A decade ago, advertisements for spread betting firms were ubiquitous. The industry promised simple, tax-free access to financial markets, with a large amount of leverage. However, it quickly became clear that for many people, spread betting is unwise.

After several cases of ordinary investors on the hook for hundreds of thousands of pounds, regulators cracked down, increasing the amount of cash that customers had to pay up front. Shares in spread betting firms plummeted, and took a long time to recover. However, recently the industry has enjoyed a revival.

One big winner from the upswing is IG Group (LSE: IGG). At the start of 2025, the shares were still trading below levels seen in August 2016, but over the past few months, they have surged by 50%. The company has successfully changed its business model to offer a much wider range of products, including traditional broking and investing services for ordinary investors, in addition to complicated, high-margin derivatives for wealthy ones.

What's new at IG Group

IG Group's CEO Breon Corcoran, who joined two years ago from money transfer business WorldRemit and had two years with Paddy Power Betfair under his belt, has also helped cut costs. He has pushed IG into new areas such as products based around the booming area of cryptocurrencies. Even though crypto is now widely deemed a mainstream asset, many investors would still prefer to buy it through a trusted provider, even if the fees are higher.

Meanwhile, with attitudes to gambling becoming much more liberal in the US, IG Group is thinking about expanding there, including a potential move into prediction markets (featuring bets on world events), and is even rumoured to be considering swapping its listing for one in the US, which should boost its share price. All these plans should help the company maintain the track record that saw sales jump by nearly two-thirds between 2020 and 2025. Earnings per share also grew by nearly the same amount during the same period. Margins have been strong, with a consistent return on capital employed (ROCE) of roughly 20%, far above the cost of capital.

IG Group also has a large amount of cash on its balance sheet, with little debt. All of this makes the fact that it trades at only 11.3 times 2027 earnings, with a dividend yield of 3.5%, seem a bargain.

Given these strong prospects, it should be no surprise that IG Group is one of the best performers in the FTSE 100, rising by more than a third in the past six months. What's more, it has continued to outperform the market over the last one and three months, and trades well above both its 50-day and 200-day moving averages. I therefore recommend going long at the current price of 1,444p at £2 per 1p. In that case I would put the stop-loss at 1,000p, giving you a total downside of £888.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

War, the US presidential election, geopolitical tensions, cyber warfare, trade protectionism, the environment and the energy transition, changes to the post-war world order, de-dollarisation, and eye-watering levels of global debt and fiscal deficits all make for an extremely uncertain investing environment. Yet time and again throughout history, the world’s money and investment flows adapt and evolve with the challenges of the day.

Corrections and market downturns inevitably happen, so the key is to prepare for these before they strike rather than after the event. Asset, sector and geographic rotation are the staples for most private investors looking to protect their wealth. But what other alternatives are there? For those willing to invest the time to understand them, options may well be part of the solution for those looking to protect and grow their wealth in these dangerous times.

Why opt for options?

Protecting and growing your wealth are two sides of the same coin. For those with youth on their side, building and holding on to long equities exposure is often recommended as the most effective way to accumulate wealth over time.

However, what if a 20% market correction (a 20% drop being the common definition of a bear market) happens later in life, leaving you with less time for the market to recoup its losses and make new highs? You could switch from equities to bonds, but this may result in lower capital growth and income compared with holding equities through the economic cycle.

Options provide investors with a readily accessible way to protect (or hedge) their market exposures over multiple different timeframes. With options, it is as easy to go short (by buying a put option) as it is to go long (buying a call option), so these instruments and strategies can be used to position your portfolio and trade in a bear market in just the same way as you could use them in a bull market.

Protect your portfolio with put spreads

The simplest way to hedge a long position that you have in an underlying asset is to buy a put option. If the value of that underlying asset (for example, shares or gold) goes down, you have the right to sell that asset at the put option’s strike price. You may either exercise that option or sell it as it increases in value. However, in times of high volatility, the cost of these options increases significantly, so investors often use put spreads instead of put options. A long put spread involves buying a near-the-money put option and selling (also known as “granting” or “writing”) a further out-of-the-money put option with the same expiry.

