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BETWEEN THE TRADING
FLOOR
AND THE
FINAL
SCORE...
How to get a job in the Spread Betting IndustrY Bright young things wanted to join some of the fastest growing companies in the City
issue 10 AUG 2011 ÂŁ3.95
Celebrity Traders: THE GADGET SHOW
The ESCALATING US DEBT PROBLEM
Stepping through a forex trend
CITY GUIDE: LAS VEGAS
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UK100
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AUDUSD
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THE OPEN | WELCOME
EDITOR’S LETTER EDITOR Alex Hammond
In the summertime, when the weather is… For months we’ve been promised better weather on the horizon, but with the sky still showing none of the brightness our favourite weather girls have been telling us about since May, things aren’t exactly looking promising. Oh well, it looks like we’ll have to put the U2 anthems (??) back in their box until a “beautiful day” does indeed decide to make an appearance. Definitely our loss. But for the majority of City dwellers the best thing about August annually is the chance to get away from it all for a couple of weeks, and this year looks set to be no different. Therefore we sincerely hope you’re reading this month’s issue of The Exchange in some far off land, laying lazily under a sweltering summer sun, idyllically lounging by a swimming pool with an ice cold cocktail in your hand. But if you’re not, we’ll try and brighten your day in our own inimitable way by giving you our highlights of the month ahead.
The best thing about August of course (before the letters come flying in, I know that for just as many people it’s the worst day of the year, let alone the month) is that the football season kicks off this month, meaning that a good proportion of men and women up and down the country now know what they’ll be doing every weekend from here until mid-May. Throw in some Rugby internationals and a great England v India test series and all of a sudden things really are picking up. We’ve got a game or two on our hands, and something to take our minds off the fact that we’re no longer getting regular visits from our big yellow friend. But if sport isn’t your thing, well then we’re straight out of suggestions. Lastminute.com? But hopefully you’ve already taken care of that and are indeed sitting comfortably, because this is where the issue begins. I hope you enjoy it.
ALEX HAMMOND EDITOR
4 | THE EXCHANGE | August 2011
ART DIRECTOR ALEJANDRO GUERRA-PALACIOS Writers & CONTRIBUTORS JOSHUA RAYMOND DECLAN FALLON KEN FISHER ALASTAIR McCAIG MARK SOUTHERN Peter Webb SIMON SMITH GREG MICHALOWSKI ATIF LATIF SVETOSLAV GEORGIEV JENNIFER VON STROHE VICTORIA POWER DIGITAL CONTENT & MARKETING ANDREW CAPEL Public Relations Mark Southern Polygon PR SOCIAL MEDIA MANAGER Simon wiltshire SUBSCRIPTIONS subscription@theexchangemagazine.com
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© 2011. The Magazine is published by The Exchange. All rights reserved. The publishers declare that any publication of any advertisement does not carry their endorsement or sponsorship of the advertiser or their products or services unless so indicated. Contributions are invited and, whether or not accepted, submissions will be returned only if accompanied by a stamped addressed envelope. No responsibility can be taken for drawings, photographs or literary contributions during transmission or while in the Managing Editor’s hands. Proof of receipt is no guarantee of appearance. In the absence of an agreement, the copyright of all contributions, literary, photographic or artistic belongs to the The Exchange. This publication (or any part thereof) may not be reproduced, transmitted or stored in print or electronic format (including, but not limited to, any online service, database or part of the internet), or in any other format in any media whatsoever, without the prior written permission of The Exchange. The Exchange accept no liability for the accuracy of the contents or any other opinions expressed herein.
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CONTENTS
28 20
contents
the open
the spread
FEATURED
the close
12 Ups & Downs 14 Book Club 16 Five good minutes with... 20 Celebrity Traders: The Gadget Show 24 Networking: eToro
28 Jobs
62
6 | THE EXCHANGE | August 2011
the long
38 The UK & The Euro 40 Eurozone Debt Crisis 42 Ken Fisher 44 The escalating US debt problem 46 Sports Spread Betting 48 Chart Wonk 50 Trading CFDs withiin a SIPP 52 Stepping through a Forex trend
56 City Guide: Las Vegas 60 Restaurants 62 Gin 66 City Guide: Baden Baden 68 Sweet Suite 70 Five Best
74 Flights 76 Who’s Who 80 Glossary 82 Killa Villa
TRADING THE EURO IS EASY? BULL .
Forex is tough. It takes skill to avoid being gored by the unpredictable. Can you handle volatility when it charges?
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Trading off-exchange foreign exchange on margin carries a high level of risk and is not suitable for all investors. Running of the Bulls, Pamplona, Spain
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Š Citigroup, Inc., 2011. All rights reserved. Citi, Citi and Arc Design and CitiFX Pro are trademarks and service marks of Citigroup Inc. and used and/or registered throughout the world. Trading foreign exchange involves a high degree of risk. CitiFX Pro offers trading on margin. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should ensure that you understand the risks and can withstand the losses and that you seek advice from your advisors as appropriate, please see www.citifxpro.com for further details. This information is directed only at persons in the UK who qualify as Professional Clients (as defined in the rules of the Financial Services Authority) and CitiFX Pro is only available to Professional Clients in the UK. Classification as a Professional Client may require an assessment of the person’s experience and knowledge (in rolling spot or similar instruments or markets). CitiFX Pro is a service offered to you by Citibank International plc which is authorized and regulated by the Financial Services Authority. Registered Office: Canada Square, Canary Wharf, London E14 5LB. VAT registration number GB 429 625 629. The main business of Citibank International plc is banking and securities business. It is entered on the FSA register under number 122342. * See www.citifxpro.com for details of our premium account pricing.
We are a global leader in FX trading Citi has a legacy of over 100 years in the FX markets. During this period, we have served leading corporations, hedge funds and other investors, banks and governments. CitiFX Pro is available to professional individual traders and small to mid-sized institutions. Trading with CitiFX Pro means you have a direct relationship with a leading FX brand, institutional grade research and commentary, special events with CitiFX strategists, tight spreads & more.
Tight spreads on 130+ currency pairs Trade 130+ currency pairs including major, minor and exotic pairs on tight spreads. CitiFX Pro offers 3 different pricing models depending on your needs and initial account opening size. Premium accounts trade from 1.2 pips on EURUSD and 2 pips in GBPUSD*.
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Trading foreign exchange involves a high degree of risk and losses can exceed your entire investment. CitiFX Pro is only available to persons in the UK who qualify as Professional Clients.
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LET’S GET GOING
OPEN THE
IN THE OPEN UPS AND DOWNS BOOK CLUB FIVE GOOD MINUTES WITH... CELEBRITY TRADER TRADING NETWORKS
Bulls & Bears on the Box
Bulls & Bears on the Box Trading’s first television network has arrived Bored of BBC 24? Tired of Sky News droning on about the latest public scandal or slapping you in the face with endless pictures of the Duke and Duchess of Cambridge? Well thankfully you can say goodbye to the humdrum of 24 hour rolling news, because now trading television is finally here. Launching later this month, TraderTV looks set to re-shape televised financial markets media, providing spread betting, forex and CFD traders with a channel dedicated to the industry.
Financial news updates, and FX, commodities, stocks and indices market round-ups from industry analysts will run on Trader TV daily, with The Exchange columnists including Alastair McCaig and Sandy Jadeja providing technical analysis and trading strategy guides. And with exclusive entertainment shows dedicated to trading also in the pipeline, it won’t be long before TraderTV’s unique programming is the must-see television for anyone with a spread betting account.
August 2011 | THE EXCHANGE | 11
THE OPEN | UPS AND DOWNS
UPS&DOWNS
From news stories to trading issues, a round-up of the things that have caught our eye this month
Send us your news, views, and unprintable gossip at: editor@theexchangemagazine.com
FSA launches trading ‘inducements’ investigation The Financial Services Authority launched an investigation last month into the practice of paying for trading order flow. The inquiry looks set to examine commonly accepted market practices including the bestexecution obligations governing the brokerage community and pricing models used by stock exchanges. The FSA watchdog, led by head honcho and Exchange Top 50 member Hector Sants, will determine whether paying for an order flow constitutes an inducement, creating a conflict of interest which may result in the end-investor getting a rough deal. Sants & Co. are also considering launching a consultation on the subject, which more often than not indicates a likely change to the existing rules.
Alpari puts pen to paper as latest summer signing for The Hammers Global FX giant Alpari has dipped another toe into sports marketing, with a three year sponsorship agreement with West Ham United being announced earlier this month. Already sponsors of the New York Knicks basketball team, the move is the first of kind for Alpari in the UK. Alpari’s alignment with one of England’s biggest football club is not the first move of its kind. Last year FxPro was the shirt sponsor of two Premier League clubs, Aston Villa and Fulham, and will again be the main sponsor of the Cottagers again for the 2011/2012 season.
12 | THE EXCHANGE | August 2011
Despite dropping out of the top flight on English football last season West Ham are set to up sticks and move home from Upton Park to the Olympic Stadium before the end of the agreement, so it looks as though Alpari have got themselves a great deal signing up to play with the Hammers. When asked about the motivation for creating the partnership David Stuart, COO of Alpari (UK), said, “Alpari (UK) and West Ham United share core values such as drive, commitment and passion for what we do. We are excited about this partnership.”
THE OPEN | UPS AND DOWNS
IG profits plummet due to Japan disaster Spread betting giants IG Group announced that annual profits have fallen heavily to just £7m in the twelve months leading up to 31st May, compared to profits of £140m made over the preceding year. Much of the blame for the slump in profits in being attributed to IG Group’s expansion into the Japanese trading market, IG purchased FXOnline Japan in 2008 for £118m but have seen little return from the investment. IG was forced to slash the value of its venture into the Japanese market after changes to Japanese trading regulations.
The maximum value of bets Japanese customers could make have been cut by half, causing a dramatic slump in revenue. Tim Howkins, chief executive of IG Group, said: “That’s a business where we’ve had quite considerable difficulties, really driven by a very unfriendly regulator who imposed restrictions which had a pretty severe impact on revenue.” Revenue across the entire IG Group over the period rose 7.3% to £320.4m, and profits adjusted after costs incurred through FXOnline Japan and the closure of Extrabet, IG’s sports division, were removed rose 3.4%.
CitiFX Pro claims Saxo Bank US Customers Citi Group added further clients to its foreign exchange division this month when it struck a deal to acquire Saxo Bank’s FX traders. Saxo clients that meet Citi’s eligibility and other standards will have the opportunity to opt into a seamless process which would enable a smooth transfer of their accounts to Citi. “We are pleased to reach this agreement with Saxo Bank,” said Kevin Wilson, Citi’s North American Head of Foreign Exchange Margin Trading. “CitiFX Pro will provide a familiar environment for Saxo clients, with similar front-end technology and the added benefit of trading on the MetaTrader 4 platform and spreads from 1.2 pips.” “After developing Saxo Bank as one of the larger foreign brokers offering FX in the U.S., we believe Citi is well positioned to service our U.S. clients going forward,” said Albert Maasland, Chairman of the Board of Saxo Bank London. “We believe Citi has the right technological capability and pricing to provide these clients the high level of service they have come to expect.” Citi is currently the only major U.S. bank offering margin foreign exchange trading for small to mid-sized institutions and high-end individual investors.
Big City Cook Off really starting to heat up Heston Blumenthal wannabes were put on alert last month, as D&D London announced that it had partnered up with the Lord Mayor’s Appeal to bring the Big City Cook Off to London. The competition, which kicks off in September, will run until November when the finalists will be set the task of cooking a gala fund raising dinner for 300 people at Floridita, Soho. Teams of three will be set challenges such as whipping up a three course dinner party on a frugal budget to whittle the entrants down to the finalists.
D&D chefs and restaurants involved in the competition include Mickael Weiss, head chef at Coq d’Argent, Allan Pickett, head chef at Plateau and Robin Gill, head chef at Sauterelle. All proceeds from the competition will go to charity. Each team must aim to raise a minimum of £5,000 for Coram, a charity dedicated to providing practical and emotional aid to vulnerable children and young people in London, and RedR UK, a charity that trains engineers and other relief workers to respond to worldwide emergencies.
August 2011 | THE EXCHANGE | 13
THE OPEN | BOOK CLUB
The Exchange Book Club The thinking trader’s answer to Oprah
Each month the Exchange takes you through the trading literature you’ll need to amass the ultimate spread betting library. This month: The Financial Spread Betting Handbook, 2nd Edition by Malcolm Pryor
Four years after the 1st edition hit our bookshelves, experienced financial analyst Malcolm Pryor returns with an updated 2nd edition of The Financial Spread Betting Handbook. It goes without saying that a number of things have changed throughout the spread betting world in those four years, including the number of firms offering spread betting services and the educational training that they provide, and the new edition has been revised to reflect these changes. The Financial Spread Betting Handbook 2nd Edition is structured to portray the journey to spread betting success like an ascent of a mountain; with the mission for traders being to reach the summit. The first step on the metaphorical climb is to establish a base camp; you then begin your journey up the mountain face, before finally attempting to reach the peak. Using this mountaineering model as a guide, Pryor splits the book into three distinct parts; the first looks at the various companies, software and types of trading available; the second outlines different strategies for trading, looking at trends, profit taking, re-entry and so on; and the third part is the attack on the summit itself, where Pryor examines the importance of spread betting psychology, how to keep in control through planning and analysis, and then how to develop your trading further. Part One – Base Camp As Pryor states in the introduction to the first part of the handbook, ‘getting to base camp means we will have the requisite background knowledge and resources to start spread betting.’ This includes knowing how to select an appropriate firm to trade with, choosing hardware resources and an understanding of the various spread betting products available on the market. This section provides all of that information and more. For newcomers it’s an ideal introduction to everything you need to know before you begin trading, and for the more experienced trader it serves as an excellent checklist for those topics you may have long since forgotten. Another chapter in this
14 | THE EXCHANGE | August 2011
section looks at ten common and very expensive errors that traders often make in spread betting. These are illustrated with case studies. Part Two – Climbing The Mountain Next comes the time for beginning the ascent up the mountain. This is where traders will have to put all the equipment and knowledge from the first section into practice. Pryor begins by looking at how to find a strategy that suits you, firstly by posing the question ‘What do you like?’ He looks at the length of bets, available time and resources, as well as your discipline and experience. It is very important to make sure you know where you stand on each of these and how your stance affects the way you trade. The rest of this section is dedicated to trends, and Pryor uses examples to explore the identification of trends, selecting bets, bet size, when to exit and re-enter, and so on. He then moves on to looking at betting on reversals, and finally betting in and out within a day. The final chapter in this section looks at more advanced spread betting techniques, for example arbitrage, pairs trading and hedging. Part Three – The Route To The Summit In Part Three the book examines how to match a particular strategy to the individual, including risk management concepts, performance reviews, psychology, how to develop a winning attitude and thoughts on continual development, in order that a losing spread bettor can become a winning one.
Many traders take months, or even years, to settle on a style of spread betting which enables them to produce consistent profits, and Pryor points out that each person is different and must find his own way of trading as it is actually very hard to successfully trade someone else’s system. He recommends looking at your own character – you need to adopt strategies and techniques which fit your character and preferences, whether that’s sticking to commodities or trading a wide range of stocks. Planning and staying in control are also key factors in the success of a spread bettor – as Pryor says, ‘It is generally easier to achieve something if you know what it is you are trying to achieve beforehand.’ To illustrate this the book features a couple of case studies, including a week in the life of successful spread bettor Robert, and this shows the effect plans can have on a trader’s actions over a week. In this revised 2nd edition readers benefit from refreshed and improved trading and risk management techniques incorporating four additional years of spread betting experience and changes in the markets, as well as brand new advice on managing exposure and updated analysis of spread betting firms’ behaviour, order types and other practical issues. As a result, The Financial Spread Betting Handbook, 2nd Edition is the essential guide to getting to the top of the spread betting mountain. You can get your copy at The Exchange Magazine bookshop for £15 www.harriman-house.com/FSBH_exchangemag About Malcolm Pryor: Malcolm Pryor is a member of the Society of Technical Analysts in the UK and has been designated a Certified Financial Technician by the International Federation of Technical Analysts. He is a director of a consultancy practice, and is an expert at several g ames, including bridge where he has held the rank of Grandmaster or higher since 1996.
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Risk Warning - The value of investments can go down as well as up. The past is not necessarily a guide to future performance and investing in shares could lose you all or part of your capital. The difference between the buy share price and the sell share price for smaller company shares can be significant. Profits from dealing in shares may be liable to tax - the level of tax and bases of relief from tax are subject to change. JPJShare.com offers an execution-only stockbroking service and does not offer any advice on the suitability of investments. If you are in any doubt about the suitability of a particular investment with regards to your individual circumstances, you should consult an independent financial adviser. JPJShare.com is a trading name of Rivington Street Stockbrokers Limited, an Isle of Man Company licensed by the Isle of Man Financial Supervision Commission and regulated in accordance with Manx Law. Registered Office: 18 Athol Street, Douglas, Isle of Man IM1 1JA. The rules made under the Financial Services and Markets Act (FSMA) for the protection of retail clients do not apply because the Isle of Man has its own system of regulation, to which Rivington Street Stockbrokers Limited is subject. Consequently, the Financial Services Compensation Scheme established under the FSMA is not available. This financial promotion has been approved for FSMA Section 21 purposes by Rivington Street Corporate Finance Limited which is authorised and regulated by the Financial Services Authority and is a wholly owned subsidiary of Rivington Street Holdings Plc. Full details of the Isle of Man’s regulatory system may be found at www.fsc.gov.im. The ISA manager for the JPJShare.com Self Select Stocks & Shares ISA is SMARTfund Administration Limited incorporated in England and Wales with company number 06016828 whose registered office is: 6th Floor, 6 Broad Street Place, London EC2M 7JH. SMARTfund Administration Limited is authorised and regulated by the Financial Services Authority.
