STOCK PICKING SOFTWARE

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Want to Beat the Market? Then Spread Your Bets – Financial Spread Betting   by Andy Richardson

GETTING STARTED WITH SHARE TRADING

At what scale?

How much money do you need to start buying shares?

Got £250?

Realistically you need, at the very least, a few hundred pounds. Say £250, to spend on buying shares in one chosen stock. With £1000 you could even kick off with a portfolio of four stocks – buying £250worth of shares in each.

There is no restriction on how few shares you can buy. (You could buy one single share if you wanted to – though the dealing costs involved would usually make it pointless).

Got only £100?

You could open a spreadbetting account with say £100, and bet in very small stakes. Some firms will let you stake as little as 1p per point (a point being a 1p move in the share price), which might sound a bit of a jokey thing to be doing but is actually a very good way of learning the technicalities ahead of
scaling up. Just set yourself the task of turning that £100 into £200 within say 3 months.

Check out this spreadbetting explanation site http://www.financial-spread-betting.com/

Got nothing?

You can take part in one of the many free-to-enter stockpicking competitions that the popular financial websites sometimes run. A few of them offer cash prizes. As a beginner you wouldn’t expect to win. But you could fluke it. And in the meantime it will help hone your selection skills.

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If you do turn out to be so good at sharedealing that you fancy the idea of doing it for a living, you are then looking for much bigger capital requirements of course. In simplistic calculation, the amount of capital you would need will depend on

(i) the performance level you have found yourself to be consistently capable of, and
(ii) the level of income you require.

If you are someone who can scrape along on £12,000 a year, and have found you can achieve a 35% pa net return on sharedealing, you would need a stake of about £35,000 – plus enough to tide you over till the gains are redeemable.

For £20k from the same performance you need £57k invested. Or £80k for £20k if you are achieving a 25% net return.

Start off with too little capital (as I did!) and you end up chasing riskier stuff to try and get greater returns, just to survive. From an idler’s perspective, the aim should be to achieve returns in excess of those needed to merely survive, so the capital base can be added to, and the percentage return needed can then be progressively lowered, reducing the amount of active effort and attention needed thereafter.

Achieving returns in excess of 15-20% pa in good years and bad does require some serious study, and some discipline. There is also an element of luck; but luck favours the prepared. Once you master the art of keeping your average loss smaller than your average win, you can get away with fewer than half your selections being right.

If your average win is more than 1.5 x your average loss size, you can make a profit from winning 4 times out of ten, and losing six times. This is a win ratio many fulltime traders are happy with. Get your average win up to 2x your average loss size and anything better than one win in three will put you ahead. Which gives you some useful leeway if your selection skills are not yet good.) Tight control of losses is a technique that can be learnt and implemented from the outset, whereas stock selection skills take longer to acquire. Most newcomers focus on selection techniques and lose money while doing so.

About the Author

More information is available at http://www.financial-spread-betting.com, a UK financial website which specialises in offering free guides and information on stockmarket products such as financial spread betting. The site introduces you to the workings, markets, and bets offered in financial spread betting.
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