The logic behind this is that you can use the premium collected from selling the further out-of-the-money short put option to finance a portion of the nearer-the-money long put option. In this case, the risk is limited to the price you pay for the spread (the value of the near-the-money put less the premium you collect for the further out-of-the-money put) plus commissions and fees. In return for the lower cost of entry you are effectively capping the near-the-money put’s profit potential, so put spreads are best used if you are moderately bearish.

Growing wealth by trading volatility

In uncertain times, market moves can be exaggerated, with volatility increasing significantly. This can be concerning for investors, but it can also generate some interesting opportunities for options traders. The price of an option is determined not just by the strike price, but also by the time to expiry (the longer to expiry, the higher the premium) and volatility (the higher the volatility, the higher the premium). So buying options during periods of low volatility can be a good way to position yourself for anticipated moves in the future.

If you are unsure whether the moves are going to be significantly up (which might be the case if peace is restored in Eastern Europe and/or the Middle East), or significantly down (which might be driven by rapidly rising inflation and interest rates), then you might consider buying a straddle or a strangle.

Straddles and strangles
Straddles and strangles are options strategies that profit from a sharp increase in volatility regardless of whether the stock rises or falls, so long as it moves by a magnitude sufficient to cover the combined cost of both options. Since these are bought-option strategies, the risk is limited to the premium paid for the strategy plus any fees and commissions.

A long straddle is a strategy in which you buy a call option and a put option at-the-money, both with the same strike price and expiration. Together, they produce a position that will profit if the stock makes a big move either up or down. The best time to buy a long straddle is during quiet trading periods – since you will pay less for the two options as their implied volatility will be lower – when you expect that more volatile trading conditions will happen in the future. For example, you might anticipate volatility in Nvidia’s shares when it publishes its quarterly results.

Given the way that the long straddle is set up, only one of the options will have intrinsic value when it expires, but the investor hopes that the value of that option will be enough to earn a profit on the entire position. This allows for theoretically unlimited profit potential on the call option to the upside. The maximum profit from the put option to the downside would be achieved should the asset become worthless.

Strangles are similar to straddles but are more cost-effective because instead of buying relatively expensive at-the-money puts and calls you buy cheaper out-of-the-money options. Although the net initial outlay for a strangle is cheaper, the strategy requires a bigger price move in either direction than a straddle for the trade to become profitable.

Generating income by selling options

Buying options and bought-options strategies limit your risk to the premium paid plus any fees and commissions that you pay to trade them. Conversely, writing them means collecting the premium paid in return for accepting a potentially unlimited risk.

Given this risk profile, why do sophisticated investors choose to grant options? They choose to do so because they feel the premium they can earn from granting options is worth the risk. If the market moves against them they can cover the losses with cash, or they are happy to make or take delivery of the underlying asset at the option’s strike price at expiry.

To illustrate this latter point, a relatively conservative way to grant options is a strategy known as covered calls. This involves granting out-of-the-money call options on a stock that you own.

For example, if you own shares in a UK bank, you might be willing to sell some of those shares if the price goes up by more than a certain percentage in a few months. In this case, you could grant a call option, collect the premium, and be prepared to deliver 1,000 shares in the bank should the option be exercised. If they don’t rise to the strike price by the expiry date, you simply keep the premium you collected.

The risk here is clearly defined and limited because you can easily deliver the underlying stock since you already own it. However, you would forego any further increase in the underlying stock price beyond the strike price. Note if you wrote a call option but did not own the stock, and the option was exercised, you would have to buy the stock in the market to deliver it. This exposes you to uncapped potential losses if the stock soars.

Options: should you use them?

The flexibility of options can make them useful tools for experienced investors, either as an overlay on an underlying portfolio of assets or for tactical trading. Still, as with any investment, your capital is at risk, and derivative products are considerably higher risk and more complex than more conventional investments. They come with a high risk of losing money rapidly due to leverage and are not suitable for everyone. If you’re not sure whether trading in options is right for you, you should contact an independent financial adviser.

James Proudlock is chief executive of OptionsDesk

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

When traders first start using options, they often employ them either as a way to take a directional view on an asset (buying a call if they expect it to rise or a put if they expect it to fall) or as a way to hedge their portfolio against market volatility. However, experienced traders can also go on to consider more complex strategies that involve buying or selling combinations of options. 