THE OPEN | FIVE GOOD MINUTES
Five Good Minutes With… Sanjay Madgavkar, Global Head of Margin FX Trading at CitiFX Pro
What is the profile of the typical CitiFX Pro trader? Is it a platform for novice or experienced traders?
Are you happy with the growth in the CitiFX Pro market share since its launch in the UK earlier this year?
CitiFX Pro is a platform for experienced traders. Our typical client is a sophisticated FX trader - either an individual or a small institutional entity - who relies on Citi for liquidity, pricing and high-quality trading technology.
We are happy with the progress we are making in the UK. Our target market in the UK and the rest of Europe is the professional end of the market and we are making excellent headway in that specific segment.
What distinguishes CitiFX Pro from other forex trading platforms? Citi offers several features that set it apart from other trading platforms. We offer our clients outstanding liquidity and pricing which have a direct positive impact on their bottom line. Citi also offers its marketleading research and market commentary to its clients.
What is the relationship between CitiFX Pro and Citigroup and how does this benefit CitiFX Pro account holders? When U S clients deal with CitiFX Pro they transact with Citibank NA, New York which, of course is a regulated U S bank. By transacting with Citibank, they can feel confident they are transacting with an established global leader in foreign exchange. Clients in the UK deal with a UK FSA regulated Citibank group company called Citibank International.
Are there any restrictions on opening a CitiFX Pro account? CitiFX Pro accounts are meant for experienced clients who have the knowledge and experience to trade in the leveraged FX markets. They will need to answer some questions as a part of the application process to establish they meet the knowledge and financial capability requirements. This is important to ensure clients that are transacting FX meet our suitability requirements.
16 | THE EXCHANGE | August 2011
Can we expect any technological developments of the CitiFX Pro platform in the near future? We have exciting plans for our product over the next few months. We are going to offer our multi-contributor liquidity offering by early August. This will be offered via a state-of-theart API followed quickly by our market-leading trading platform in a few weeks thereafter. In terms of product breadth, we plan to offer precious metals and other products, such as forwards and options over the coming months.
Finally, what’s the best piece of advice you could give to an up and coming forex trader? The most important advice is to get experienced in the market while trading small sums - all of which he should be able to afford to lose. The trader should educate himself on Technicals and Fundamentals and most importantly in good risk management, so that his exposure to losses is always limited and controlled. The FX markets and the trading platforms offer excellent stoploss and limit order functionality and with 24 hour liquidity in most currencies, risk exposure can be managed well. Most importantly, clients should trade on modest leverage levels, which will ensure gains and losses are moderated.
“We offer our clients outstanding liquidity and pricing which have a direct positive impact on their bottom line”
Explore the New Look Central Markets
At Central Markets, we understand that listening to clients, and understanding their needs about the service we offer is important to us, but more important to our clients. Over the last three months we have changed the number of products you can trade and the number of platforms you can trade on, plus much more. What Central Markets can offer you:
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Register online for the latest of our free no obligation reports – Oil and Gas investment.
If you would like to learn more about what Central Markets can offer you and your trading, contact us now at newoffering@centralmarkets.co.uk
+44 (0) 207 265 7900 | www.centralmarkets.co.uk
Risk Warning: The value of investments can go down as well as up and you may not necessarily get back the amount you invested. Contracts for difference (cfds) and fx are leveraged products and carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary and only speculate with money you can afford to lose. Authorised and Regulated by the Financial Services Authority - No 473312
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the open | CELEBRITY TRADER
CELEBRITY TRADER Every month CityIndex and The Exchange present you with Celebrity Trader. We take an unsuspecting celebrity, take them to the trading floor, give them some money a little training and let them trade with all profits going to their chosen charity.
This month’s Celebrity Traders are Channel 5‘s Gadget Show presenters Ortis Deley and Pollyanna Woodward. The trading floor might be like reading binary for most untrained folk, but we’ve got a sneaky feeling these titans of technology won’t be crying into their iPads at the end of their stint in the markets
20 | THE EXCHANGE | August 2011
Ever since Channel 5 burst onto British screens back in the nineties, the new kid on the televisual block was crying out for a seminal programme to lodge itself firmly in the minds of fickle UK audiences. Many came, and some partially succeeded, but still the adjective of ‘iconic’ sat firmly in its box awaiting a suitable moment to be used. That is, until one fine day in 2004 when a seemingly rag-tag bunch of gadget-loving TV presenters appeared in front of bright sets reviewing the very best consumer technology available to buy. The Gadget Show was born and, in the (never knowingly undersold) words of techbehemoth Apple, this changed everything. Suddenly a bit of social nerdiness wasn’t just acceptable - geek-chic was the only way to be. It’s with this indepth tech knowledge that we were particularly excited about Gadget Show presenters Ortis Deley and Pollyanna Woodward, as they road tested trading on CityIndex’s exceptional iPhone/iPad app*. Could their desire to stay at the cutting edge of gadgetry be the missing ingredient that would propel them past runaway leader, Adam Boulton, at the top of the Celeb Trader leaderboard? We meet the bright and buzzy duo at the start of their trading adventure, and talk is, as you would expect, gadgety. Consumer tech is now everywhere we all agree, but what tech would they
be investing in now if she were playing the trading long-game? “Smartphones!” Pollyanna instantly replies. “Everyone wants one, lots of us already use one. They have become a dependable lifeline.” Talking tech with experts like these two is addictive; the enthusiasm is almost tangible. Pollyanna continues, “I for one feel completely lost without my smartphone, as I not only use it for the basic calls and texts, but it’s my diary, my email, my notes, my music player, my instant access to the internet, my maps and sat-nav all in one. These devices are only going to become more clever and intuitive to serve us even better, and every new iteration becomes even more desirable.” Does she see any end to the smartphone boom? “No, not when the kids growing up today are getting use to having devices that multitask like a smartphone, and will only expect and demand more from their smartphones in the future, which i’m sure will be delivered.” Talk about a sound investment pitch! As anyone who has witnessed the weekly Gadget Show challenges will testify, these presenters take no prisoners, and it was no surprise to see Ortis take the bull by the horns, and occupy positions in the two industries that he has extensive first-hand knowledge of. Originally sticking to the industry that set the tone for
THE OPEN| CELEBRITY TRADER
“Smartphones... Everyone wants one, lots of us already use one. They have become a dependable lifeline.”
August 2011 | THE EXCHANGE | 21
the open | CELEBRITY TRADER
TRADER’S VIEW Lee Curtis,
Sales Trader at City Index ORTIS: Going into this week, the UK market was at a low for the month of July as concern grew that the European debt crisis is on the precipice of derailing the economic recovery, with European banks in particular feeling the squeeze. This created some ideal buying opportunities which Ortis took full advantage of. Following the News Of The World controversies BSKYB had taken a tumble but analysts were still upbeat about the stock. Ortis added to his portfolio and bought in at 707, and returned a good profit on this trade. With the banks finding some ground Barclays, in the low two hundredths, seemed an attractive buy, having not dipped to these levels for two years. Ortis went long at 212 and saw immediate returns on the trade. On the back of the banks’ rebound, confidence began to filter back in to the FTSE 100, causing Ortis to buy in to the low area of the 5800-6000 range we’ve been seeing for a few months, at 5798. With these buys in place, he decided to keep them going in to the final day of the week, benefitting from the successive 4-day positive streak on the FTSE. His final profit at the end of his session as a Celebrity Trader was £1,236.28. POLLYANNA: Pollyanna took a more direct stance by focusing on two trades; energy heavyweight Conocophillips and the Euro/Dollar pair. She wanted to get long the oil and gas sector and therefore bought COP at 7595. She also felt that the split in the company in order focus on oil and gas production would help to act as a reward for shareholders and would’ve therefore attracted confidence. Pollyanna then sold the Euro against the US Dollar at 1.4345 as she believed the debt crisis plan would not be enough to save the Eurozone. Unfortunately neither of these trades worked, and her final loss was £239, although credit should go to her for the well thought out strategy that on another day could have seen big profits.
22 | THE EXCHANGE | August 2011
consumer tech from record players to iPods, the show’s resident music-tester went long on music retail group HMV. However, with the position hardly moving and only a limited period of time to claw his way up the Celebrity Trader leaderboard, this position was quickly closed as Ortis decided to chase bigger prizes the market had to offer. Sensing an opportunity to profit from the recent events at News Corp and the demise of The News of World, Ortis decided to buy BSkyB at 707p. The BSkyB share price collapsed from a high of 850p to below 700p after Rupert Murdoch announced that News Corporation would no longer be looking to acquire the television network, but with analysts confident that the shares would rebound quickly this looked like a good opportunity to start rolling in more significant profits. This instinct proved well-founded, with share prices rising immediately, and when Ortis closed the position he had manage to secure his first big returns of the month. Rolling with the trading momentum, the new Gordon Gekko of tech trading then applied a similar market approach to banking heavyweight Barclays. On realising that Barclays shares had touched their lowest value for nearly two years Ortis went long, hoping for a reaction from investors that would bring the price back up. He bought at 212p just after the share price had begun to recover, and closed the position after a steady upward trend, again leaving him with strong profits. With the banks now recovering after a somewhat inauspicious opening to the month confidence returned to the FTSE 100. Sensing the link between the two, Ortis reinvested some of the profits made in the FTSE 100 at 5798, lower than the range the index had been fluctuating between for a number of months. The index began trading upwards, rising steadily for four consecutive days. Ortis kept the position open until the end of time as the Celebrity Trader, raking in his highest profit from any single trade in his time in the markets. Meanwhile, fellow
Gadget guru Pollyanna also got to grips with the markets, determined to get one over on her presenting pal. Taking a different approach to Ortis’ jumping in and out of a variety of trades, Pollyanna elected to concentrate on just two trades. Thinking that a wise speculation would be to invest in the oil and gas sector - in many ways the very fuels fuelling the tech markets - she went long on Conocophillips at 7595. She also correctly predicted the Euro debt crisis and potentially imminent collapse of the Eurozone would have an adverse impact on the currency, selling the currency against the dollar. However, as the dollar is far from strong itself at the moment due to the fragility of the US economy, this worked against her trade. She sold the Euro at 1.4345, but was forced to eventually close out the trade for a loss. Her trade in Conocophillips also closed for a small loss. With a remarkable total profit of £1,236.28 from his initial starting account of £2,500, it was clearly Ortis who claimed the spoils this month. And with a profit percentage of 49%, the presenter-turned-supertrader fell just one step short of clawing his way to the top of the charts, but does currently hold the title of our second most profitable Celebrity Trader to date. There’s just time to find out Pollyanna’s views on why the current go-to tech giant Apple are so successful and worth anyone’s investment, “It’s the way they come up with the most in demand designs and goods time after time, and manage to market products like a designer label. People seem to strive to own them, although I don’t necessarily think the success is down to an individual, I think it’s a lot of cogs in one big machine.” And then they’re off again to get stuck into the latest batch of high tech wizardry we’ll all be wanting this summer. The Gadget Show returns on Channel 5 for its sixteenth series this August, with Ortis and Pollyanna testing HD video in Morocco, Jon road-testing fold-up bicycles in the home of crazy drivers, Rome, and Jason reporting back from this year’s E3 gaming conference. Frankly, we’re exhausted just watching them. * CityIndex’s iPhone and iPad app is available from the iTunes store.
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You and whose Army?
THE LONG| TRADING NETWORK
Trading for the Social Network Age
24 | THE EXCHANGE | August 2011
THE OPEN| TRADING NETWORK
Sure, you might have taken a sneak peak at your Facebook or Twitter in the midst of a particularly slow session on the markets once or twice, but that’s a far as a crossover between social networking and trading goes, right? Well no, actually, because there is one platform that’s taken many of the concepts you might find from said Facebook and combined them with a traditional trading mechanism. eToro, the world’s first social trading network, is revolutionising the way people trade. No longer is trading a solo pursuit against the markets, it’s now a team effort. The people are joining forces to take on the system. To learn more about this unique concept we caught up with Yoni Assia, founder & CEO of eToro, in order to better understand what may turn out to be the future of the trading world.
The great thing about online foreign exchange trading is that it democratises the financial markets. Once a field for professionals only, thanks to a new wave of online platforms the currency market and its inexhaustible opportunities have been opened up to anyone interested in financial investment. However, many beginner traders still find their first steps in the currency market challenging, and are even tempted to quit after a string of bad trades. After all, it takes time to acquire the knowledge and the discipline to trade responsibly and to achieve a consistent success rate. However, in the busy rat race of modern day life, most of the people that get involved in financial trading simply don’t have the time or the patience to educates themselves in this way. So what is a novice trader to do? Absorb the losses and try to slowly improve, or just give up the dream of a career as a financial trader? eToro’s groundbreaking OpenBook application makes sure that you don’t have to do either. The idea behind eToro OpenBook is that trading expertise can be shared. There is no reason for every trader to go through the same teething pains when they begin trading currency when there is a entire community of expert traders who have already paid their dues and know how to make consistent profits in the market. By connecting traders with each other, OpenBook unleashes the power of social networks onto the financial markets and enables users to trade more smartly together. It is a place of sharing ideas and collaboration, a giant lab of creative thinking about financial trading. Online social networks have already proven the effect they can have on the way people go about their daily lives, and OpenBook is set to make the same revolution in the way people trade financial instruments. The advantages that OpenBook brings to the inexperienced investor are enormous. Instead of fumbling alone in the darkness of the unknown trading terrain, novice traders can observe more experienced traders as a guide and follow them as they make their trading decisions. This means that they can learn and gain experience from watching experts make their moves in the market instead of learning the hard way - making mistakes that are often costly and completely avoidable. Through OpenBook traders can see live trading feeds of the entire eToro trading community, follow particular traders and even
copy trades automatically. With all due respect to the standard educational materials provided by online trading platforms such as books, tutorials and courses (all of which incidentally are also provided by eToro), nothing beats actual exposure to live trading in the markets. With OpenBook, novice traders are constantly exposed to unending flows of live trading activity, and they don’t need to risk any of their funds to gain this essential live trading experience because other traders are doing it for them. Better yet, they can start making profits by following successful traders and copying their moves before they even start the learning process. There is an obvious question that arises with OpenBook, and that is how can I know which traders to follow? This is a very important decision since as an inexperienced trader you don’t want to follow someone who doesn’t know what he or she is doing. Fortunately, OpenBook makes the choice rather easy. In the financial markets, a trader is only as good as his or her profits, which is why OpenBook provides live updated rankings of eToro’s top profiting traders. On the ranking page, you also have the option of choosing the period for which you want to see the top profiting traders (1 week, 1 month, 3 months, 6 months, 1 year), which gives you the option of either following rising stars, or alternatively seasoned veteran traders. The most profitable trader of the week may turn out to be very lucky, but not someone you’d want trust with your own funds. Another way of going about choosing which traders to follow is to have a look at eToro’s Market Leaders. This is a feature that gives FourSquare-style badges to users who out-trade their peers, with leaders elected by country and by trading instrument. For example, if you’re interested or more familiar with trading a particular instrument, for example EUR/USD, and you live in France, it would make sense to go to the Market Leaders page and find the top profiting EUR/USD traders from your area. This is a very effective method of finding traders who are compatible with your personal trading style, because you can automatically eliminate traders who trade instruments that you have no interest in trading. Why look through the profiles of traders who mainly trade indices when you only want to trade commodities? The added geographic categorization of eToro’s market leaders can help you overcome language barriers if you want to get in touch with the trader personally.
August 2011 | THE EXCHANGE | 25
THE LONG| TRADING NETWORK
You may also prefer to follow a trader who is a market leader when it comes to the currency of his/her own country - for instance a Swiss market leader who is leading the field in trading the CHF. Whichever your preferred method of top trader spotting is, you can always click on any trader’s user name to view their profile. This gives OpenBook users a better idea of each trader’s trading style and enables them to take a look at their statistics - the instruments they usually trade, the leverage they usually use, the success percentage of their trades, etc. By looking at a trader’s profile you can both determine whether or not this is a trader you want to follow and also learn about successful trading strategies. The personal trader profile is also the gateway to getting socially involved in the investment network. It is through the profile that you can view and comment on the trader’s trades, see who they’re following and who is following them, and add them to your friends list by choosing to follow or copy them. You can even start a discussion on the trader’s discussion wall where they can answer your questions, give you expert tips and advice, and generally share the wisdom they’ve gained from years of trading. Finally, if you see that following a certain trader’s position brings you consistent profits, you can choose to use OpenBook’s CopyTrader feature to copy their trades automatically. With CopyTrader you can set aside as much as 20% of your available funds to copying any one trader’s positions, whilst at the same time maintaining full control of your trades and full transparency. You will still have control of any copied trade, and you will be able to stop copying a trader’s positions at any time. This is the most radical revolution in currency trading, because instead of currency trading you can now people trade - i.e. build your own dream team of traders to trade for you. In one sense, through the CopyTrader feature, OpenBook users have the chance to instantly promote themselves to a managerial level position in which they no longer have to trade themselves, but spend their time managing their team of traders instead. Like any manager, the users can recruit traders, distribute responsibilities in the shape of the percentage of their balance they entrust to each trader, and even fire traders that don’t perform as well as they expect. Where else can you go from being a newbie to being the boss in a matter of seconds?
26 | THE EXCHANGE | August 2011
“instead of currency trading you can now people trade”
With so many features and options, the uses of OpenBook are virtually endless, and the greatest thing is that by coming together as an investment community, everybody wins! Novice traders get to use the knowledge of experts to their advantage and expert traders get rewarded for their followers with the soon to be launched Guru reward program. eToro OpenBook is a true revolution in financial trading and I am sure that we have not even yet seen the full potential that this one of a kind social trading network can achieve. To learn more about eToro OpenBook go to www.openbook.etoro.com.
