the comissions?

 

[tomorton]

What yearly yield is normal for you using this method including all the comissions?

I hope it goes well for you. One thing I have found is that trade entry signals are less important than good trend set-ups. Once you see a decent trend is confirming, any old signal to get in is acceptable. The clear picture of the features you need to see in order for the trend to be a trend is vital: after that, just get in.

 

[KiboR]

The clear picture of the features you need to see in order for the trend to be a trend is vital: after that, just get in.

What do you do in the time of the bearish market? Are you closing long positions or averaging it?

 

[tomorton]

What do you do in the time of the bearish market? Are you closing long positions or averaging it?

I would close all equity longs and index longs as soon as the index turns bearish. No exceptions. Then short the index as soon as a downtrend confirms.

Actually, its more than possible I would run some equity shorts into a bear market as when the index is bullish, I would be long the index but also like to short downtrending member equities. This is reasonably low risk - the greatest risk to shorting an equity is if the market turns bullish - so, if the market is already bullish, that risk is eliminated. I would then run these "inherited" equity shorts until the equity or index stops falling, never hold them into a new uptrend - a rising market can sometimes cause indiscriminate buying, even of the cr@p at the bottom. Worth keeping in mind that if you're short on an equity in a bull market, picture what that stock is going to do when the market crashes.........

 

[KiboR]

Worth keeping in mind that if you're short on an equity in a bull market, picture what that stock is going to do when the market crashes.........

What do you like to use for short positions - ETFs only or derivatives? What method is cheaper and the most popular in the UK?

In real life we oftener use derivatives (futures) in Russia. ETF isn't popular. I like to use options more, but our MOEX almost hasn't liquidity and put-options, as an instrument for short, are very expensive for regular participants.

 

[tomorton]

What do you like to use for short positions - ETFs only or derivatives? What method is cheaper and the most popular in the UK?

In real life we oftener use derivatives (futures) in Russia. ETF isn't popular. I like to use options more, but our MOEX almost hasn't liquidity and put-options, as an instrument for short, are very expensive for regular participants.

I only ever trade via spreadbetting these days. Its cheap (not for long-term holdings over more than a few months) and tax-free (though almost no traders ever make enough profit to have to worry about tax).

SB is looked down on by most experienced and big traders - they use Contracts for Difference (CFD's) and/or they trade the forex market directly.