It is important to have a strong grasp of options trading principles before attempting this and to understand the risks involved in each position. Broadly speaking, bought options and long option strategies carry limited risk. The buyer pays the seller a premium that equals the maximum loss on any position expiring out of the money. Granted options and short options strategies (also known as sold options and written options) have the potential for unlimited maximum losses in some cases if the position expires in the money, and so very careful risk management is needed when employing some of these strategies.

Trading spreads 

Traders seeking leveraged exposure to an underlying equity might consider trading cheaper call and put spreads. These benefit from lower initial outlays in exchange for a capped maximum profit or loss. 

A long call spread, also known as a debit call spread or a bull call spread, is used to express a moderately bullish view on an underlying asset. It is constructed by purchasing a call option with a lower strike price while selling a call option with a higher strike price. Both options have the same expiration date. 

This profits from a moderate rise in the price of the underlying asset. Purchasing a call with a lower strike and selling a call with a higher strike – creating a spread – lowers the initial net premium in exchange for a capped maximum profit, which is reached if the underlying asset’s price is at or above the higher strike price at expiration. The profit is the difference between the strike prices minus the net premium paid. The maximum loss is limited to the net premium paid for the spread and occurs if the underlying asset’s price is at or below the lower strike price at expiration. 

For example, if XYZ Inc stock is trading at $400, a trader might buy an out-of-the-money XYZ $420 20-Sep-2024 call option for $17 and sell an out-of-the-money XYZ $460 20-Sep-2024 call option for $6. The net premium paid for the spread and hence the maximum loss is $17 - $6 = $11. If the stock price rises to $460 or above, the trader’s maximum profit is $460 - $420 - $11 = $29. 

A short call spread, also known as a credit call spread or a bear call spread, expresses a moderately bearish outlook on an asset. It entails selling a call option with a lower strike price while buying a call option with a higher strike price. Again, both options have the same expiration date. 

This strategy profits from a moderate decline or neutral movement in the price of the underlying asset. The trader receives a net premium since the sold call option (lower strike) is more expensive than the purchased call option (higher strike). The maximum profit is the net premium and is achieved if the asset’s price is at or below the lower strike price at expiration. The maximum loss is limited to the difference between the strike prices minus the net premium received. 

For example, a trader may sell an out of the money XYZ $420 20-Sep-2024 call option for $17 and buy an out of the money XYZ $460 20-Sep-2024 call option for $6. The net premium received for the spread is $17 - $6 = $11. If the stock price remains below $420, the trader’s maximum profit is $11 (the premium received). If the underlying asset’s price is at or above the higher strike price at expiration, the maximum loss is $460 - $420 - $11 = $29. 

Similar strategies can be employed with put options. A short put spread (bull put spread or credit put spread) is another way to take a moderately bullish view. It involves selling a put option with a higher strike price and buying a put option with a lower strike price. A long put spread (bear put spread or debit put spread) expresses a moderately bearish view, by buying a put option with a higher strike price and selling a put option with a lower strike price. As with call spreads, these strategies have a maximum potential loss that can be calculated before entering the trade.

Getting to grips with volatility

Options can also be used to construct positions that are sensitive to changes in volatility, rather than directional movements in the underlying asset. These positions allow traders to profit from sharp changes in the market without needing to predict the overall direction of the change in an asset’s price. 

The CBOE Volatility index (VIX), often referred to as the “fear gauge”, is a real-time market index that represents the expectations for volatility in the US stock market. It is derived from the implied volatility embedded into the prices of S&P 500 index options traded on the Chicago Board Options Exchange. 

When the VIX is high, it indicates that traders expect large price swings in the underlying assets. Both call and put options become more expensive during periods of high volatility. This is because the potential for large price movements increases the likelihood that an option will expire in-the-money. When the VIX is low, it suggests that traders expect stable prices with minimal fluctuations. Both call and put options become cheaper during periods of low volatility, because of the reduced probability that an option will expire in the money. 

During times of geopolitical and macroeconomic uncertainty, opportunities to trade volatility may arise amidst the chaos. A long straddle, also known as “buying volatility”, is employed by a trader expecting a sharp rise in the volatility of an underlying asset. It is constructed by buying a call option and a put option with the same strike price and the same expiration date. It will make a profit when the underlying asset price moves by a magnitude sufficient to cover the combined cost of both options. 