By
Up to 50% bonus* on your first deposit! Promotional code: theexchange Contact an eToro representative at www.etoro.com for more information. * Limited to July, up to 1000£ The eToro trading platform is a product within International Capital Markets Pty Ltd (ABN 12 123 289 109, AFSL 335 692). Trading of contracts for differences, foreign exchange contracts, derivatives and other investment products which are leveraged, can carry a high level of risk, and may not be suitable for all investors. It is also important to note that past performance of financial products or investments is no assurance of future performance and it’s recommended that you seek independent professional advice. A Product Disclosure Statement (PDS) is available from our website www.etoro.com.au or by calling us on 1300 466 256 and should be considered before making any decision to deal in our products.
FEATURE | EMPLOYMENT
28 | THE EXCHANGE | August 2011
FEATURE | EMPLOYMENT
Talkin’ ‘bout the Revolution MOVE OVER TRADITIONAL CITY FIRMS, THERE ARE SOME NEW KIDS IN TOWN. FINANCIAL SPREAD BETTING IS NOW BIG BUSINESS, AS IS EMPLOYMENT IN ITS LARGEST COMPANIES. BUT JUST HOW DO YOU GO ABOUT GETTING A JOB IN SUCH A FAST MOVING INDUSTRY? WE ASKED JOSHUA RAYMOND OF CITY INDEX TO EXPLAIN HOW Spread Betting today is big business. Whilst spread betting companies invest millions of pounds each year in marketing their products to the wider public and acquiring new customers, one of the more unknown elements is not how to start trading with a spread betting firm, but how to join one. City Index was formed in 1983, with a starter team of just 10 personnel, mostly traders. Ten years later that figure grew to 30, and today we have grown to become City Index Group, a global firm with a multitude brands and products including spread betting, CFDs and margin foreign exchange, with around 500 employees worldwide. The growth of the Industry, has been a sharp and progressive one, particularly over the last decade or so with the enormous growth of the accessibility of the internet. As such, opportunities of employment in the industry have grown tremendously in what was previously a difficult and exclusive party to join. Today spread betting firms are always on the lookout for new talent that can help drive business forward and what’s more, the diversity of the typical jobs on offer is now incredibly varied. It’s important to remember that spread betting firms are every bit an internet company
“opportunities of employment in the industry have grown tremendously in what was previously a difficult party to join” these days as they are a trading company. Upwards of 75% of all trading volume is executed via the internet trading platform (ITP) and 20% via the mobile trading platform such as City Trading for iPhone, Android and Blackberry devices. This means that for every sales trader needed, there is an IT, mobile developer, app developer, client service, digital marketer needed also. So regardless of your skills background, there are plenty of opportunities to join the industry. So how does one join? The first thing I would recommend is that you know the products inside out. All employees at City Index, regardless of whether they work in IT, Marketing, Sales or Trading, are required to
know how the products themselves work, and what are the advantages, disadvantages, risks and similar properties of trading. The reason for this is simple enough, if you know why we are here, you will be able to do your job much more effectively. Therefore, for anyone seriously thinking about joining our industry I would strongly recommend getting to grips with the products and platform as soon as you can, regardless of whether you expect to be asked product related questions at the interview stage, though I know we do! There are a number of resources available to help you to do this too. At City Index we have a wide library of webinars, seminars and education material on www.cityindex.co.uk, along with our own education and market analysis portal. I would also recommend opening up a demo trading account and start spread betting. As it’s a demo account, it’s absolutely no risk to real cash and what’s more, most traders always say the best learning’s they have ever experienced has been in a live trading environment. There are consistent opportunities to join us throughout the year depending on your experience and role preferences. We have an annual 10 week summer internship and full
August 2011 | THE EXCHANGE | 29
FEATURE | EMPLOYMENT
time graduate programmes, but be aware, both are hugely oversubscribed and very competitive. Our summer internship programme is available for 15 successful undergraduate or graduate applicants. The 10 week programme gives you an opportunity to take part in a rotational scheme based around you area of interest. You will discover all about our business, gains hands on experience and learn to deliver the level of service our customers expect. Positions in divisions such as client management, Sales, Marketing, Risk and Finance are available and for those interns that impress during the 10 week programme, they will be invited to apply for a graduate entry position at City Index Group. Each graduate role includes a tailored personal development plan, study assistance towards professional qualifications, the support of a mentor and excellent salary and benefits (which includes pension contributions, private healthcare and gym membership). However, be warned that both programmes are heavily oversubscribed. This year, we have over 2,000 applicants for just 15 placements within our summer internship programme, so make sure your application stands out!
30 | THE EXCHANGE | August 2011
Throughout the year we are also always looking for talent to join us. We do this mostly through recruitment agencies but do also post all positions available on our website. So what type of candidates do we look for? Well this very much depends on which department you want to join. Below are just some descriptions of the typical attributes we would look for in certain roles. • Sales Trader: Our sales traders need to be confident, extremely strong mathematically, personable, and able to think under immense pressure. They also need to be emotionally robust to some degree, given that sales traders will be the front line to clients when markets are going for or against them. When markets are moving fast against you, some of our clients can be, understandably, hot blooded on the phone, and our sales traders must be able to provide best execution at all times. • Market Makers: Market makers tend to be a completely different breed to that of sales traders. They are risk conscious, using their strong analytical skills as well as strong mathematics to judge how price moves affects the companies risk instantly and can translate
that change into trades to nullify that risk. • Sales: Sales staff, as you would imagine, need to have strong personalities and personable skills, able to talk confidently with prospective clients on the phone and in person. They also need to be great listeners, as a big part of their role is to help educate our prospective and new clients base. As such, they need to have patience and ability to listen to client needs. • IT: Most IT recruits would need to have very specific attributes that are unlikely to have a strong a crossover as other areas of the business. For example, a mobile developer will need to have a very specific set of mobile application skills, whilst an IT support role, would need to have a wide range of technical skills to help support both internal staff systems and client platforms. • Marketing: Roles across the marketing department vary from social media and digital experts to brand managers and e-communications. As such a typical skills set will also be quite varied. You can find out more about a career at City Index by going to the careers section of our website at www.cityindex.co.uk/careers.
FEATURE | EMPLOYMENT
Taking the plunge Ready to take the next step on the road to becoming a full time trader? Make sure you know the pitfalls of the stay-at-home pro
Sure, all traders enter the markets with the intention of making, not losing money. However, there is a clear distinction between the part-time trader and the professional that extends beyond the number of hours trading, because when your livelihood is dependent on the success of your trades it is even more important to be mentally prepared for the daily battle with profit and loss margins. The transition to becoming a full time trader, especially for professionals coming from the corporate world and are new to selfemployment, is often a tougher road to travel than many expect. And what’s worse, it can have a very real impact on your trading profitability. So with that in mind, we break down some of the biggest stumbling blocks preventing new home-trader pros fulfilling their profit-making potential.
32 | THE EXCHANGE | August 2011
Keeping your two home lives separate
The first problem many pros find difficult to overcome when they first take to full time stayat-home trading is just that, the workplace is in their own home. The invisible divide between the trader’s office and his castle is often difficult to define, or doesn’t exist at all. Throw into the mix the fact that the ones you love might be occupying the same space that you’re trying to work in and it’s even easier to appreciate the fact that things can get a difficult working in the midst of the environment you also live the rest of your life in. The key to long successful trading sessions at home is to create a barrier between your new office and your home, and preferably a physical one at that. Trading at your kitchen table won’t optimise your performance, make sure you have
a room in your house where you only trade. Not only will this help you “get in the zone” as whenever you go in there you’ll know it will be strictly for business, but it will also detract from the number of potential distractions around you, including the occasional rigmarole of family life. Put in the hours
If you’re planning on turning your hand to becoming a full-time trader then be prepared to put the hours in, because if you under-estimate the workload required to be successful then you’ll never reach anything close to your full potential. Much like any other self-employed profession, research, market analysis and application all take time and dedication. Whilst being a full time trader might not mean
FEATURE | EMPLOYMENT
confining yourself to solitude for fourteen hours a day, three hundred and sixty five days a year, it is a career choice you will have to commit to. Your family will also have to accept that the increase in the amount of time you’re spending at home isn’t an increase in the time you can necessarily spend with them. Money Management
Money management and discipline are two of the most important concepts of being a profitable trader at any time, but are even more crucial when trading is your sole source of income. To be able to become a full-time trader, a move that will completely alter your lifestyle, you have to guarantee that you’ll be able to maintain a steady stream of profits, something that you don’t necessarily need to accomplish when only trading as a supplement
to another job. The most important thing to remember is to maintain the balance between keeping a healthy trading account and taking profits. Whilst it’s always tempting to take whatever profits you make immediately it is often more prudent to reinvest gains into successive trades, as this will enable you to be more profitable in the long run. If you manage your money correctly you can both reap a substantial income from trading whilst simultaneously increasing the size and frequency of your trades, which will lead to a growth in income in the medium term. Realistic Expectations
Similar to money management, having realistic expectations as to what to expect from your trading performance has to be a priority for
the new professional trader. To determine how much monthly profit you wish to make, and then trade attempt to chase this figure will more often than not result in rushing into inadvisable, poorly researched or overambitious trades. Again, it is important is to be in the mindset of treating trading as a business, rather than a financial hobby. If you take the attitude that you can “get rich quick”, you’ll find yourself taking large positions and exposing yourself to losses you couldn’t recover from (again, this is connected to good trading account management). Taking a more systemic approach to making profitable trades, which may result in initially banking less as a monthly salary than you were being paid before, but will result in growing your new business far more successfully in the long term.
August 2011 | THE EXCHANGE | 33
FEATURE | EMPLOYMENT
Getting in and getting on Opening the doors to a professional trading career
34 | THE EXCHANGE | August 2011
FEATURE | EMPLOYMENT
Many dream of an exciting career in the City as a trader, but not many actually pursue their dream, mainly because they fall at the first hurdle – they don’t know how to get started. We spoke to Schneider Trading Associates to find out how budding traders can kick start their career and make the grade through a sponsored Professional Trader Programme.
“the course being offered by the London based trading and brokerage house is aimed at those who want to pursue a serious career in trading”
The old adage goes, ‘nothing in this life is free’. However, contrary to this, the Professional Trader Programme – a comprehensive four week training course offered by Schneider Trading Associates (STA) - is sponsored and so there is no cost to attendees. STA offers potential traders the opportunity to attend the fully funded course and, provided they successfully complete it, guarantee a role as a self-employed trader at this well respected and established trading house once the course is finished. STA’s Professional Trader Programme (PTP), assumes no prior knowledge of the industry, instead it does give candidates the opportunity to become a real trader and experience the excitement of the trading floor straight off the bat. The intensive course combines theory, psychological assessment and hands-on practical skills, using STA’s state-of-the-art markets simulator and training facility in London; course attendees can get a true feel for a career as a trader using the same systems as STA’s experienced traders, whilst learning how to trade short term interest rates, government bonds, and commodities. In short, the course being offered by the London based trading and brokerage house is aimed at those who want to pursue a serious career in trading, who also welcome a challenge and enjoy a fast paced environment where they need to be on their toes and quick witted. With recent figures revealed by the Higher Education Statistics Agency that 20,000 graduates failed to find work after leaving university (9%) and thousands more took jobs in ‘elementary’ positions, it is clear that opportunities for graduates are limited. For graduates with an interest in trading, STA offers a realistic opportunity to forge a career with potential for great rewards. However, graduates are not the only ones who can benefit from this course. Matt Silvester, Head of Training at STA says “Although graduates are more likely to be in position to join our training programme after
three years of university, it is not exclusively aimed at them. We accept candidates from all walks of life including those looking for a career change. Indeed, many trainees from various backgrounds of different ages have gone on to become extremely successful traders after completing the programme. The key personality traits are that they need to have the right attitude, aptitude and desire to be successful, regardless of background.” Although there are no guarantees that candidates will successfully complete the four week programme, and traders who do make the grade work on a self-employed basis, STA is offering a professional and fully supported environment for the right people to shine and develop their career. With regular courses taking place throughout the year, STA is actively seeking the next wave of candidates for the PTP course. Silvester added: “Whilst there are various training courses available for potential traders, like with any industry, the standard varies dramatically. We can genuinely state that STA’s programme is fully funded and professionally run to ensure those who want to succeed as a trader can do so. STA is an established trading and brokerage house and this programme has been running for over 12 years; it is in our interest that candidates are successful and become professional traders so we help them every step of the way.’ Another saying states ‘if it seems too good to be true, it probably is’, but with this PTP course the opportunity is there for the taking with no hidden catches. Those with a genuine desire to become a trader should not pass this up. Applications for the fully sponsored Professional Trader Programme at STA can be made by sending a CV with covering letter to training@schneidertrading.com. Or for further information visit www.schneidertrading. com and follow the team at www.facebook. com/schneidertrading and www.twitter.com/ schneidertrader.
August 2011 | THE EXCHANGE | 35
Our trades.Your advantage.
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Real thinking - Real trading
THE THINKING PAGES
LONG THE
IN THE LONG GREG MICHALOWSKI ATIF LATIF ALASTAIR MCCAIG KEN FISHER
DECLAN FALLON PETER WEBB SVETOSLAV GEORGIEV DECLAN FALLON
IG questions FSCS spread betting levy IG group has hit back at an unforeseen levy it was compelled to pay as compensation to investors stung by the collapse of Keydata, the structured product provider. The spread betting company has been forced to foot the bill to the tune of £4m as its share of a £326m levy doled out by the Financial Services Compensation Scheme to fund claims from customers of defaulting investment firms.
Keydata went into administration, causing 30,000 investors to lose out in 2009. After a levy of £326m was settled to remedy claims by investors, the majority was pass on by the FSCS to fund managers, including IG Group. IG has asked the FSCS to be more transparent, and also called on the FSA to clarify why companies who act only as a broker should be treated in the same way as investment firms who act as an agent and gives the client advice.
August 2011 | THE EXCHANGE | 37
THE LONG | ANALYSIS
By Simon Smith, Chief Economist - FxPro
38 | THE EXCHANGE | August 2011
THE LONG | ANALYSIS
One of the major, but also largely forgotten, impacts on the UK of the crisis in the Eurozone has been to completely kill off the debate of whether the UK should join the single currency, from which it currently has maintained an opt-out. It’s also served to quite categorically answer the question of whether the UK would have been better off in the Eurozone. The debate should remain dormant at least until the next election (likely in 2015). Beyond then, the UK will face a very different choice to the one that it faced in the early years of the single currency. Back in those early days, Britain worked hard to justify not joining the Euro. In the initial years of the Labour government, the then Chancellor (Gordon Brown) tried to make the issue less subjective via the introduction of five so-called ‘economic’ tests, designed to justify the decision more on economic rather than political grounds. The UK’s relationship with Europe also dominated the political agenda to a disproportionate degree, to the detriment of other equally pressing issues. Nevertheless, the UK was a standout in terms of its economic and financial model which did not make it a natural shoe-in to the single currency. Debt financing has always been of a longer duration than many other countries, with the average maturity of UK debt around twice that of the eurozone. Furthermore, there was a stronger reliance on the financial sector and greater proportion of home ownership. Ahead of the crisis (things are different now), the UK also had a tradition of being a lower-tax economy, total receipts as a proportion of GDP being some 6% below the eurozone average in the early part of the last decade. That gap has since halved. That the UK was better served being out of the Eurozone during the first phase of the financial crisis is of little doubt. Certainly the economy would most likely have been larger as a result of being in the Eurozone (thanks to lower interest rates across the maturity spectrum) but, at the same time, the fall would have been that much harder. Being out of the Eurozone meant that the Bank of England was able to respond quicker to ease monetary policy elsewhere, whilst at the same time also have the ability to undertake quantitative easing.
“the UK will face a very different choice to the one that it faced in the early years of the single currency” Furthermore, the Bank was able to lower the interest rate during early 2008, albeit from a higher initial level than the ECB’s rate. Finally, although it has not led to the desired sustained shift to net export growth, sterling’s twenty-five percent depreciation between 2007 and 2009 no doubt softened the blow to the economy to a certain extent. In this situation, it is doubtful that the UK would have been able to maintain its triple-A status credit rating on its sovereign debt. But could the question of UK membership of the Eurozone return to the UK political agenda? The answer is not in the next eight to ten years at the very minimum. For starters, even though EU leaders will not accept it, the sustainability of the single currency is currently being questioned. What this means is that no country will contemplate joining a monetary union when the shape and form of that union in the short and medium term is far from certain. This applies not only to the UK, but to
the other EU members which have yet to join (Poland, Hungary and Sweden being the most notable countries). There are two broad scenarios for the eventual direction of the single currency from here. The first would be one that would result in much more of a fiscal and political union. Despite various attempts, both have been fiercely resisted by nation states in the belief that the checks and balances within the Eurozone (the main one being the Stability and Growth pact) were sufficient. They have been shown to be severely lacking and, to date, the proposals for reform (such as automatic sanctions) have been weak at best. The question is whether government - and by design their electorates - are ready to accept this. To a degree we already have it, given that Germany is lending money in various ways to peripheral nations at rates of interest that are far below market rates. In effect, this is a soft fiscal transfer but has already met with stiff resistance from the German electorate. The alternative scenario is a fracture of the Eurozone, into perhaps a ‘hard’ and ‘soft’ Euro, the former taking in the core, the latter the periphery. If the UK was ever to contemplate joining the single currency, this is the only likely scenario under which it would do so. The primary reason is that if the Eurozone were to go down the path of fiscal and (to a degree) political union, it’s inconceivable that any British political partly would agree to this. Electorally, it would be a disaster. A smaller but ‘harder’ Euro, whilst still requiring some degree of fiscal coordination, could operate more along the lines of the current eurozone, with less need for reforms aimed at the periphery. This leads me to the conclusion that the UK is more likely to join the single currency if we see a partial break-up of the Eurozone. The reforms required to make the current Eurozone viable would prove just too unpalatable for the UK electorate. The debate around whether to join, whilst dead for now, will no doubt be just as divisive when it does return. What is more certain is that, when it does resurface, we’ll be talking about a very different single currency than the one we see now and this in itself will ensure that the sterling stays around for the coming decade at least.
