IG Index – David Jones FX Seminar

Hi people 🙂 Here are my notes from the seminar presented by David Jones (IG Index) on Thursday at the Renaissance Heathrow near the London (obviously) who also wrote ‘Spread Betting The Forex Markets’

Have patience – do NOT get in and out of trades like a maniac. Most people think people spread betting have to be glued to a screen all day but this is nonsense. Sitting there doing that will make you mental and stressed.

Any hedge fund is averaging 13% PA. If you’re returning 2% a month consistently then you are a superstar and people will beat a path to your door

One of their biggest/best clients made an exceptional £1.2 million return but they had a £3million account to start with so this is only a 30% return. Set realistic expectations and you’re far less likely to blow up your account and FX is one way of easily doing this (the blowing up bit). David spent 5-6 years loosing money through taking an overcomplicated approach. Even with a strategy that’s right only 50% of the time if you can cut your losses short and let your profits run then you will come out ahead. This is where psychology is everything to a trader.

Most people lose money… so do the opposite of most people because, for IG at least, 35% of their clients win and take money from the remaining 65%. Of the 200 people who applied for an invite to come to the FX seminar only about 80 turned up. That’s your ratio right there 😉

David uses support and resistance but remember it’s buyers and sellers moving the market influenced by sentiment. The market doesn’t move on it’s own. Neither does it care about EMA’s, RSI’s, or trends. However, levels that were important previously in currency pairs should be important in the future. At all times we’re looking to stack the odds of probability in our favour.

Big mistake for traders – setting stops far too tight and continually getting taken out by market noise. Let’s say you have a 25 point stop on the Dow which is at 12300… So that’s you betting on an accuracy of 0.2%! This is just insanity and your account will suffer the ‘death of 1000 cuts’ equivalent. On GBP/USD 100 pts is background noise in the market. The price might go exactly nowhere in a day (open to close) but travel through a 100 point range while doing so.

The average spread account value in the UK is £980 and the average trade is £3/4 pounds per point in volume. Personally I found this a really interesting statistic

Currency contracts expire at 8pm on IG then all bets on all periods roll over. Explanation of the margin requirements for rollovers. Let’s say you bet £1 per point on EUR/USD which is at 14,200 so your deposit is £200 and rollover is about £1.27 per day. Weekends do count for 3 days though!! For a few weeks of less then use a daily contract. For >2 weeks use a quarterly bet as the rollover is built into the spread.

Use currency pairs and support/resistance levels to find low risk/high reward trades.

Support/resistance lines are more important than trend lines. Longer time periods have more weight for judging a trend than shorter time periods. People have a huge tendency for going short, even when the market has been going long for months and even years. David put up examples of gold, oil and the FTSE to illustrate this. The trend is your friend apart from the bend at the end…

Position sizing is all a function of psychology – risk no more than 1-3% of your account per trade.

More than this will pile on the pressure and you will make shit decisions to add stress to what is already a stressful experience. If you have a £10K account then your max exposure would therefore be £300 at 3% so with a 20 point stop that’s £15 per point. David’s longest losing streak was 8 trades in a row and longest winning streak 9 in a row. He has seen people with £1K account risking £3/400 per trade and he’s also done this himself. The aim of the game is to make money, not to be right. So if you have a £1K account then 3% is £30 max risk which at 60 points risk is £0.50 per point on FX for example.

Worst (among many) stories was a guy who went short £20 per point at the bottom of the FTSE correction in Oct(?) last year from 5500 to 6100… He had £10K in his account and lost the lot because he was determined to be right and too attached to the outcome.

Section on RSI – this is the strength of the market measured against itself 10(period) days earlier. If it’s >70% then it’s moved too far too fast up and is due for a downward correction. If it’s <30% then it’s sold off too fast and is due a correction up. So immediately here you’re betting against the trend while people who don’t realise this will lose in continuing to short (possibly). Watch out for the RSI trying to put you into the market against the trend. Divergence is the key one to look at and it’s not that common. Say the stock is going down but the RSI is going up then this is ‘bullish divergence’. EUR/USD was doing this very recently.

IG Index will open 2000 accounts and 35% of people won’t place a trade. David talks to the same people over and over at shows who’ve never placed a trade and are still looking for the right approach years later. Also – key point I think is that rather than pay £2K for a training session or a course use the money to trade and learn. Taking the driving analogy – you can learn all the theory but at some point you’ve got to get in the car and drive it… Also recommend watching his online market run through at 12:30 every Wednesday – extremely useful to just watch how this guy analyses charts.

That’s it. My key learning’s from the talk (2hrs?) and a great exampe which pulls it all together are in the next post…

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4 thoughts on “IG Index – David Jones FX Seminar

  1. David Jones

    Hi Robert,

    Have been following your blog for a while as we seem to be travelling down the same road.

    Do you live in London? I’m looking to make some friends in this game to bounce ideas off, and to help reduce the isolation of solo trading!

    Cheers

    Dave

    Reply
    1. robertsweetman Post author

      Hi David

      ROFL – yep, looked a bit odd on the IP register section that wordpress provides 😉 but since you’re not wearing the regulation suit/tie I guessed you’re not a clone.

      I’m residing in Maidenhead which is about 35 minutes (max) outside Paddington so t’London is only a short hop away. More than happy to meet up and go through this stuff 😉 Just let me know when/where you are free and can easily sort something out. Message me via robertiansweetman at gmail dot com

      Cheers

      Robert

      Reply

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