For example, a trader may buy an at-the-money XYZ $400 20-Sep-2024 call option for $30 and buy an at-the-money XYZ $400 20-Sep-2024 put option for $23. The net premium paid for the straddle is $30 + $23 = $53. If the price of the underlying asset goes above the strike price of the call option, the trader’s potential maximum profit is determined by how high it goes and is (theoretically) potentially unlimited. Should the price of the asset fall instead, the maximum potential gain from the put option is $400 - $53 = $347. The strategy breaks even when the underlying price at expiry is either $453 or $347, since this is equal to the strike price for each option plus or minus the total premium paid for both options. The maximum loss if both options expire out-of-the-money is the total premium of $53. 

A long strangle, similar to a straddle, is also executed by investors expecting a sharp rise in the volatility of an underlying asset. It entails buying an out-of-the-money call option and an out-of-the-money put option with different strike prices and the same expiration date. A long strangle will be cheaper than a long straddle because the premiums for out of the money options will be lower than at-the-money options used for a long straddle, but the underlying asset price will have to move further to make the position profitable. 

For example, if a stock is trading at $400, a trader will buy an out-of-the-money XYZ $450 20-Sep2024 call option for $6 and buy an out-of-the-money XYZ $350 20-Sep-2024 put option for $7. The net premium paid for the strangle is $6 + $7 = $13. The maximum profit to the upside from the call option is again in principle unlimited; the maximum profit to the downside from the put option is $350 - $13 = $337. The maximum loss is limited to the $13 premium paid for both options. However, the breakeven points for this strategy are $463 or $337 (the strike prices plus or minus the $13 total premium) – a greater distance than for the long straddle. 

Traders who want instead to bet on volatility being lower could sell put and call options to create a short straddle or short strangle. However, unlike the long strategies we have discussed, both of these strategies can produce potentially unlimited losses if volatility spikes, so they should only ever be considered by very experienced traders with rigorous risk management.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Let’s start by stating the obvious. Commodities exist in the physical world. That means they are very different from stocks, bonds or cryptocurrencies. 

Those asset classes can move around the world with a keystroke. Commodities must be transported. That is both costly and time-consuming. They degrade and spoil, are stolen, hidden and fought over. Meanwhile, their prices can move in an exceptionally volatile manner. That means fortunes can be quickly made or lost. 

They are also totally essential to our daily lives. I’m not ready for the day until I’ve had my coffee, for example! It doesn’t matter what happens to the stock or bond markets – commodities will always exist and so will our need for them. 

Commodities offer valuable diversification from other assets: they may rise when most markets fall. Individual commodities often also trade very differently from each other, so that offers an additional avenue for diversification within the commodity asset class. 

However, you have to know how to trade them to get the benefit of this. Simply buying and holding commodities is not likely to get the best results.

How commodities trade

Commodities trade on both a “spot” basis (the price to buy them immediately) and as futures (the price for delivery at a given point). Of course, as a financial trader, you don’t actually take delivery of these physical items, but this reality is reflected in how these markets behave. 

Futures prices have a relationship to spot prices, but they are not the same. The difference reflects both expected changes in supply and demand and also, crucially, the “cost of carry”. It costs money to store commodities, so as soon as you open a commodity position, you are paying for storage. Those costs are mostly wrapped into the price of the various instruments that you trade, rather than being charged explicitly – but they are always present. That’s why, for example, spot crude oil might trade at $85 per barrel, futures for delivery in three months at $87 and futures for delivery in a year at $90. 

Experienced traders who are able to put up the large amount of capital required may sometimes trade commodities futures directly. However, traders can use also spread betting and contracts for difference (CFDs) and these require less capital, as well as being simpler to start learning the principles.

Spread betting and CFDs

You can use spread betting and CFDs to trade both the spot price and futures prices. Exactly what is available will depend on the commodity and on the provider you use – some will have more choice than others. If you trade the futures price, the bet will follow the conventions of the underlying futures market. For example, gold futures contracts are three months long, while natural gas futures contracts expire at the end of every month. (You can, of course, close your position at any time before expiry.) 

