Spread Betting with Malcolm Pryor

10 Jan
Financial spread betting

Financial spread betting

Malcolm Pryor is an esteemed figure in the world of financial spread betting. He gave up his day job in 2002 to trade full-time, and has subsequently held seminars, created DVDs, performed consultancy work, manages a website, and wrote The Financial Spread Betting Handbook. Reading his tome is often undertaken by people who have just set up a trading demo account. In contrast to some commentators, Malcolm approves of demo accounts.

For his intraday trades, Malcolm concentrates on the FTSE 100 and Dow Jones Industrials indices and the sterling/US dollar exchange rate. He has been known to sometimes trade other major currency pairs. He devotes his time more to US than British stocks as there is less slippage with the spread betting companies he uses. He is generally at his desk from 7:45am to 10am and 2:15pm to 3:30pm.

For one day to five day and two day to 20 day trades, Malcolm mostly uses stop loss orders and so does not need to be at his computer. He never uses guaranteed stop losses, as their additional spread makes them unduly expensive. He deals with longer periods at the weekend, when he also spends “a couple of hours” on research and analysis, some of which he posts at his website. Malcolm says that too many traders are not aware of the important of constant research.

Malcolm has used the Sharescope investment software for more than a decade, but has more recently used Prorealtime for intraday trading because he appreciates some functions it offers. He also uses some of the search criteria of bollingeronbollingerbands.com.

Malcolm holds that position sizing, exit methodology, discipline and psychology are more important than entry strategies. He says that many unsuccessful traders have respectable trade set-ups but fail because that is their primary or only area of focus. His most commonly used trade set up, which he believes is easiest for new traders, is trading pullback in a trend. He finds an obvious trend, makes an entry after a pullback and then rides the trend for a while. He automatically exits trades that reach their stop loss point. He never stakes more than 0.5 percent of his account on a single trade. He usually has only one position open at a time for day trading, but might have one index and one currency simultaneously.

Malcolm cares little for back testing, giving himself a rating of 20 on a scale of zero to 100. He says that purportedly back-tested strategies often transpire to be useless, because the back-testing was curve-fitted to predict the past perfectly.

When Malcolm has a new strategy, he places 30 trades on a demo account and then another 30 with very small amounts of real money. He says that 30 is generally believed to be the minimum sample size to yield meaningful data.

Malcolm acknowledges the influence of other people. He has met Linda Rashke, Chuck le Beau and Van Tharp. He has read the work of Jesse Livermore, and thinks he has read Reminiscences of a Stock Operator 20 times. He has also read work by Mark Douglas.

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