August 2011 | THE EXCHANGE | 39
THE LONG| ANALYSIS
40 | THE EXCHANGE | August 2011
THE LONG | ANALYSIS
How long can you kick a can down the road…….before you get run over by a bus? The continued fallout and tribulations of the Eurozone debt crisis, by Alastair McCaig, WorldSpreads
Greece is still part of the European
Monitory Union (just), the potential disaster has been averted and the markets have been allowed to return to on their merry way. At least that’s what the European finance ministers hope you believe, but for how much longer will we all agree not to state the obvious facts about this Greek Tragedy? Greece was a country that did not pay its taxes when the bills were relatively small, and they did not have an infrastructure in place that enabled their government to chase those who had not paid. As an indication of this, according to tax returns from 2009, less than 15% of Greek doctors earned over €25,000 in that year. Either Greece has some of the poorest paid doctors in the Western world, or this fact highlights the nations acceptance of wide spread tax avoidance. Now we are being asked to believe that, after an extended period of arm twisting by the EU’s finance ministers, the Greek Finance Ministry will be able to not just collect all those taxes that they should have been collecting but also the huge increases that were required to be agreed to in order to tackle the deficit. With the new austerity measures that have been agreed, the average family of four will face a tax increase of almost €2,800 a year. I feel sorry for the 85% of Greek doctors who earn less than €25,000 a year as that is a tax increase of more than 10% of annual earnings. It is unrealistic to expect the budget deficit to be tackled through tax collection alone, as unemployment levels have been increasing over the last couple of years, effectively reducing the number of people eligible to pay taxes. So the other half of the equation is asset stripping the country and selling off the family
“how much longer will we all agree not to state the obvious facts about this Greek Tragedy?”
heirlooms. These will attract considerable interest from Asian investors who will be eager to obtain key Greek infrastructure. The likes of ports, airports, rail lines and transport infrastructure would all be assets that investors would be willing to bid for. The problem with asset stripping the country is that thousands of Greeks have already shown their willingness to demonstrate, and further action that would affect the population for generations to come would surely be highly unpopular and increase the unrest of the already unhappy residents. Greece, of course, is not the only country in Europe that has failed to balance the books by spending considerably more than it has collected. The contagion from this has already spread to Ireland and Portugal, and European Finance ministers have been working hard to try and avoid others from joining the list. One of the best ways of gauging how likely a country is to default is by looking at the bond market and the levels that sovereign debt is yielding at. Over the last 4 months Italian five year debt has risen from 3.84% to over 5.43%, Spanish five year debt has risen from 4.28%
to 5.58%. Although both of these levels are less than ideal they should be manageable, but with European interest base rates at 1.5% it’s certainly a healthy premium that they both have to pay. Given both the comments and the actions that we have seen from the European Central Bank, it is likely that we will see an increase in ECB interest rates over the coming months. This action will be taken in order to help the major European export led countries such as Germany and France who are currently feeling inflationary effects not just from the likes of Oil, Gas and Crop price increases but also from high employment levels coupled with a buoyant job market. With high employment levels salaries will creep higher, leading to an increase in expendable income and an increase in the cost of goods. The longer the negativity towards the Euro currency lasts, the better it is for the export driven economies of the European Union. With the Euro being weak it will indirectly increase the buying power of all those countries outside the Euro zone, meaning buying something like a new BMW will be cheaper for your average Asian business man. So what will be the catalyst that causes this house of cards to fall? We are all aware that the European finance ministers will be meeting three months after the last bailout package was agreed for Greece and the chances of the Greek government meeting all of their commitments that would entitle them to be given the next tranche of bailout money is unlikely. However, the markets will be given three months to absorb this information and will not be surprised when they fail. This will give the other European Finance ministers time to come up with an alternative plan, so Spain and Italy are the two to watch out for.
August 2011 | THE EXCHANGE | 41
THE LONG | KEN FISHER
KEN
FISHER
What Slow Recovery?
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THE LONG | KEN FISHER
The Exchange columnist Ken Fisher fills us in on economic events from the other side of the Atlantic. This month he looks at the continued concern at the rate of the US economic recovery, and wonders what all the fuss is about. Media headlines everywhere bemoan the current “slow pace” of the economic recovery. They complain that we’re currently in the midst of one of the slowest salvage jobs in history, too slow in fact to provide the economy with any momentum. Yet at the same time these pundits are being forced to scratch their heads over the big corporate profits and huge stock market returns received since the March 2009 market bottom—to them, that reality just doesn’t square with what they see as the slowest recovery since 1930. And it shouldn’t, because this is not the slowest recovery ever, or even the slowest since 1930. Firstly, let’s note that we’re no longer in recovery, we’re in a period of expansion. US, Global, and Emerging Market GDPs are all at all-time highs—the overall developed world is only a fraction below this, and will hit all-time highs this quarter if not next. Further, the current US expansion is exactly in line with both the post-2001 and 1991 recoveries in terms of GDP growth. Neither 2001 or 1991 were remembered as deplorably sluggish, and the 1991 recovery kicked-started a near-decade long, historic period of global economic growth. Remember, too, thanks to fast-growing Emerging Markets, the whole world grows faster than the US and UK. This is a fine, normal expansion, overall. True, US Q1 GDP growth was 1.9%— slower than Q4 2010’s 3.1% growth. But a slower rate is still growth. What’s more, UK growth since 2009 has been slower overall than in the US. But in a normal expansion growth rate volatility is normal. In an otherwise terrific decade, US GDP quarterly growth (annualised) fell from 4.5% in Q4 of 1994 to 1.0% in Q1 of 1995 and 0.9% in Q2. But it didn’t spell disaster—growth reaccelerated to 3.4% in Q3 and 2.8% in Q4 the same year. Grow rate volatility is normal. In 1986 (during another overall strong decade) quarterly GDP growth was 3.9%, 1.6%, 3.9%, then 1.9%—faster, slower, faster, slower—then strong in 1987.
GDP growth is volatile in the UK too. Q2 growth in 1988 dipped to 1.9% from 6.8% in Q1. Recession didn’t follow—Q3 growth was 5.7%. The UK growth, like the US and most of the world, slowed in the mid-1990s—GDP growth fell from 3.0% in Q4 of 1994 to 1.4% in Q1 1995, then reaccelerated. Much of the angst over current economic growth rates is tied to higher unemployment— still a historically high 9.2% in the US. But it is normal for unemployment to stay elevated well into an expansion—as it has after every recession. Growth creates jobs, but always at a lag. Jobs don’t create growth. No CEO
“US Q1 GDP growth was 1.9%—slower than Q4 2010’s 3.1% growth. But a slower rate is still growth.” wants to ramp up employment numbers until they’re confident sales have recovered and then accelerated—that takes time. Also, the current pace of US job creation is just slightly behind the trend after 1991’s recession, and actually ahead of 2001. In the latter crisis, payrolls actually fell two successive years following the economic bottom. Still, that lackluster job creation wasn’t a harbinger of what followed (full employment in later years and fine economic growth). Unemployment is a symptom of past economic problems—it’s not indicative of future economic or market direction. And in any case, there’s no “right” economic
growth pace. Though we can maybe forgive people for thinking there is, as for the last three years politicians have endlessly babbled on about how we must do something to “save” the economy. Politicians have a very real incentive to keep harping on how bad the economy is now. The out-of-power party is trying to persuade the electorate to throw the government out, and the in-power side doesn’t want to seem out of touch by saying the global economy is fine (even though it might be). Make no mistake: there are things governments could do to make the economies riper for growth, including actual deregulation, the passing of more free-trade agreements and simplifying and reducing taxes. However, it’s not so easy as to say that by cutting taxes by X% GDP will be boosted Y% in Q3, and that jobs will boom because GDP growth is higher. Rather, such things create a world where private businesses have more latitude, freedom, capital and incentives to expand. Whether they do is their business, though, and not a government policy call. The most important thing is always to think globally first. The British always think Britain first, and Americans do the same with America—but this is wrong. The whole global economic picture matters more than its component national parts. The world is projected to grow 4.3% this year, and 4.5% in 2012—helped out by fast growing Emerging Markets which are currently growing at double the rates of the developed world. What’s more, US and UK firms derive a huge amount of their profits from activities abroad—faster growth in developing economies is good for the developed world. Also, if the world wants to go one way, it’s very hard for the US and the UK to go a different direction. The current pace of global growth is fine, and normal. As long as this expansion continues, there will be periods of faster and slower growth, but that has always been true, and always will be.
August 2011 | THE EXCHANGE | 43
THE LONG| ANALYSIS
Financing a confidence crisis
The impact of a continued US debt problem, by Svetoslav Georgiev, Hantec Markets The high level and consistent growth of U.S. government debt inevitably attracts more attention, making it a cause for concern. The topic of possible U.S. debt default appears increasingly frequently in academic and business publications. What could the economic and financial implications of this debt be globally and within the U.S. is a question that intrigues many. Despite unchallenged safety and seemingly unlimited access to credit, the U.S. government debt financing at low cost is largely dependent on investors’ expectations. The U.S. public debt has increased from 36% of GDP in 2007 to a critical 62% of GDP at the end of 2010. Historically, the U.S. public debt stood at such high levels only in the years of World War II. This poses the question: what debt level is sustainable? The U.S. has the privilege of borrowing at low interest rates on international markets due to the unchallenged perceived safety of U.S. bonds. However, rational investors continuously evaluate the
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debt level to establish if excessive borrowing may lead to solvency problems or if an inflationary route becomes appealing to keep debt at sustainable levels. Studies have shown (Reinhart & Rogoff, 2010) that a debt to GDP ratio of over 90% is generally associated with low growth environment and a value of over 60% is critical. A low growth, especially for an extended period of time, will challenge any “safe debt” status, as the debt to GDP ratio continues to deteriorate and solvency problems deepen to reach a point where spending cuts or higher taxation are necessary to maintain the balance. The US debt financing model relies on the unique status of U.S. debt, where perceived safety goes further and allows issue of unbacked debt. Thus, the U.S. government can borrow at rates lower than superior private borrowers. The access to virtually unlimited credit at cost advantage provides numerous social benefits. One of these benefits is the intergenerational wealth smoothing that allows current
investment based on promised future repayment. However, unlimited debt is unsustainable. Some fundamental factors such as budgetary limitations and government’s ability to service its borrowings limit the debt level. U.S. fiscal policy has been largely dependent on the perceived safety of U.S. Treasuries. The safe debt concept, backed by a history of strict payments and a lack of default (if we exclude a 1979 technical default), allows the floating of unbacked debt, or rather debt backed by the value of security to investors. However, when the debt to GDP ratio approaches unsustainable levels there should be fiscal policy steps that compensate. The decision as to whether the adjustment comes from spending cuts or tax increases, or a combination of the two, turns out to have major political implications, as the recent weeks of frantic negotiations between Democrats and Republicans have shown. A plan that seems to offer a possible
THE LONG| ANALYSIS
end to the impasse was proposed by Mitch McConnell. The plan entails three stages for raising the debt ceiling over the next year. At every stage there should be spending cuts at least equal to the amount of the debt-ceiling increase. There are two main concerns associated with a debt model based on perceived safety. The first is related to the fiscal implications during periods of low economic growth and the ensuing cost to society-a scenario currently unfolding in the U.S. The second refers to investors’ confidence and the ability of a debt issuer to maintain the “safe debt” status of its bonds. A deep confidence crisis holds a potential for an international financial calamity. Rational investors explore policies and may question debt repayment, even if a country has no history of default. They will also question the appeal of inflationary policy, which for now seems to be off the table given the weight of short term debt in the U.S. debt composition (Blanchard, 2010). Although it is difficult to
time for changes in expectations, these can be sudden and dramatic. On the other hand, many will say that the U.S. government is too big to fail and default is unthinkable, as the Federal Reserve will provide a bailout. Nevertheless if a confidence crisis scenario, triggered by debt financing problems or solvency concerns, is indeed realised then it will lead to investors’ expecting high interest rates, expansionary monetary aggregates, and a likely loss of value for the U.S. Dollar. The implications for the international financial system may be dire. Expectation from rational investors of higher rates on US debt will bring down the existing refinancing model of U.S. debt, and could lead to lasting solvency problems followed by defaults. An expansionary monetary environment will likely be associated with a lasting drop of the U.S. Dollar in international markets. This scenario may lead to a re-evaluation of the reserve currency status of the U.S. Dollar, which would cause flight to alternative safety assets and would further
weigh on the supply side, deepening the drop of the U.S. currency. The U.S. enjoys the unique benefit to finance its debt based on a “safe debt” status at privileged cost levels. This model of debt financing has ensured easy servicing of debt payments and availability of credit to the U.S. borrower. However, the excessive use of the privilege may unleash a torrent of problems for the U.S. economy and the international financial system. Unsustainable debt levels may be associated with extended periods of low economic growth and may translate into a substantial cost to society in the form of fiscal austerity. More dramatically, solvency problems can trigger shifts in investors’ expectations and a confidence crisis. This scenario can jeopardise the existing debt financing model, but even more critically can trigger an unprecedented international financial crisis. With so much at stake and negotiations for the increase of the U.S. debt ceiling continuing, the reality of the unthinkable U.S. debt default becomes more tangible.
August 2011 | THE EXCHANGE | 45
THE LONG| STRATEGY
A fresh start, but the old numbers don’t lie In his latest article Peter Webb explains how the numbers are telling you to manage your team’s expectations this football season As the new season comes upon us, football fans up and down the country will no doubt be harbouring fresh hopes of what the season will bring. Transfers will have been concluded, hopes are raised. But what is it that makes a team successful? What are the most defining characteristics? As is well known, a lot of club revenue gets spent on wages to attract top players. This is in the hope that buying talent buys performances. So I wanted to know if wages were correlated to performance. If it was, then the bigger the wage bill, the higher the league position, and vice versa. I looked back over many seasons and ranked all teams by their wage bill, then typed in their final league positions. The results of the study were that the correlation was strong. On average you were looking at an 80-90% correlation in the majority of seasons between teams ranked by wages and their final position in the league. This meant that more often than not the league ended up with the lower spending teams near the bottom and the higher spending teams at the top. This would have been much higher if some of the free spending teams had performed to their expected level. In general the “big four”
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(Manchester United, Chelsea, Arsenal and Liverpool) not only ended up at the summit of the league but also had the four largest wage bills. And what generally happened to the three teams with the lowest wage bill? They were relegated. Each year, excluding exceptionals, such as clubs in financial trouble, the team with the lowest wage bill finished bottom. This pattern of correlation up and down the league repeats with amazing regularity from season to season. The inevitable conclusion was that if your club owner didn’t have big pockets it’s unlikely you will ever challenge those that do. Every year you do tend to get one over or under performer, but in general it seems that money does indeed buy success! The advantage of this from a trading or betting perspective is that does allow you to, generally, forecast longer term success or failure of a club. Wages appear to be a good proxy for generally how well a club should perform. This underlying fact also has important ramifications for how you should asses a manager’s performance and prospects. If we look at relative performance we can even out the playing field and see who really is achieving
above their means. Liverpool have been performing below expectations for a number of years, meaning they were probably right to let go of Rafa Benitiz, but wrong to appoint Roy Hodgson, who did not overachieve whilst he was the manager at Fulham. Apart from the Europa League run in Hodgson’s last year in charge at the Cottagers, performance was nothing special or above expectations, especially not in the Premier League. Knowing this I gave some decent predictions last year for the forthcoming season. I predicted Roy Hogdson would underperform at Liverpool and come under pressure very quickly. Liverpool were backed in all the way into 11.50 for relegation at one point last season, even though this wasn’t a serious prospect given the calibre of players in the team.
“I wanted to know if wages were correlated to performance”
THE LONG| STRATEGY
With one of the top wage bills in the Premiership, relegation was severely unlikely unless the board at Liverpool self-destructed the team, and didn’t replace Hodgson. Liverpool were a great lay for relegation, even at larger odds. Eventually ‘King Kenny’ Dalgleish returned Liverpool to their ‘rightful’ place in the League. The wider problem for Liverpool fans is that their teams are losing, relatively speaking, their place as one of the elite clubs in the Premiership. Lack of success has kick-started a downward revenue spiral, meaning spending power has suffered. This has meant they are now likely to be stuck outside the real contenders for the League title, Chelsea, Manchester United and Arsenal. We also now have Man City spending more and challenging the recent dominance of the top two sides. Outside of that there is a huge gap to the next set of clubs, who in truth have no real chance of competing on the same level given their lack of resources. So how best can you use this information? Before the start of each season and during the season you can watch the news flow coming from each club. If the club is struggling financially then it is certain that their prospects for doing well in the League will diminish. If a team has a bottomless pit of money then it will most likely improve their prospects. New managers can wipe the slate clean and kick start the team back to their appropriate level, but there is little statistical evidence they can get them to perform far above it. Popular managers that resign can have the opposing effect. You can take advantage of temporarily success or failure by backing or laying a team
and trading out when they regress to their rightful place in the league. But you may also be willing to take longer term positions and benefit from increasing certainty or uncertainty as the season progresses. Blackpool were my favourites for the drop last year given their wage structure and lack of resources. Despite this they got off to a great start. However, it is not unusual for a new club to perform well in the first half of the season only to slump later in the year. I refer to this as ‘the shock of the new’. The incumbent members of the league can take a little time to get used to the new kids on the block. But once they have worked them out, the second half of the season gets much tougher. When Blackpool’s price for relegation started to drift into the late single digits, they started to become really good back value for relegation. They traded at a high of eights for relegation; I should have waited longer before backing them! Not all opportunties are wage generated though. The best, but most unusual, situation to develop last season was the championship relegation market. When the administrator for Portsmouth football club came on the news to say they were a good candidate for bankruptcy, the media latched onto that phrase without adequately covering the full statement. Reading between the lines, as I did, I saw that that this was a call to action for all parties to sort their differences and get the club out of administration. It was a tactical, political, ploy; not a death statement. The over-reaction was huge, you could lay Portsmouth for relegation
at 1.33. I didn’t manage to get in at that price but wasn’t far away and never traded out when Portsmouth’s form improved. After people had fully digested the statement from the administrator, there was a mercurial change in sentiment and the price rebounded to 12.00 in super quick time. It was a hugely profitably trade. At a core level, the economics behind football are pretty horrible. Costs, mainly wage related, are so high that aspiring football clubs often have to sell their best players just to stay afloat. But selling your best players will probably lead to poorer results; it’s a catch 22 situation. This can be very frustrating for fans that have seen somebody come up through the ranks, only to see them sold off to a rival. It seems that the big clubs regularly buy up the best players from smaller teams, thereby retaining a fierce strange-hold on talent. With no restrictions in place, there seems nothing other than money to stop them from doing this. But of course UEFA financial fair play rules are coming into place soon so that should help. Unfortunately this is unlikely to make much difference in my opinion. Wage growth is rapid across the board, but at the top clubs it is growing faster than lower clubs. Excluding the exception of Man City at the moment, wages take up less of total revenue at the top than the bottom. Therefore I suggest that the financial fair play rules don’t really address a key imbalance and are unlikely to level the playing field. With that in mind, try and have realistic expectations for your team. But more importantly enjoy the coming football season!