Let’s take an example of spread-betting gold and see how it relates to spot prices and futures prices. At the time of writing, the spot price of gold is trading at $2,471 per oz. The December futures prices (ie, gold to be delivered in December) are trading at a spread of $2,510-$2,510.60 (ie, you can sell at $2,510 and buy at $2,510.60). That $39 difference between spot gold and December gold is the holding cost of gold for four months. If gold prices simply go sideways for two years, those costs add up and eat into your capital. That’s why most commodity trading strategies rely on trading volatility rather than buying and holding. 

Let’s say that I want to bet that gold will rise. I buy the $2,510.60 price. Spread bets are based on pounds per point, with a point here being a $1 move. Say I bet £10 on my gold wager. If gold rises $50, I will make £500. If gold falls $50, I will lose £500. You will notice from the above example that currencies don’t come into this: you can bet pounds on a dollar-denominated instrument because you are betting on the number of points moved rather than the strict value of the product you are trading. 

Spread-betting firms also offer daily rolling bets on spot prices. The spreads on these bets are tighter, so they are less expensive if you are a day trader (ie, you are getting in and out of the position on the same day). However, the costs will mount up if you roll over the bets from one day to the next: the provider will close the bet at the end of the trading day and open a new position for the next day, and you pay the spread a second time. My rule of thumb is if you intend to hold the position open for more than three days, it is less expensive to bet on the futures price than the spot. 

Ultimately, both spread betting and CFDs work in a similar manner to trading futures directly. However, they may limit the strategies available to trade. For example, they do not allow calendar spreads (where you go long a futures contract with expiry on one date and short a contract that expires on another date).

The problem with commodity funds

An alternative way to trade commodities is to buy exchange-traded commodities (ETCs) – funds that are traded on the stock market and bought and sold through a stockbroker. ETCs typically work by taking positions in futures contracts and regularly roll the position into the next maturity before they expire. 

How well these kinds of funds perform is closely related to the cost of rolling these futures over for a prolonged period. The prices of the futures contracts factor in the cost of holding the physical commodity until expiry. In addition, since most commodity trading is leveraged, the cost of borrowing the money to hold a position is also factored into the price of the futures contract. The result is prices can vary significantly from one contract to the next, just as we saw with the difference between spot gold and the December contract above. 

As a broad rule, the normal condition in the commodity markets is that the price for delivery in future is higher than it is today (known as contango). That makes sense: if I buy copper, it costs me money to hold it for three months, and so I will want a higher price to commit to selling it when the contract expires in three months than selling it now. 

When markets trade in contango, ETCs do not tend to perform well, because to roll over they must sell lower-priced futures contracts that are expiring and replace them with higher-priced ones expiring further ahead. They will only generate positive returns if the price rises enough to offset what they lose on each roll.

However, there are times that prices are higher in the present than in the future (known as backwardation). These are generally associated with supply shortages. This happened recently in the cocoa market: there have been several bad harvests and it takes several years to grow new trees. The shortage of available supply created higher prices overall, but also backwardation because cocoa buyers are scrambling to get hold of supplies immediately. Futures-based ETCs do best on the rare occasions when backwardations more than compensate for the cost of holding. 

Some ETCs hold physical commodities rather than commodity futures. These funds are usually limited to metals, because these don’t rot and they are dense (you don’t need a lot of storage space to hold a significant volume of material). 

The biggest physical metal ETCs are the ones that invest in gold. Using these funds keeps the cost of holding physical metal as low as possible. At the same time, they remove the leverage, risk and cost of trading gold via futures. Many traders and investors see them as the most convenient way to get exposure to the gold price. Of course, they are not appropriate for anyone who wants leverage to the price of gold. 

A final note: trading commodities can be profitable, but they are very volatile and not straightforward. There are many different ways to participate in the commodity markets. The most important thing to remember is that all commodities behave according to their own unique characteristics and traders should study these markets carefully before starting to trade.

Eoin runs the Fuller Treacy Money investment strategy service (fullertreacymoney.substack.com).

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

The S&P 500 index tends to rise or fall half a per cent in a day – a swing of 50 points or so. That may not mean much to a buy-and-hold investor but, to a trader, it’s enough for a spectacular gain if they employ sufficient leverage. With 20:1 leverage, for example, that half a per cent move in the index means a 10% move in the value of your position.  

