Tuesday, October 22, 2013

Book Review: How to Win at Spread Betting, Patel and Kiri

This book is not unlike trading itself, having to deal with a considerable amount of information, some of which is not clearly sourced (e.g. what is their data source, we wrote the publisher, did not receive a final answer), some of which is contradictory, some of which is insightful -- from authors Alpesh Patel and Paresh Kiri.

Best we can tell this is their first publication.

This is more a green gold field than a working mine, no Holy Grail here, just a lot of questions you have posed to yourself and fairly pedestrian answers.  Maybe we're just not "getting it."

For example, here are the questions the authors pose, and to the best I could determine, the answers offered up to the reader:

-         Which clients win and lose? What are their characteristics?
-         The majority of spread bettors lose.  No number given.  Many winners become losers over time.
- Which markets are the easiest to make money on?
-         No difference.
- Which markets should retail investors avoid?
-         Winning traders focus on no more than 4 markets.
- Do investors make more money in volatile markets or quiet markets?
-         In the middle
- Which is more profitable: to go long or to go short?
-         Same
- Do short-term/day traders make more money than long-term traders?
-         Short term, i.e. < 4 months.
- What are the most common mistakes made by losing clients?
-         Let big losers run.  Winners have many small losses, few big.
- How much do the top spread betters actually make?  
       Doesn't say.
- Which trading systems work best?
-         Mean reversion or breakout -- is this their Big Idea?  Fade or go long?  If so, this is not groundbreaking information, traders have been all over this turf for generations.
- Do technical analyst traders outperform fundamental analysis traders?
-         No decision given.
- How long are the most profitable positions held?
-         Tradeoff, but winners cut losers quickly, hold winners longer.
- What impact do dealing costs have on your ability to beat the market?
-         No answer.
- What rules do profitable traders use for setting trade size and stop losses?  2% on the stop.
- What do winners do differently from losing spread betting traders?
-         Cut losers quickly.
- What size accounts do the most profitable traders have?
-         Enough size to be able to lose 2% per losing trade and keep going.  No actual size given.
- How many spread betters win and how many lose?
-         “Majority” loses.
- Do losers become winners and winners become losers over time?
-         The latter is true, the former wasn’t answered.
- Do winners mimic what big winners like George Soros do?
-         No

The rest of the book is street smart observations, and perhaps this is equal or surpassing the aforegoing in value.  

As for the first line of the book:  "We believe that no other book has ever provided the kind of essential hard information traders need to win in spread betting as we do in this book," we did not find the bold claim to be fulfilled in its svelte 115 pages.  Perhaps you will.  For us, it was "nothing new under the sun."

A Kindle version is available for a fraction of the cost of the hard copy.