August 2011 | THE EXCHANGE | 47
THE LONG | STRATEGY
CHART WONK #10
Oscillator Market top or market bottom? Chaikin Volatility Oscillator offers some clues says Declan Fallon of Zignals The Chart: Microsoft (EURUSD) from Zignals.com charting application
What does it all mean? Chaikin Volatility Oscillator (CVO) is one of a range of indicators developed by Marc Chaikin. It’s used to spot market tops and bottoms by measuring volatility between high and low prices over a trading range. It can be applied to any market where high and low prices are available. Increases in volatility over a short space of time suggest prices are approaching their minimum or maximum, while a decrease in volatility over a longer time period suggests prices are at or close to a peak (maximum or minimum). How does it work? The CVO calculates an exponential moving average of the difference between high and low for each period, typically ten days. Next, a percentage change in the moving average over a further period, typically ten days again, is applied to smooth the relationship. During periods of increased volatility, CVO spikes. During periods of low volatility, CVO trades in a narrow range. During price swing reversals the CVO initially spikes, before moving
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into a low volatility period as traders lose interest. It’s during the low volatility period that price reversals occur. So what are the signals to look for? The CVO is used to warn of reversals. Volatility peaks occur when prices reach an extreme and then retrace, causing a drop in volatility. Volatility should grow alongside price; each peak in the CVO should be greater than the prior peak during a price trend. When volatility fails to make a new reaction high as part of a trend (e.g. price makes a new high), then a divergence emerges and a price reversal is warned. A price break from a trading range should be accompanied by an increase in volatility. If the CVO fails to make a new high with price there is a greater probability of the price breakout failing. A rapid loss in volatility doesn’t just reflect a slowing in the rate of price movement but warns of a possible sharp reversal in price too. In August 2010, EURUSD saw a sharp drop in volatility as prices fell from a peak $1.3178 to a low at $1.2646. But, $1.2646 also formed the
low for the next reversal. The narrowing of CVO for August-September 2010, highlighted by the blue box, reflected the subsequent lack of interest to push prices below $1.2646 or above newly established resistance at $1.2890. When CVO rose outside of its range on September 14th, it confirmed the price break of $1.2890. Volatility through April and May 2011 was very tepid, despite continued gains in an extended EURUSD rally. The CVO low on May 1st effectively corresponded to the price peak of the rally at $1.4809. A similar price peak looks ready to emerge in early July as CVO attempts a new push lower. This suggests traders are unimpressed with the late June mini-rally in the Eurodollar. The CVO is best used in combination with Moving Average Envelopes and/or moving averages as a confirmation signal. Price breaks of a moving average, moving average crossover or envelope breaks can all be confirmed by CVO. For example, in late September, EURUSD extended beyond its 4% Moving Average Envelope as prices hugged the line higher. However, CVO had begun to diverge after peaking in the middle of September, suggesting dwindling interest for the advance. When prices fell inside the Moving Average Envelope in midOctober, CVO was already negative. A spike in volatility on October 20th was not associated with a new price higher, further questioning the validity of the rally. Even when a new price breakout was established in early November, CVO had again diverged and was well away from the last peak; suggesting the November breakout was a potential bull trap. When do I make my move? Spikes in volatility typically occur before changes in price trends, so the CVO is a good lead indicator for reversal. Once a volatility spike is detected, the subsequent low volatility period in the CVO can be used to define price support and resistance. The signal to trade comes when defined support or resistance breaks and volatility spikes above its volatility range.
THE LONG | STRATEGY
50 | THE EXCHANGE | August 2011
THE LONG | STRATEGY
THIS MONTH, HOW TRADING CFDS CAN SIGNIFICANTLY BOLSTER YOUR PENSION POT By Atif Latif, Guardian Stockbrokers
What is a SIPP?
A SIPP is a self-invested pension plan held in your own name which lets you decide when and where to invest the funds, even when you are still in full time employment. You also have control over what happens to the funds once you pass away. One of the key advantages of a SIPP is that you have this level of control, and as such you can choose from a very wide range of investment products in which to invest, from low risk interest bearing bonds to higher risk investments and even using your funds to leverage your investments via CFDs. You can diversify your investments by using your SIPP to invest in wine, property, and even antiques. Unlike a more traditional pension contract where you are restricted from buying/selling certain assets in your plan, a SIPP allows you the freedom to buy/sell assets at any time, and transfer them back into another SIPP or pension scheme such as an employer’s scheme. The only constraint is that there is a restriction on how much you can invest each year in to your SIPP, and this currently stands at £215,000. In order to be eligible for a SIPP you need to be under the age of 75 and a UK resident for tax purposes, a SIPP is also portable meaning you are able to move or split your plan between providers, allowing you to maximise and vary the range of investments available to you. Withdrawal of funds also offers greater flexibility as you do not have to wait until retirement age to withdraw funds from your SIPP, currently you are able to start drawing down funds from the age of 55 with the option of taking a tax free lump sum of up to 25% of the plan value.
“A CFD SIPP account allows you to use funds from your SIPP to trade various investment instruments”
What is a CFD SIPP?
A CFD SIPP account allows you to use funds from your SIPP to trade various investment instruments using the leverage advantages of a CFD. Most CFD accounts will give you access to trade single stocks, indices, forex, commodities, ETFs, futures and options. A CFD allows the investor to leverage purchases by using a small deposit to give them a larger exposure to an investment. For example, to buy £10,000 worth of Vodafone shares the initial deposit (margin) will be £500. Although the deposit is only 5% of the value of the investment, the exposure to this position is still the full £10,000 therefore your risk is not £500 but INSTEAD the full value of the trade. Another cost advantage to stock investments with a CFD is that there are currently no stamp duty charges for buying a CFD position in UK listed companies. Clearly markets do not move in one direction and CFDs will allow you trade short which gives the investor the advantage of making potential profits in a falling market. Many investors have found this aspect an effective tool when looking to hedge out other investments within their SIPP portfolio.
As with a standard CFD account a CFD SIPP has the same order features such as stops and limits allowing investors to protect their risks and some platforms have the advantage DMA trading allowing investors to trade directly into the market. What are the risks?
As with all leveraged products there are inherent risks that every investor should be made aware of before considering such a product. The obvious is that your losses can exceed your initial investment through using leverage, as the losses can be magnified in exactly the same was as your profits. It is also worth noting that you, as the underlying client, could be liable for any losses over and above your initial investment, not the SIPP provider. Also of particular importance is the £215,000 limit that you are allowed to invest each year into your SIPP, this means careful risk management is required to ensure that your account is not over exposed. As with a traditional SIPP you are unable to withdraw your funds until you reach an age of at least age 55, and this is subject to changes in tax and pensions legislation. Summary
Whether you are looking to trade short term and have access to leverage, to take advantage of negative market moves by bear trading, or simply looking to hedge your portfolio to protect you existing long positions, this product could be of use to you. If your account is managed carefully, the range of products and the flexibility in the strategies available, plus the benefits of reduced dealing costs and speed of execution through DMA, could greatly benefit your pension pot.
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THE LONG | STRATEGY
Making Sense of Forex Trading Run, Jog and Walk through a Trend
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THE LONG | STRATEGY
In last month’s issue of The Exchange, I outlined how retail forex traders can step their way through a forex trend using trendlines and Fibonacci Retracements. This month I will further explore the use of trendlines in trading trends by looking at the varying slopes that may develop as a trend develops. The Forex Trader is Often Visual and Simple during Trends
Last month I characterized forex traders as being visual and simple at the same time. The reason for this is if you can visually see something simple on a chart, the chances are other traders - just like you - can also see it. If a large number of traders see the same thing, then the more likely those levels cause “action” to happen at them. Typically, they either become points of reflection, where the price bounces in a particular, or alternatively they are like the mirror in the children’s novel Alice in Wonderland, and the price doesn’t reflect but instead it simply moves right through the “looking glass” – as if it were not there. Running with the Trend In Figure 1.0 the hourly chart of the EURUSD shows the upward trend at the end of June and into July. For the example, focus initially on the white circled points. By the time points 1 through 4 are defined as lows and highs on June 27th and June 28th, it is easy to see the market has created a visual channel. The slopes of the lines that define the channel are identical. Traders will use these “guardrails” to create entry boundaries for the trend and indicators of when to take profit. The price within the trend will tend to rotate from the top to the bottom. It is therefore not surprising that after bottoming at white circle 4, the price peaks at white circle 5 at the top trendline. Profit takers enter the market and a consolidation begins. Note the action on 29th June. Although the price dipped below our bottom trendline (at 6), an indication that the trend might be over, the price quickly reversed and the integrity of the upward trend reestablished (at 7). What is important to note is if the price returns into the channel quickly, traders will likely lean against the channel guardrail to define a low risk trade entry level. This is what happened at white circle 7 and the price started a new trend leg higher. By this point, traders should be comfortable with the trend. The price has bounced off upper and lower boundaries with the most astute traders buying low and selling high. The
Figure 1.0 EURUSD Trends Higher
trend is upward. I coloured the channel lines green to signify that the trend in this stage is running along at a steady pace. All systems are “GO” for a race higher in the pair. Traders can be aggressive against the defined levels. After testing white circle 7 and reflecting/ bouncing off the line, the next target would logically move toward the top end of the channel if the Green Channel were to continue at the running pace. But what happens in our trend instead? Transitioning into the Jog Phase At this point in the trend, the price does surge higher toward the top green channel line but falls short at black circle 4. Traders sell before reaching the green line as momentum at the higher levels starts to fade a bit and profit taking enters earlier. A new trendline connecting the latest tops at black circles 2, 4 and 5 can be drawn (blue line) defining the new slower pace. A parallel trendline can be placed on the bottom starting at black circle 1. Instead of proceeding at a running pace, the market is now moving higher at a jogging pace. The trend is still up; but it is just not as steep. Traders – recognizing the new development can start to anticipate a slower trend. It is now time to take less of a position, or to be more flexible if perhaps the trend starts to reverse. The blue channel lines are drawn in Figure 1.0 to represent the slower trend – the jog. Winding down. The Walk Phase Not long into the Jog Phase, the momentum slows even further. The trend is still up, but the pace has slowed to a walk. Focusing on the gold
boxes, the momentum to the upside cannot reach the blue line at point 5. This ceiling helps define the new channel that connects the gold boxes on the top and the bottom. Seven different times the price tests the upper or lower guardrail, and each time the market reflects off the level. Could the price break above and reassert a stronger trend (jog or run)? Sure. But until it does, it behooves traders to listen to the new market cadence. A disruption to the rhythm of the trend happens at gold box 8. At this point, the price does not reflect, but moves through the support trendline. Traders expecting lower levels sell. The price does move lower but quickly reverses and re-enters into the channel. What should the trader do? Cover any shorts on the failed break and true to form, a test of the top trendline occurs at point 9. Finally at gold box 11, the guardrail is broken again. It is safe to sell on the break with risk of a move back into the channel. It does not happen and the move down begins in earnest. Channels form in currency trading all the time. Sometimes the channel runs at a good pace. Other times they slow to a jog or even a walk. If you can define a channel, trade with the pace it sets and when it is time to stop, the market price and the lines will tell you when the race is over.
Greg Michalowski is the Chief Currency Analyst at FXDD (www.fxdd.com ). He is also the author of “Attacking Currency Trends”, April 2011 (www.attackingcurrencytrends.com).
August 2011 | THE EXCHANGE | 53
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IN THE SPREAD... CITY GUIDE: LAS VEGAS RESTAURANTS GIN CITY GUIDE: BADEN BADEN SWEET SUITE WEEKENDS
New Park Lane restaurant to be CUT above the rest World-renowned chef and restaurateur Wolfgang Puck has Londoners on the edge of their culinary seats as the opening of his first restaurant in Europe, CUT, draws ever closer. Featuring the best selection of beef from the UK, the USA, Australia, Chile and New Zealand, CUT’s menu will offer contemporary interpretations of classic steak dishes and signature homemade sauces, the food the restaurant group has built its impressive reputation on. Taking residence at 45 Park Lane, Puck will be aided by David McIntyre. McIntyre was also heavily
involved in the launch of the incredibly popular and successful CUT Beverly Hills, on which the London restaurant is based. “I am enormously excited about bringing CUT to London which is renowned for having some of the finest restaurants in the world,” Puck has said of his latest venture. “We want it to be a place where people can eat, drink and socialise, and return to time and again regardless of the occasion.” I don’t know about you, but we’re salivating just at thought of CUT. Bring on the end of the month.
August 2011 | THE EXCHANGE | 55
THE SPREAD | CITY GUIDE
Viva Las Vegas! With Dubai and Miami overtaking Vegas as the go-to destination dens for celebrity inequity, Mark Southern discovered if Sin City can still claim to be a global high roller Roll up, gamblers, put your chips down now. What’s it to be, red or black? Is it fate or is it chance as to where the ball will end up in life’s eternally spinning roulette wheel of imponderables? It’s a mystery. However, what’s not mysterious in the slightest is the enduring appeal of the self-styled ‘Fabulous’ Las Vegas. For more years than it cares to admit, Sin City has been fatefully peddling fate and chance to the millions of wide-eyed wonder-seekers who descend on it every year. Marketing strategies as cynical and varied as million dollar slot machine payouts to Elton John residencies all scream in unison the same message; “It’s your fate to come here and change your life on the roll of a dice. It could be you.” In lurid pink neon, of course. Yes, in the brash consumerism capital of Nevada, ‘chance’ means something to everyone, whether it be the life-changing lucky spin of a roulette wheel or the chance to buy any vice you like in broad daylight. It’s a chance of a lifetime. But make no mistake; the great irony of being in the epicentre of Chance City is that nothing is left to it. The house always wins, and compliant tourists are simply the pawns moved around the board to complete the ultimate fate; a stack-full of chips in the pockets of the international entertainment companies that run the town. But, despite how that may read, it’s not a criticism. In fact, it’s quite the opposite. For Vegas is exactly what it is; gaudy, overly-lit showbiz in its rawest form. It’s giving people what they want – namely, spoon-fed, heartstopping moments of sugar-rush joy. It’s not changing the world, but it doesn’t pretend to either – it’s only interested in providing (expensively-bought) cheap thrills to millions of ordinary lives.
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Because of this, many holiday-makers still see Las Vegas as ‘fabulous’; a 21st century cavern of wonders to be marvelled at. For the more discerning traveller, the experience is equally fascinating to witness the skilful way the town plays its chance-card in such a linear fateful way. Las Vegas today still remains a place of excess, albeit with a somewhat Disneyfied inequity, and still represents a long weekend that everyone should take at least once. You’re essentially fated to try it if you haven’t yet, and what are the chances that you can say that about anywhere else? Where to Stay?
The Vegas strip is home to probably the most famous series of hotels on the planet. However, one of the oldest is still the best for quality
and, importantly, location. Caesar’s Palace was putting up the rich and famous in Sinatra’s day, and decades later is now playing host to Barack Obama. And with good reason. That everything is ‘bigger’ in Vegas is a given, but that everything is ‘better’ is less guaranteed. At Caesar’s, not only are you right in the centre of the strip for easy access, but you’ll be sure that your stay will be the best in town, and you’ll be well looked after at all times. Book into one of the ‘Rainman Suites’, made famous by the movie and the inspiration for the hotel room featured in ‘The Hangover’. Make sure you ask for a room as high as possible, and bask in the glory of one of the great hotel room views as the legendary strip sails past you in both directions. Make full use of the exceptional facilities in the hotel too, and make sure you put time aside
THE SPREAD | CITY GUIDE
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THE SPREAD | CITY GUIDE
to enjoy the almost guaranteed weather in one of the many pools at Caesar’s. Also, don’t forget to book at least half a day in the stunning spa. Here you’ll be transported back to ancient times with gloriously ornate and allegedly authentic Roman baths (aside from the flat screen TVs embedded into the walls). If you’re with a partner it’s worth bearing in mind it’s a separate male/female spa, but it’s impossible to not enjoy the complete relaxation you’ll feel take over your body. However, when in Vegas one is compelled to at least try their hand at the casino, and the gaming floor at Caesar’s is the best in the city. As you’d expect, this isn’t a place for shrinking violets, it’s a bold, striking arena in which to experience the most famous high-rolling on Earth. There’s something for every pricebracket, from the 25c slots to the million-dollar buy-in card games, so if you’re going to gamble in Vegas, make sure you do it at Caesar’s. www.caesarspalace.com
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Where to Eat
Dining is eclectic and excellent at Caesar’s Palace. It’s worth exploring all the options available, although Bradley Ogden, Guy Savoy and Italian diner Rao’s are outstanding. For something totally different, take a cab away from the strip to the Hofbrauhaus, where the famous traditional Munich hotspot has been brought to the Nevada desert. All the food and beer is made in the motherland before being transported to Vegas, and the atmosphere is certainly unusual. www.hofbrauhauslasvegas.com Where to Party
The casino resorts very carefully manage the entire user experience, famously hiding clocks, so time reduces its meaning. However, night is still when the town comes alive, and partygoers are still in their element with a bar on every corner. One of the best for location and evocative atmosphere is Gallery Nightclub
at Planet Hollywood, featuring exceptional cocktails and risqué décor. www.planethollywoodresort.com Entertainment
These days it could be argued that Vegas is less Sin City and more Entertainment Town, and there are a huge myriad of spectaculars claiming to be the greatest show on Earth. Whilst many thrill and amaze, undoubtedly the only show that could lay claim to this is the truly staggering ‘O’ at the Bellagio. The Cirque de Soleil show has won every award going, and with reason; it’s simply one of the best displays to have ever been witnessed on a stage. Unbelievable acrobatic skills, death-defying stunts and an evolving stage-set which can switch from a hard floor to a 1.5 million gallon diving pool in the blink of an eye. Just wonderful, and a must-see. www.cirquedusoleil.com
THE SPREAD | CITY GUIDE
Another show that’s currently packing them in, in more ways than one, is Peep Show at Planet Hollywood, featuring former Playboy playmate Holly Madison. Combining burlesque, vaudeville and acrobatics, this is more than a seedy side-show, and deserves the plaudits it’s currently generating. www.lasvegaspeepshow.com The other go-to performance is another Cirque du Soleil production, LOVE, at the Mirage. Chronicling the works of The Beatles against a semi-autobiographical backdrop, LOVE is a more fun and accessible introduction to the spell-binding Cirque extravaganza. www.cirquedusoleil.com Shopping
If you accept in advance that your credit card will get plenty of use in Nevada then you’ll make life much more simple for yourself and, whilst there are plenty of malls to take your hard-earned cash, Fashion Show is the best
place in town for high-end brands and exclusive shopping. Check out the weekend runway shows taking place in the courtyard area using only clothing from the mall itself. www.thefashionshow.com Something Different
When you’re in a city where anything goes, it’s hard to find something that feels genuinely dangerously exciting, with many vices having their edge taken off purely because of their acceptability. However, if you’re looking to challenge yourself, head down to The Gun Store, where you can fire everything from hand guns to machine guns in the fully supervised range. Coming from a British viewpoint that ‘guns are bad’, it’s deeply odd (not to mention a little uncomfortable) to see a plethora of firearms able to hire, but the satisfaction of unleashing rounds into the terrorist targets is undeniable. www.thegunstorelasvegas.com
Getting There
British Airways has launched a new First Class service to Las Vegas, and it’s outstandingly good. Get to Heathrow T5 early and settle in to the fine dining at the Concorde Lounge, before heading down and enjoying the sumptuous comfort of BA’s First Class. Unlike some airplane sleeping experiences, the new fold down chairs are like sleeping on your own bed, which is a nice way to relax before the impending chaos of Vegas. www.ba.com
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THE SPREAD | RESTAURANTS
Restaurants of the Month
We’ve been diligently traipsing the streets of London once again to bring you our best findings of the month
Le Pont de la Tour Tower Bridge, SE1 Seated serenely on the south side of the Thames, Le Pont de la Tour overlooks one of the most delectable spots on London’s iconic river bank. Offering an original take on classic French cuisine that’s complimented superbly by a stylish dining room and bar, the restaurant is a picture of culinary elegance matched by only a handful of eateries across London. That being said, the way to eat at Le Pont de la Tour is certainly on the restaurant’s outside terrace. With a warming ambience and stunning views of the magnificent Tower Bridge by night, the space generates one of the finest atmospheres you can possibly find to dine at in London. Le Pont de la Tour’s waterside surroundings demand good seafood, and that’s exactly what the kitchen delivers. The highlights of our visit
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were the fabulous oysters, lobster bisque and Cornish crab, but with a whole host of sumptuous delights from the sea on offer, fish lovers cannot possibly be disappointed by the Pont de la Tour menu. And the choice of palate-teasers doesn’t end there. Classic French dishes such as crêpes suzette, pear tartin and summer fruit crème brulée make choosing your dessert as difficult an ordeal as it is enjoyable to taste, and definitely anything but an after-dinner afterthought. The restaurant is celebrating its twenty year anniversary this year, and is still getting better and better with every season that flies by. So with warmer weather on the way, make sure that Le Pont de la Tour heads your list of places to dine this summer. www.lepontdelatour.co.uk
THE SPREAD | RESTAURANTS
Boisdale Canary Wharf, E14 The newest addition to the Boisdale chain, Boisdale of Canary Wharf, is a two-story treasure chest of timeless delights. This new venue offers everything a man’s night on the town would desire; delicious food, live jazz, Cuban cigars and a legendary whiskey bar. Start your Boisdale experience with a bite to eat at the 2nd floor restaurant. The Scottish themed restaurant offers an extensive menu selection of caviar, fresh seafood and aged steaks. Choose from selections like; Royal Beluski caviar, West Coast Scottish Langostines or 28+ day aged sirloin on the bone. For a perfect accompaniment to your appetizing dinner, enjoy welcomed musical entertainment from the featured live Jazz band. As the evening winds down it is the ideal time to retire downstairs to the Cuban Library, Cigar Shop and Cigar Terrace. When you enter the classic library scene an invitation to enter the 16 square meter walk-in humidor awaits. Let your personal cigar sommelier guide you through one of the finest Cuban selections in London and allow you to sample your selection indoors before you buy. Once you are satisfied with your choice, light up and lay back on the Cigar Terrace. The awning-covered heated terrace offers 42 comfortable lounge seats with uninterrupted views of the Thames and City of London skyline. The end a perfect evening one should always have a nightcap and Boisdale’s extensive Whiskey list won’t disappoint. Peruse over a 1000 malt whiskey selections that will satisfy the most discerning of palates. You can sip on a rich and peaty delicacy like the Ardbeg Supernova or indulge in a nutty and caramel libation like the 1990 Laphroig. The options are endless. Boisdale of Canary Wharf, located on Cabot Square, Canary Wharf is welcomed addition to the area. It is a lively London escape with all the elements for a great night out. If you are looking for a relaxing drink after a longs day work or a proper big night out, Boisdale Canary Wharf has it all waiting for you under one roof. - Jennifer Von Strohe www.boisdale.co.uk
Langtry’s Pont Street, SW1X Langtry’s on Pont Street forms part of the 125 year old historic Cadogan Hotel. Located just a stone’s throw from both Knightsbridge and Sloane Square stations, this hidden gem is housed quietly away from the main chatter of the High Street. If you are looking for an elegant dining experience, off the beaten-track and away from the flare and glare of central London, then this secluded location will provide you the perfect setting for an intimate dining experience, whether it is romance that’s on the cards or strictly business. Langtry’s is one restaurant that doesn’t need to rely on a buzz of characters to create an enigmatic atmosphere-this beautifully decedent dining hall, complete with period feature King Louis XIV fireplace and master chandelier do that all by themselves. The restaurant is graced with a host of charming and attentive staff who will cater to your every need without intruding on the intimacy of this exclusive setting. There are many talking pieces to this establishment, such as the fact that this very dining hall once formed part of the residence of famed 18th century actress Lilly Langtry, the mistress of King Edward VII. There is also the infamous room 118 situated inside the Cadogan Hotel, once home to Oscar Wilde, upon his arrest. And that is just the building; Oliver Lesnik, head Chef at Langtry’s, has his set of credentials boasting pupillage under culinary royalty too, with Angela Hartnett, Michael Bourdin and Gordon Ramsey to name but a few chefs he has worked with. The menu offers Fine British dining with a twist of unique and inventive flavours. Choose from a variety of seasonal specialties such as the Beetroot risotto with caramelized young beets and their leaves to start, or the Seared Aylesbury duck breast with roast plums and Amaretto mash for main. Dessert is to die for, and I would recommend the Chocolate & wild strawberry soufflé as the perfect way to end this luxurious over-indulgence. All ingredients are locally sourced produced, so you can be sure to enjoy a thoroughly organic and British dining experience. www.langtrysrestaurant.com
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THE SPREAD | DRINK
It’s the fashionable beverage that’s keeping London Dry
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THE SPREAD | DRINK
The world’s worst kept secret is out…gin is back, and better than ever. The spirit Londoner’s can truly call their own has re-taken the capital by storm, and now sits astride it as the unquestionable queen of the erudite alcohol-quaffer’s palate. And with that in mind The Exchange has been diligently roaming the City’s winding streets in search of the best establishments to drink gin in London. It’s been a tough job, but someone had to do it.
The Whistling Shop
Worship St, EC2A Tucked neatly into the backstreets of East London, the Worship Street Whistling Shop sits just a stone’s throw from the hustle and bustle of Liverpool Street and Moorgate. However, despite its close proximity to one of the capital’s most hectic business districts, a visit to the Whistling Shop will transport you to a place that couldn’t be further from its surroundings. To the passer by the Whistling Shop could easily be missed, its understated front gives little away as to the alcoholic treasure-trove awaiting within its four walls. All that changes, however, as soon as you take your first step over the venue’s threshold. A winding narrow staircase leads down to a cavernous cellar bar, and in the seconds it takes to descend into the Whistling Shop’s inner sanctum customers are instantaneously transported from the 21st century back 150 years in time. A modern day shrine to the gin palaces of Victorian England, the Whistling Shop is part city drinking den, part museum, part film set.
“the Whistling Shop is part city drinking den, part museum, part film set”
The final result of this unique concoction is really something to experience, because not only is it this establishment one of the most original drinking holes in London, it’s also one of the best. Dimly lit corners, dark wood tables and antique furniture supplement the undeniably dramatic atmosphere you sense inside the Whistling Shop’s cavernous interior. Despite dripping from head to toe with Dickensian quasi-glamour, the undoubted centrepieces of the stage set are a grand Victorian street lantern and a private drinking room known colloquially as The Dram. Allowing seating for eight, The Dram is a snug space comprising of a covered Victorian bath tub containing gin botanicals and flanked by wooden benches. Frosted glass windows, a straw-covered floor, and cabinets containing dusty vintage gin bottles (ranging from £400 to £1,000 each) complete the scene, as you take a surprisingly comfortable seat it’s all too easy to picture your ancestors soaked somewhere similar in a bygone age. And just when you think it’s the décor that’s the star of the show, your eyes are drawn to a cocktail menu that packs such a fantastic punch that just the reading of it is enough to sweep you off your feet. The Whistling Shop has its own molecular mixology laboratory on site, giving drinkers an experience the likes of which they won’t find anywhere else in London’s winding streets. A combination of scientific geekiness and experimental cocktail wizardry has resulted in superb libations including The Black Cat’s Martini, made with The Whistling Stop’s own cream reduced gin, The Panacea, a subtle blend of compass box whisky, honey and lavender shrub, lemon juice and sage, and the (substitute) Bosom Caresser, a (formula) milky concoction flavoured with Hennessy Fine de Cognac, Dry Madeira and homemade grenadine and salt and pepper bitters. An excellent selection of various gins are also on the menu and should be the tipple of choice given the homage to the beverage The Whistling shop has become. However, for those who like their juice coming in more one flavour high end vodkas, rums and whiskys also adorn the bar shelves. Whether you’re a gin or even cocktail connoisseur or not, there’s no doubting that a night spent at The Whistling Shop will be one of the most palate-pleasing, and adventurous times you may (or may not) remember.. www.whistlingshop.com
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THE SPREAD | DRINK
The Artesian Bar, The Langham Hotel
“Every component of the G & Tea menu is carefully crafted to bring out the complex flavours of this cocktail”
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Portland Place, W1B Locked away inside the splendorous confines of the Langham Hotel, The Artesian Bar plays host to one of London’s most delicious secrets, its G & Tea Tiffin. This bespoke afternoon delight, ideally located for shoppers looking for an escape from London’s West End, has to been seen, and tasted, to be believed. Plates of the some of the most delicious individual sandwiches are spread in front of wide-eyed customers accompanied by fluffy homemade scones packed with seasonal fruits and delicate French pastries. Our favourite delicacies, however, were various savoury ice cream cones filled with a selection of chicken and fish mousses, with a salmon and papaya mouth-waterer being the best of the best. Every plate of extravagant amuse bouche coming from the Artesian’s kitchen is a wonder in its own right, but the undisputed highlight of a G & Tea at The Langham is the fabulous gin cocktail that accompanies the more traditional afternoon tea fayre. Made with super premium Beefeater 24, the gin and tonic cocktail combines the aromatic sensations of citrus, juniper and angelica botanicals of the silky smooth gin with actual tea flavours. Every other component of the G & Tea menu, including the many teas on offer (a tea sommelier will help you to select the infusion that will suit your palate best), is carefully crafted to bring out the complex flavours of this cocktail, and the labour of love certainly doesn’t disappoint. The Langham is credited with being the birthplace of the afternoon tea, and 146 years later the most luxurious hotel in London still proving its head and shoulders above the rest when it comes to a late afternoon tipple. www. london.langhamhotels.co.uk
THE SPREAD | DRINK
The Arch Bar, The InterContinental Hotel
Park Lane, W1K Remodelled and redesigned to resemble an archetypal art deco lounge of the 1950s, the lobby bar at the famous InterContinental Hotel in Park Lane has been rebranded as The Arch Bar. With cool, stylish furniture and stunningly striking décor, this drinking spot effortlessly oozes class, which is why it regularly attracts a crowd of the who’s who from across the capital. The Arch’s expansive cocktail menu is gincentric, and is all the better for it. 25 individual gins grace the magnificent backdrop of the bar shelves, and with such a wide variety of botanicals to select from the Arch’s master cocktail mixers produce some of the most exciting and often original concoctions in London. Standouts of the Arch’s gin cocktail menu
“Standouts include the classic Tom Collins”
include the classic Tom Collins, made with Jenson’s Old Tom gin, and the gin martini made with London Nr.3, a classic London dry gin. The highlight of our visit, however, were the French Lady cocktail, a unique twist on a White Lady made with G’Vine, a grape based gin spirit, and fresh berries. The Sipsmith Sloe gin, which is best drunk over ice, is smooth, sweet and full of flavours, and is also a must try for any gin lover paying the Arch Bar a visit. For those feeling peckish a number of stunning canapé-style dishes are also available to compliment the wonderful deluge of gin, we cannot recommend the beef tartare with pear marmalade, bistecca with crushed juniper and salmon cucumber cone highly enough. If you like to drink your gin with lashings of sophistication, flair and above all beautiful flavours, you won’t find a better place to do it than The Arch bar.
The Arch’s expert bartenders are every bit as impressive as the bar’s cocktail menu is fabulous. Bespoke cocktails are available on request.
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THE SPREAD | CITY GUIDE
Once upon a time in a land called
Most of the fairytales ever written have been set in magical lands, and included princes and princesses, castles on hills, and dark, mysterious forests. It wasn’t until my visit to Baden Baden in Western Germany did I realise that such places could exist beyond the storybooks. Baden Baden is a picturesque spa town located in the western foothills of the Black Forest in Baden-Württemberg, Germany. The term “Baden”, which translates to baths, appropriately describes the town, which is built above 2000-year-old hot mineral springs. These springs have created the foundation of Baden Baden’s vibrant and diverse history. First discovered by the Romans as a natural source for Roman baths, then revitalised by the
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margraves and in the late 19th century deemed the spa escape of Europe’s royal elite; Baden Baden is a town with many faces. As you walk the streets of this spa town you can instantly feel the fountain of youth permeating through your body. Surroundings of lush green gardens, crystal clear singing streams, and idyllic architecture untouched by time will revive and restore the weariest of souls. Brenners Park Hotel and Spa During my time in Baden Baden I was privileged enough to stay at one of the two 5* resorts in town, Brenners Park Hotel and Spa. Brenners Park is part of the Oekter Collection and one of the Leading Hotels of
THE SPREAD | CITY GUIDE
Continuing her pursuit of the perfect hotel destination, Jennifer Von Strohe heads to the resort of Baden Baden for an idyllic weekend break the World. This impressive resort, set amongst the Lichtentaler Allee, has left no luxurious detail untouched. Choose from a selection of 100 rooms including suites and junior suites, or the High Roller option, the Royal Penthouse Suite. The rooms themselves are magnificent, and exquisite décor, vast marble bathrooms and unobstructed views of the Black Forest foothills will create a level of comfort that even the most discerning of guests would consider opulent. Although the accommodation alone puts Brenners in a league of its own, this lavish resort offers so much more than that. You can dine and drink the days away with a number of unique restaurants and bars; channel your inner cigar aficionado in the distinctive cigar lounge (smoking jacket included); or even discover that the “hills are alive with the sound of music” while on a guided bike ride through the Black Forest. Brenners Park-Restaurant The true culinary gem of the hotel is the two Michelin Star Brenners Park-Restaurant. Brenners Park- Restaurant has been open since 2002, quickly received its first Michelin star in 2005 and was then awarded a second Michelin star earlier this year. This gastronomical success can greatly be attributed to Head Chef Andreas Krolik and his dedicated team. Krolik’s downto-earth techniques and seasonal ingredient choices highlight food in its best form without any extra fuss. Join Krolik in his passion for fishing and Norwegian seafood with a unique seafood degustation or take in the treasures of the Black Forest with the gourmet menu. I had the honour of dining at Brenners Park-Restaurant as a guest of the hotel’s Managing Director, Frank Marrenbach. This priceless experience started with an introduction to Restaurant Manager Josef Breitenfellner and Head Sommelier KarlHeinz Schopf. Josef welcomed our table with enthusiastic decorum while Heinz offered us an invigorating Champagne aperitif to begin our meal. The menu presented four courses of culinary artistry from Krolik himself. Our taste buds were awakened with arich crustacean
“This impressive resort, set amongst the Lichtentaler Allee, has left no luxurious detail untouched” bisque accessorized with succulent crayfish, fresh asparagus, woodsy morels and a delicate quail egg. As the courses continued we had the opportunity to try a main course of fresh venison, which was hunted on grounds owned by the Oekter Collection. In true Krolik style, the venison was not over thought and its natural gaminess remained the star of the plate. The perfectly medium rare saddle was lightly flavoured with wild pepper and accompanied by a tart raspberry vinegar jus. You could taste the hunt in your mouth. Our journey ended with a patisserie of cream cheese cake, meringue and Champagneelderflower sorbet. The light, sweet dessert provided a refreshing cleansing of the palate after our succulent game and a perfect moment for reflection of the evening.
Brenners Park Spa As my vacation of opulence came to a close I took advantage of one more treat offered by Brenners, the Spa. After days of wandering through endless gardens, shopping in the village and bike riding to waterfalls, I was in need of a soothing facial and massage before my departure from this fairytale. Brenners Park Spa pays homage to the town’s reputation as a influential spa town with an expansive offering that includes; wet areas with saunas, steam rooms and plunge pools; a full medical spa with nutrition and exercise programs designed by licensed doctors; and a treatment menu with several options for the body and face. A visit to the spa at Brenners will drift away all that ails you. And you will live happily ever after… A holiday to Baden Baden is an enchanted adventure set in another time and place. After you have sauntered through the cobble stone streets, sipped the reviving mineral springs, dined on garden-fresh cuisine and walked in the footsteps of royalty, your life will not be the same. Thoughts of winning the princess, slaying the monster and conquering the kingdom will no longer be only tall tales. Rediscovering your energy and internal optimism will be at your fingertips and for once in your life the thoughts of living happily ever after will finally seem possible.
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THE SPREAD | SWEET SUITE
Sweet suite#:
No.2 - The V1ceregal Suite Looking for something more than a little bit different? Sumptuous luxury, but well off the beaten track? Look no further, as the Viceregal suite at the Ananda hotel, set in the Himalayas, is exceptional. Located in the precincts of the Maharaja’s Palace, The Viceregal suite is a perfect retreat for the connoisseur, comprising of a spacious sitting and dining area and a plush bedroom featuring a period four-poster bed. The attached dressing room and bathroom are beautifully appointed with antique fittings and furniture. However, it’s the private terrace and roof top Jacuzzi overlooking the sloping landscaped gardens and the distant Ganga Valley that takes this suite into storybook realms, sweeping you up in a magic carpet ride back into India’s regal past. www.anandaspa.com
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■ Trade worldwide markets in Equities, FX, Commodities and Indices
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www.guardiancfds.com
020 7638 6996
Please note that leveraged products are high risk and can result in losses that exceed your initial deposit. They may not be suitable for everyone, so please ensure that you fully understand the risks involved. Guardian Stockbrokers Limited is authorised and regulated by the Financial Services Authority.
THE SPREAD | WEEKENDS
Culinary Britannia
British food used to be the laughing stock of the world, but these days rules the waves. Mark Southern discovered the top five Michelin-starred hotel breaks for foodies in the UK and Ireland
The Atlantic Hotel JERSEY Less than an hour outside of London, and officially the warmest place in the British Isles, Jersey makes the ideal short-haul hop and ‘foodie’ destination. As the name suggests, The Atlantic Hotel boasts spectacular views over the Atlantic Ocean, with waves crashing onto the rocks a few hundred feet from your balcony the dramatic and romantic setting. The influence of the sea is carried into the Michelin-starred Ocean
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Restaurant, where Executive Head Chef Mark Jordan serves up a variety of maritime delicacies from his coastal and countryside larder. Temptations include roasted fillet of sea bass with lobster risotto and champagne bubbles, loin of venison with chocolate tortellini and passion fruit miniatures to share. It celebrates its 40th anniversary this year, and retains its Michelin star for a fifth consecutive year. www.theatlantichotel.com.
THE SPREAD | WEEKENDS
St Endoc Hotel Cornwall The South West of England has a special heritage in both the nation’s cuisine and holidaying history, but many once-great institutions have been left behind as the world has gotten smaller. One place that did keep up is St. Endoc in the town of Rock. A classic seaside hotel re-invented. That’s the ethos behind St. Enodoc Hotel with its emphasis on comfort, design and great food. Double Michelin starred chef Nathan Outlaw is in charge of food, including Restaurant Nathan Outlaw which is currently basking in the glory of being named as Best Seafood Restaurant in the UK. www.enodoc-hotel.co.uk
The Dorchester LONDON Awarded three Michelin Stars in 2010, Alain Ducasse at The Dorchester offers an experience that encompasses exquisite contemporary French cuisine, modern design and highly professional, bespoke and friendly service orchestrated by Restaurant Director Nicolas Defremont and his energetic team. For the ultimate luxury, guests can enjoy an unforgettable experience at the celebrated private dining room Table Lumière, surrounded by 4,500 shimmering fibre optics and the exclusive use of a collection of Hermès china, Puiforcat silverware and Saint-Louis crystal. www.thedorchester.com
Le Manoir aux Quat’Saisons Oxfordshire Many celebrity chef projects remain just that; a ‘project’, and not a labour of love from its eponymous creator. Raymond Blanc has made sure this isn’t the case with this superb weekend break destination, and has concocted a truly special blend of food and luxury. Le Manoir is a 15th century Oxfordshire hotel comprising 32 individually designed rooms set in beautiful grounds. Le Manoir caters to expert food lovers, with its two-Michelin starred menu and expert team delivering the freshest ingredients and delicious modern French cuisine. www.manoir.com
The Cliff House Hotel Waterford, Ireland For those willing to jump on a plane to experience great food weekends, Ireland has a hidden gem waiting just 40 minutes from London. The five star Cliff House Hotel in Waterford is distinguished as much for its design and sea views as for the region’s most exquisite food - The House Restaurant is Ireland’s only One Star Michelin Hotel Restaurant. Whether you enjoy the Head Chef Martijn Kajuiter’s delicious mix of Irish cuisine and international expertise in The House Restaurant or the 18-seater private dining room, the food speaks for itself, with Kajuiter’s kitchen using only the finest of local ingredients. www.thecliffhousehotel.com
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SAVING THE BEST ’TIL LAST
CLOSE THE
IN THE CLOSE FLIGHTS WHO’S WHO GLOSSARY OF TRADING KILLA VILLA
It’s a beautiful day As the summer rolls on from July to August there’s one sentiment that resonates above all the others. The wait is over. The sigh of relief is audible all over the country. No longer will we sit at home on a Saturday afternoon idly watching time slip painfully away, or stare absent-mindedly at our nearest drinking companion lost for conversation. And why? Because football is back. We’ve all been saved the agony of having to watch England butcher their way through two weeks of an international tournament, meaning we’re entering the new season with at least a positive feeling about the game itself, if not for our team’s chances of success (it was good while it lasted eh, Arsenal fans?) The Premier League kicks off on 13th August, with the Gunners trip to Newcastle and Tottenham welcoming Everton to the capital looking likely to be the games of the weekend. I don’t know about you, but we certainly can’t wait.
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THE CLOSE | FLIGHTS
We review the new British Airways First Class Service After a difficult few years, British Airways is back, and has launched its new First Class service across a small number of planes in its fleet (as always with BA, its size is both its biggest asset and its number one Achilles heel as what it makes up for in routes it loses in its nimbleness in making changes). So what of the new First Class? Well, it’s mostly very good. The biggest new innovation by a long chalk is the comfort of its seats, which hydraulically drop down to a flat bed using a dial on the control panel. In pretty much any of the 90 degrees in between both extremes comfort
British Airways Airline: First Class Flying Class: ALounge Quality: A Cabin Decor: A+ Seat Comfort: A Bed Comfort: ATechnology: B Entertainment: B+ Food: A Wine: A ice: Cabin Crew Serv A Overall:
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is absolute, and there’s plenty of legroom to spread out into. Service is mostly excellent and friendly – hopefully the days of haughty BA cabin crew are long gone – and you’ll feel rested and suitably VIP at the end of your journey. There are some things that perhaps could be improved (the technology and entertainment feels a bit Eighties, whilst food is not perfect) but overall this is an excellent experience, and one worth labeling ‘first class’. Find out for yourself and book your First Class ticket today at www.ba.com.
THE CLOSE | FLIGHTS
August 2011 | THE EXCHANGE | 75
THE CLOSE | INFORMATION
WHO’S WHO Whether you’re new to financial markets or just looking for a better deal, The Exchange has all the info you need. By Toby Anderson
ETX CAPITAL ETX Capital is the trading name of Monecor (London) Limited. The company joined interdealer broker Tradition in 2000 and in 2002 Monecor became the retail derivatives arm of Tradition. In 2007 Robin Houldsworth and Peter Shalson acquired Monecor for an undisclosed sum from Tradition UK. The name ETX Capital was adopted in 2008. What’s their pitch? ETX Capital provides institutional, high net-worth and retail customers with multi-asset dealing capability through contracts for difference and financial spread betting products. It seeks to offer high levels of customer support and guarantees total client confidentiality. ETX offers spreads from just 1 point and margins from 1%. Anything for newbies? ETX Capital provides up to £250 cover if the client is not in pro to within the first 10 days of trading. Contact www.etxcapital.com 020 7392 1430
PROSPREADS ProSpreads is a Gibraltarincorporated division of London Capital Group. What’s their pitch? ProSpreads’ advanced trading technology provides the same functionality as direct market access, delivering execution in a fraction of a second, extremely
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tight spreads and no re-quotes. It offers speculators a unique trading platform with direct market access functionality to trade the major indices, commodities and currencies. Anything for newbies? Clients can open an account with £1,000 and take advantage of the same technology used by direct market access brokers and futures traders. Account holders have access to a complete package of trading tools and a number of education options, including a demo account allowing them to test trading strategies. Contact www.prospreads.com 0800 804 8772
GEKKO GLOBAL MARKETS Used to be known as VDM, the company now styles itself Gekko Global. We are not sure quite why. Users rate the speed of execution and the simple-to-use platform. What’s their pitch? They claim to have highly competitive spreads (1 point on the UK 100 through the day and up to 8pm), low initial deposits, low minimum trade sizes, a userfriendly platform, free guaranteed stops and cutting edge technical research. All of which ticks a lot of boxes for us. Anything for newbies? You bet. A cash bonus of 25% of your initial stake up to a maximum matched amount of £500. That’s the most generous offer out there. Contact www.ggmarkets.com
020 3326 2131
CANTOR INDEX Cantor Index is a financial spread betting company, established in 2000. Part of the global Cantor Fitzgerald group, Cantor Index is open 24 hours a day, and offers bets on a wide range of markets from shares and indices to bonds and commodities. What’s their pitch? Cantor Index has a comprehensive data service which allows clients access to detailed market reports as well as news from third-party sources, and state-of-the-art stock screening tools. With specialised forex and commodity pages, as well as an economic and company diary, the data service has detailed financial information available free to all account holders. Anything for newbies? Cantor Index offers new clients a £50 account opening bonus. To qualify for the offer clients simply have to fund at least £250 and have placed a minimum of two non-equity bets (each with a stake of at least £2 per point) within 1 month of account opening. The offer is available until the 30th November 2010. Contact www.cantorindex.co.uk 0207 894 8040
PAN INDEX Pan Index was established in Ireland in 2001 and focuses
predominantly on China but also retains operations in Europe. What’s their pitch? Pan Index seeks to offer clients secure online access to trade on stock indices, forex and commodities, with competitive spreads and low margin requirements. The company has a multi-lingual customer service team that operates 24 hours a day. It offers streamed spread trading news, analysis and professional charting, giving clients continuous access to up to date market information. Anything for newbies? Compared with many, Pan’s front end is easy to use and negotiate – important for beginners. Contact www.panindex.com +353 1855 9404
SPREAD CO The Spread Co group of companies, with offices in London and Singapore, is a specialist provider of retail derivative trading products worldwide. It provides the facility to bet on CFDs, forex and the usual range of spreads. What’s their pitch? “The Spread Co trading platform is the simplest and most userfriendly CFD platform I’ve seen,” says Alpesh Patel, a professional trader. Anything for newbies? A new account funded with £300 or more allows the client, once having placed four qualifying trades, the opportunity to take on Head Trader Rajesh Patel in a one day, head to- head challenge. If the client beats him, Spread Co will double the client’s profit by
THE CLOSE | INFORMATION
SPREAD BETTING
up to £150. If the client happens to lose on the trade, but still fares better than the trader, the company will refund losses on that trade up to £150. Contact www.spreadco.com 01923 832 682
FINOTEC Offering forex, commodities and CFD trading, Finotec serves serious retail as well as institutional clients. The minimum contract sizes on forex, for example, underline that this is a site for the more committed trader. What’s their pitch? The Finotec Trading Platform offers one of the most diversified range of products in the industry, including currencies (at least 32 pairs), options, commodities and CFDs on all major indices. New products are regularly added and the platform is regularly upgraded. The level of trading capital and volume generated through Finotec allows it to negotiate inter-bank conditions with liquidity providers. Forex can be traded with margin requirements of up to 0.5%, and up to 5% for CFDs – among the lowest available in the market. Anything for newbies? The Finotec Demo Account enables clients to simulate trades and spread bets in real market conditions. Clients can trade with $100,000 in virtual money and learn how to use trading tools and real-time charts. Contact
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FOREX
www.finotec.com 0207 398 0170
WORLDSPREADS WorldSpreads was founded in 2000. It offers a range of services to retail clients, specifically spread trading and CFDs. The WorldSpreads head office is in Dublin, and it has offices in London, Paris, Frankfurt, Stockholm, Copenhagen, Madrid and Kuala Lumpur What’s their pitch? WorldSpreads offers zero – you read it right, zero – spread on a range of 10 instruments with plans to bring more on stream. It aims to provide high quality financial trading services to a global audience. Services offered include trading of contracts for difference and spread betting. Anything for newbies? Clients opening new accounts with a minimum deposit of £500 can receive up to £300 in cash back against realised losses. Good deal. Contact www.worldspreads.com 0207 398 5220
ODL Markets / FXCM Originally founded in 1994 as an options house, ODL Securities was bought by FXCM Holdings LLC. It has 200,000 live trading accounts and over 700 employees worldwide. Voted Best Retail Platform by FX Week last year. What’s their pitch? ODL allows clients to spread bet on forex, oil, gold and global
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CFDs
stock indexes. Functionality is a strong suit; you can trade in one click, and direct from the chart you’re looking at. The software works on all manner of smart phones and mobile devices. Anything for newbies? ODL requires a minimum deposit of £300 for all new accounts. Also, should everything go south, there’s a no-debit deposit guarantee, so you can’t lose more than your deposit. Contact www.odlmarkets.com 0207 903 6550
MF GLOBAL SPREADS MF Global Spreads provides the opportunity to trade in forex, futures and options and to spread bet. What’s their pitch? MF Global Spaces offers news and views throughout the day as a guide to the client’s trading decisions. Clients are able to monitor the markets and stocks they want by creating watchlists in My Markets. Subscribers to MF’s My Markets Product will soon be able to access content via iPhone or other mobile devices. Anything for newbies? New clients will be given a £2 free FTSE index bet with a 1-point spread, a year’s free access to technical analysis worth £300 and access to a special discount book club. Contact www.mfglobalmarkets.com 0207 144 5678
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FUTURES
DELTA INDEX Delta Index was founded in 2001 by Joint Managing Directors Conor O’Neill and Technology Specialist Micheal O’Shea. The team is led by non-executive Chairman, Dermot O’Donoghue, former Head of Treasury at AIB. What’s their pitch? Delta Index seeks to provide transparent and tight pricing throughout its range of markets, whether trading through its online trading platform XDeal or speaking to its traders over the phone. Clients can trade commodities, shares, forex and indexes. “Where the traders trade” is their tagline. Anything for newbies? The offer of one-on-one training beats anything the rest of the pack offers, like videos or tutorials. You can also sign up for the Trading Ideas service which will send you info like buy and sell signals. Contact www.deltaindex.com +353 1 664 8500
SPREADEX Spreadex was formed in 1999 by former City dealer Jonathan Hufford who was hooked on the sheer fun offered by spread betting and decided to set up his own company to make spread betting more accessible and user-friendly. What’s their pitch? Spreadex offers leveraged access to trade on a huge range of global financial markets including
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THE CLOSE | INFORMATION
indices, shares, commodities, currencies, interest rates, bonds and exchange traded funds all via a professional yet simple-to-use trading platform. The firm offers a full suite of charting tools, tailored phone trading service, some of the most attractive margin rates in the industry and also provides credit, subject to client status. On the sports side of the business, Spreadex offers thousands of sports spreads and fixed odds prices on a range of sporting events with hundreds of markets offered in-play, all from one platform. Anything for newbies? New customers at Spreadex can qualify for up to £400 in offers and once signed up they can receive £50 for every friend they refer to Spreadex. On the financial platform, new clients can gain up to £200 cashback on net losses on trades in the first two weeks providing a minimum of five opening trades have been placed in that time. There are sports deals too. Contact www.spreadex.com 08000 526 570
ShortsandLongs.com ShortsandLongs.com is an arm of Spreadex Ltd and was formed in October 2008 as a unique alternative from the existing spread betting firms. The aim was to make trading cheap, simple and hassle-free while also offering spread bettors much greater risk-control. What’s their pitch? ShortsandLongs.com has some
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of the tightest spreads in the industry on key markets such as the UK 100 daily, Wall Street daily, gold, light and Brent crude and major spot currency pairs. It also offers a further weekly half-price spread reduction on its most popular markets and provides guaranteed stop losses completely free of charge on every trade. Coupled with a full charting package and fast and easy to follow trading platform with no re-quotes, ShortsandLongs.com is the ideal choice for either the novice spread bettor or for day traders who wish to be in complete control over their positions. Anything for newbies? New customers can enjoy £100 of risk-free trading in their first 14 days with ShortsandLongs. com. Provided they have placed a minimum of two opening trades, any net losses in that period will be refunded up to a maximum of £100. Contact www.shortsandlongs.com 01727 895 140
CMC MARKETS CMC Markets started when Peter Cruddas put £10,000 into a firm he called Currency Management Corporation. In 1996 he launched the world’s first online forex trading platform, from where CMC Markets has evolved to become one of the largest financial spread betting companies, with over 26 million trades executed annually. What’s their pitch? CMC says it wants to become the world’s leading online retail
financial services business, constantly innovating to differentiate its content, services and products. “You bet in pounds sterling and you can keep your bets open as long as you like,” the company says. Anything for newbies? CMC provides demo accounts and the front-end is going to look familiar to anyone who’s done a lot of video gaming. That said, if you haven’t, it still looks slick and is easy to drive. There’s also a handy ‘Insights’ section which tells you essential trading details but also tells you what influences price and there’s a news feed too. Contact www.cmcmarkets.co.uk 0207 170 8201
INTERTRADER InterTrader.com says its aims are simple: to make the markets accessible to all, to make trading affordable and to provide a service that the client can trust. InterTrader.com is a trading name of London Capital Group. What’s their pitch? Clients can take their own positions on global markets. InterTrader.com covers a variety of markets from stock indices and FX to commodities, oil and metals to UK, US and international equities. Anything for newbies? InterTrader’s cash loyalty programme allows clients to receive a monthly rebate on trading costs of up to 10%, dependent upon the volume of trades. Also, sign up before the end of the year
and they’ll add 10% to your starting deposit, up to £500. Contact www.intertrader.com 0207 456 7677
CITYINDEX City Index was established in the UK in 1983 and is part of IPGL – a privately owned company with substantial shareholdings in the derivatives broker ICAP plc. The company has over 600 employees worldwide and offices in the UK, US, Poland, Singapore, China and Australia. It transacts in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. What’s their pitch? CityIndex says it seeks to provide consistently competitive spreads (like 1 point on the FTSE) and margin access on thousands of markets worldwide including indices, shares, currencies, commodities, bonds, interest rates and more. Award winning mobile platform. Anything for newbies? There’s a four-week ‘Learn to Trade’ program where you can trade lower-than-normal value bets to get your eye in, like 25p per point on spreads. Contact www.cityindex.co.uk 0207 550 8500
FINSPREADS Finspreads offers access to thousands of instruments on the world’s financial markets. It claims to have pioneered fully interactive
THE CLOSE | INFORMATION
online spread betting in 1999. It is part of the City Index group. What’s their pitch? Finspreads sells itself on transparent and fair prices. It publishes the size in which it is prepared to deal at its quoted price, meaning what you see is what you get. Anything for newbies? New account holders are offered up to £100 in trading credit and while you’re learning the ropes you can trade as little as 10p per point for the first eight weeks of your account. After that, trades start as low as 50p per point. Contact www.finspreads.com 0207 150 0400
GFT UK GLOBAL MARKETS GFT Global Markets is a whollyowned subsidiary of the US forex and futures dealing firm Global Futures & Forex and a sister company to worldleading online forex dealing firm Global Forex Trading. What’s their pitch? GFT’s trading software, DealBook 360, is capable of handling virtually any kind of order. Except your lunch. DealBook is a software platform that streams data direct from the dealing desk to the client, allowing them to operate using the most up to date prices. Anything for newbies? GFT offers a 5% deposit matching scheme for all of its new spread betting customers, hoping to draw even more attention to the potential tax benefits offered to investors by way of spread betting.
Contact www.gftuk.com 0207 170 0770
IG INDEX IG Index was initially established to give investors the opportunity to bet on movements in the price of gold, without having to actually buy or sell the physical commodity in the market. When founder Stuart Wheeler hit upon the idea of trading the price of gold as an index, IG Index was born, laying the groundwork for financial spread betting as it is now known in the UK. The IG Group has over 120,000 clients worldwide, making more than four million transactions per month. What’s their pitch? IG Index has been responsible for pioneering several types of financial spread betting products, including the innovative Binary and Bungee Bets, which offer clients yes/no and bounceback propositions. All this is available on its PureDeal trading platform which features Price Improvement technology and one-click dealing. There’s a mobile phone platform too. Anything for newbies? IG offers two types of account: the Limited Risk Account will cost a few points in terms of the spread, but it means you’ll have risk management in place and won’t lose more than your deposit. The Plus Account has tighter spreads and options on order types including Limited Risk orders and Trailing Stops.
Contact www.igindex.co.uk 0207 896 0011
PADDY POWER Paddy Power Trader is a unit of the ever-popular bookmakers. Incidentally, there was no Paddy Power; the name comes from a result of the merger between three bookmakers, none of whom was called Paddy. What’s their pitch? PPT aims to be the best value offer in the market with, for example, just a two-point spread on cable. There is a strong analyst and recommendations offering, with targets and suggested stop-losses. There’s a useful long/ short percentage indicator so you can see what your fellow PP traders think about various bets. Anything for newbies? Deposit £200, trade four times, and they’ll top you up by £100. In addition there is the usual suite of seminars and online help videos. Contact www.paddypowertrader.com 0207 456 7041
CAPITAL SPREADS Capital Spreads is another division of London Capital Group, providing the expectation of a solid platform and financial stability to the CS offer. What’s their pitch? Capital Spreads allows clients to trade in many financial products using one of the several major currencies from one platform. It also offers a limited margin policy, where clients are required
to deposit only the maximum value of their stop-loss (plus 20%). This means that large sums of capital are not tied up funding the spread betting account. It also says it offers ‘extremely’ tight spreads and offers them for far longer than many of its competitors. Anything for newbies? A nice interactive tutorial, and a load of other learning tools: ‘take a tour’, user manual, FAQs section, free seminars plus the usual practice account stuffed with 10,000 practice pounds. Contact www.capitalspreads.com 0207 456 7020
TRADEFAIR Linked to the phenomenally successful Betfair, Tradefair offers a wide variety of markets. The no-nonsense interface offers customers thousands of financial instruments with some of the tightest spreads on one of the most reliable spread betting platforms. What’s their pitch? Simple but sophisticated frontend with low spreads. Nothing much new there. The USP here is Autochartist, which can send signals about significant potential trading triggers as well as allow you to customise your own charts. Anything for newbies? Free subscription to info service ADVFN, plus £100 matching when you deposit and make a few trades. Contact www.tradefair.com 020 7456 7071
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THE CLOSE | INFORMATION
TRADING GLOSSARY Welcome to The Exchange financial glossary. We’ll be updating every month and we welcome additions (decent and clean, please) – bottle of champagne for each issue’s best suggestion. contact@theexchangemagazine.com
A
ABS Asset-backedsecurities; ie. securitiesbacked by mortgage loansor suchlike which areobtainable if the creditor defaults. ACTUALS The physical assets behind commodity securities. ADR American Depositary Receipt. These are sharesof foreign companies listedon exchanges in the US. ALEXANDER’S FILTER A method that measures the rise or fallof a share price in percentageterms over a given period. Afast rate of increase suggestsa buy; the reverse, a sell. AMERICAN OPTION Can be exercised at any time during thelife of the contract. Europeanoptions, by contrast must beexercised on the expiry date. ARBITRAGE The action of profiting from the differencein price for similar securitiesin different markets.
B
BACK MONTH The traded future or option that is due to expire latest.
BACKWARDATION A situation within futures markets wherethe cash price is greater than the price for future delivery.Such a scenario often occurs when supply of a particular commodity is short but the futuresprice remains low because the expectation remains that further supply will come online in the near future. See Contango. BEAR An investor who is essentially pessimistic about the fundamentals of a given market. So called because a bear fights on its hind legs, moving its paws in a downward motion. BEAR RAID The attempt to push down the price of a security, most often by SHORT
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SELLING. BEAR TRAP The belief that the market will start to fall having risen significantly, there by leaving short sellers trapped by increasing prices, forcing them to cover their positions by buying stock at higher prices. BED AND BREAKFAST DEAL A transaction where by stock is sold and subsequently bought back after the end of the tax year, allowing shareholders to register either or a loss or a profit for tax purposes. BELLS AND WHISTLES Feature sadded to a security put up for sale to attract investors or reduce the costs assumed by the issuer. BID/ASK SPREAD The difference between the price at which adealer is prepared to buy and the price at which they will sell. The spread between the best bid and the best ask (or offer) is sometimes known as the touch. BLUE CHIP COMPANY A long-established company with a long and strong record of profitability and endurance. The term is taken from the most expensive chip on a poker table. BOTTOM FISHING The practice of buying shares when they lie at a level the investor believes is unlikely to decline further. The same term is also used with respect to companies buying competitors that are cheap or failing. BOTTOM UP An investment strategy whereby investors pick stocks, rather than rely upon achieving a balanced weighting in each sector. Such a strategy is based upon the management of individual companies rather than market or economic trends. The opposite of Top Down. BUCKET SHOP A brokerage, often from overseas, that sells shares with little underlying value at, by definition, elevated prices.
BUFFER STOCK A stockof commodities held by an international entity, which seeks to buy and sell from its stockpile as a means of maintaining price stability. BULL An investor who believes that the market will rise. So called because the raising ofthe head (denoting a command to buy a security) is redolent of the action of a bull raising its horns before attacking. BULL MARKET A market where prices have risen significantly over a prolonged period of time.
C
CALL An option giving the holder the right to buy an instrument for a particular price within a set time.
CALLABLE Callable bonds give an investor the right to redemption at a set price on a set date. CIRCUIT BREAKERS When an exchange imposes the closure of trading after prices have fallen by a certain percentage- a move designed to restrict so-called panic selling. COCKTAIL SWAP A mixture of different kinds of swaps. Often used to spread risk on large deals. CONTANGO A situation in which futures prices rise progressively as the maturity date moves further away from spot. The increase reflects the addedcost of storage and insurance for commodities. Contango isthe opposite of backwardation and is the normal relationship between spot and future prices. CREDIT RATING The assumed creditworthiness of a company or sovereign nation issuing debt securities and their ability to repay the investor. Credit ratings affect the ability of a government or company to secure financing from banks and also inform the price their securities might command on the open market.
D
DEAD CAT BOUNCE A rise in a security or broader market following a sustained drop, followed by another precipitous drop due to a lack of change in the fundamentals of said financial instrument or market. DISCOUNT A derivative that is trading below the current market price it is said to be trading at a discount. DOUBLE DIP A second drop in a market or economy after significantly dropping for first time. DUTCH AUCTION An auction in which the price is gradually lowered until a bid is secured. That bid then becomes the price at which the offering - such as US Treasury Bills - is then sold. The term is often synonymous with tenders.
E F
EXPIRY DATE The date at which a security matures. It can no longer be traded thereafter. FAIR VALUE The priceat which a security canbe expected to trade.
FALLEN ANGELS Bonds that have fallen below a previously held investment grade, becoming junk. FIBONACCI NUMBERS A mathematical phenomenon described by 13th century mathematician Leonardo Fibonacci, whereby the sum of any two consecutive numbers equals the next highest number. The system is used by technical analysts to establish price objectives. FILL OR KILL An order to buy or sell stock at the particular moment that a security reaches a certain price. FOKs are usually initiated when an investor wants to buy a large chunk of stock at a particular price.
THE CLOSE | INFORMATION
FRONT RUNNING 1) The practice whereby a trader illegally deals on his own behalf prior to carrying out a client’s order to buy or sell a specific security when he knows the client’s transaction will likely move the price. 2) A brokerage’s trading in shares ahead of publication of its own research report.
G
GFD A term signifying that an order can only be filled on the day it islodged and will expire at the close of business. GUARANTEED ORDER An order that limits losses to anamount specified both duringand outside office hours.
H
HAIRCUT The difference in price between market value and the value o fthe collateral used in repurchasing agreements. (see repurchasing agreements) HEDGE FUND An investment fund, usually only open to wealthy clients, that seeks to produce high returns from short-term markets. They use a broad range of strategies but aim absolute returns, rather than returns benchmarked to an index or asset class. HEDGING A strategy whereby investors seek to minimize risk. Hedging often involves buyingassets in one market to offset potential losses in another. HIT Jargon for the acceptance ofan offer to buy or sell a security.
I
IN THE MONEY A term used to describe an option when the current price for the underlying security is above the exercise for price for a call and below the price for the exercise for a put.
K L
KERB MARKET A term applied to trading outside official market hours. LIBOR London inter bank offer rate.
LIMIT UP/LIMIT DOWN When an exchange imposes either a floor ora ceiling on a security price, closes or suspends trading in order to
prevent extreme changes in price.
M
MARGIN The use of a margin allows an investor or a spreadbetter to trade without them being in full possession of the necessary funds. The margin is the part payment of costs to cover contractual obligations, thereby protecting the investor or better against unlimited losses. MARGIN CALL The call made by a spread betting company to a client whose account has fallen below the minimum requirement. MARGIN TRADING A process that allows investors to borrow funds from a brokerage at a particularrate of interest. The added gearing will however cost the investor more money should the market move in the opposite direction tothe way they had anticipated.
O
OUT OF THE MONEY When the current market price of an instrument underlying an option is below the exerciseprice for an option to buy and abovethe price for an option to sell.PPUMP AND DUMP A formof fraud whereby falselyoptimistic about a company’searnings are circulated aheadof their official publication with aview to pushing up the share price.PUT/CALL RATIO The ratio of thenumber of options to sell traded inrelation to the number of options traded to buy. The number is viewed as a gauge of market sentiment.
R
RED HERRING A term used for preliminary prospect uses for a new issue used to measure market sentiment for the in the security. The keyfigures on such an announcement, such as the profit forecast, will always be deliberately left blank. REVERSAL DAY A term used to describe the day on which a security makes a significant change of direction in terms of its price. The term is not applied until the security has made a significant change in the opposite direction to the previous trend. RSI Relative strength indicator. A technical indicator (see page 38) based on the momentum of prices in a preceding 14-period block. A reading above 70 (out of 100) is classed as ‘overbought’; a reading below 30 is deemed oversold. RESISTANCE The price level at which a security
or index will tend not to rise above, either for technical reasons regarding the price or psychological ones, for example gold rising above $2000 per ounce.
S
SCALPERS Futures andoptions traders who switch their positions within a very short time in order to make money from small gains frequently. SHORT SELLING A transaction whereby an investor borrows stock from a shareholder for a fee and with a guarantee to return theequity at an agreed later date. In theory, the borrower is anticipating a decline in the share price, which will allow them to benefit from the differential between the price at which they sell the borrowed stock and the price at which they repurchase it. For spreadbetters, it is selling the hope that the stock will decline. The trade is then closed by buying – the‘long’ – to balance the book. SPOT The price of a security for immediate delivery. This is usually executed two days after the trade. SQUEEZE A short squeeze happens when investors buy shares to cover short positions. The term is also used when a particular commodity is in tight supply. STOP LOSS The level below the purchase price at which a spread better automatically closes their position. STOP ORDER The instruction to buy or sell below the current price of the financial instrument in question. STRADDLE An options trading strategy whereby the investor buys one call and one put option with the same execution and expiry date. This allows the buyer to take advantage of price movement in both directions. STRANGLE An options investment strategy, whereby the investor purchases a call and a put option with different strike levels but the same expiry date. The investor will then make a profit if prices break above a set range. The strategy is basically a bet on volatility. STRIKE PRICE The agreed price atwhich an option can be exercised.
SUPPORT The price level at whicha security or index will tend not to fall below, either for technical reasons regarding the price or psychological ones, for example gold falling below $1000 per ounce. SWAP A security, agreed between two parties, that seeks to offsetinterest rate or currency fluctuationsto match the parties’ assets to their liabilities. The security is basedupon cash flow rather than the underlying amount of fixed debt. SWAP SPREAD The difference between a swap interest rateand the benchmark government bond yield at the set maturity.
T
TOP DOWN An investment strategy whereby the investor seeks a balance by buying stocks in particular sectors. Such a strategy is basedupon historical and forecasted economic and market trends. TRIPLE WITCHING A quarterly event whereby stock index futures, stock index options and options of individual stocks expire. The event usually results in increased market volatility.
U
UP AND IN An option that is triggered when the price of the underlying security reaches a set level. The reverse of this isknown as Up and Out.
V
VANILLA BOND A bond with no unusual features. Such paper pays a fixed rate of interest and is redeemable upon maturity. VARIATION MARGIN The amount of money owed by a spread better when holding open positions and they are in a negative position. VARIABLE REDEMPTION BOND A bond, the redemption value of which is determined by a variable such as the exchange rate between two different currencies or perhaps the performance of a stock index.
W
W/I When issued.Trading in bonds can start in the so-called grey market as soon as the formal announcement of their issuance has been made but before they are delivered. Thisis also known as free to trade.
August 2011 | THE EXCHANGE | 81
THE CLOSE | KILLA VILLA
killa villa #1:
Akasha, St Lucia Some Caribbean villas are, shall we say, dated. Others are, if we should be so bold, a bit tacky. However, if you’re the sort to prefer uber-stylish rock-star villas then read on, as there’s only one place to stay in St Lucia, and that place is Akasha. Nestling on its own private bit of Caribbean coastline, Akasha offers the kind of A-list glamour and privacy that movie stars dream of, with sumptuous minimal interiors and a breath-taking infinity pool overlooking Pigeon Island. Cementing its position as the party house in St Lucia, the villa comes with the very best entertainments systems integrated into every room, and even a grand piano for the more cultured. Furthermore, with water sports and golf all on tap, and a fabulous staff to tend to your every need, this is one of the world’s very best bolt-holes. Do not miss. Stay at Akasha by booking through www. homeaway.co.uk - the number one holiday rentals site with over 200,000 luxury properties worldwide.
82 | THE EXCHANGE | August 2011