But while using spread bets, contracts for difference (CFDs) or futures for that kind of trade will give you much more potential upside, you also have more downside if the trade goes against you. In some trades, the downside is – in theory – potentially unlimited.  

Options are different, of course. With some (not all) options, your maximum loss is capped at the outset. For example, with a long call option, the downside is limited to the premium paid, while the potential gain is much greater if stocks surge upwards. That kind of asymmetric pay-off makes them very attractive to people who are drawn to lottery-ticket-type trades. 

This helps explain why the powerful bull market in the US in recent years has been accompanied by the increasing use of options by retail traders – and, in particular, an explosive growth in zero-days-to-expiration options (0DTEs), or “dailies”.

What are 0DTE options and how do they work?

A 0DTE is an options contract that expires on the day it is being traded. In the past, S&P 500 options trading activity would be concentrated in contracts that would expire relatively soon, but still had a few days or weeks to run. Today, 0DTEs account for more than 40% of S&P 500 options activity. 

S&P 500 options contracts used to have one weekly expiry. This went up to three days a week and then five in 2022. So there is an index options contract expiring each day, which is very appealing for a trader who wants to take a punt on how the market will move because of a US Federal Reserve meeting… a payrolls report… or Nvidia’s results. They can buy an out of the money call or put and hope for the best. 

Since the option will expire that day, there’s a high possibility that it will expire worthless if it is not already in the money. However, the premium will be small. If the market moves enough to bring it in-the-money, the pay-off can be large. Note, though, that research by the Chicago Board Options Exchange (CBOE) shows that the big intraday swings needed for large gains in 0DTEs are not common – less than 10% of moves are “gap” moves (meaning a two-standard deviation sudden increase in short-term volatility). 

So 0DTEs come with a serious health warning. This kind of trading is high risk for addiction. Once you’ve seen a $5 bet end up worth hundreds, it can be very intoxicating. You can see why traders get seduced into buying them and end up consistently losing money over time.

Can you make money with 0DTEs?

So is there a way to trade 0DTEs with any prospect of success? The characteristics of these trades – a very short time to expiry (so they lose value very quickly through a trading session), a high chance of expiring worthless and very convex pay-offs (small moves in the index can mean a big move in the value of the option) – mean that timing is all important. This doesn’t simply mean timing in relation to the underlying market move, but timing in relation to the expiry of the option. 

Activity in 0DTEs tends to start trailing off by around 11.30am New York time. Canny traders tend to buy the option that has one day to expiry, hold it overnight (when the price will probably gap up or down) and sell it in the morning of the following session (when it becomes the current 0DTE). This trading behaviour accounts for the tighter spreads and greater volume in 0DTEs before noon. 

Consistently successful 0DTE traders will not be those who happen to end the trading day owning options that ended in the money because luck went their way that time. Instead, those who trade the high volatility inherent in these options and then get out before the market dries up, may have a better chance.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Leveraged trading with spread betting and contracts for difference (CFDs) isn’t for everyone. It certainly won’t form the core of a strategy for most MoneyWeek readers. However, for some people, short-term trading can be a useful supplement to your longer-term investments. Gains can be tax-free with spread betting, although not with CFDs. Stronger regulation, especially around leverage and negative balance protection for retail investors (so you can’t end up losing more than is in your account), have also reduced the risks of some of the horror stories of traders suffering large losses that were more common during the early days of these markets. 

However, leveraged trading is still risky. It is called “spread betting”, not “spread investing” for a reason. When I was spread betting before I joined MoneyWeek, I ended up learning some hard lessons about the importance of controlling losses. 

Here are five tips that should help you when starting out. This advice won’t guarantee your success, but it will at least cut the risk of racking up losses that you can’t afford. It will also help you think about whether your expectations are realistic enough.

1. Spread Betting: where to start with trading

How much "disposable" money do you have?
The first thing to do when starting out in trading is to work out how much available money you have. This is money that you can afford to lose. A good rule of thumb is that the amount "at risk" should form only a small part of your investment portfolio – no more than 5%. You should never spread bet with borrowed money, or money that you need to pay the bills, under any circumstances. 

Do you have enough capital?
No trading strategy is perfect, and sooner or later you will hit a run of bad luck. Some professional traders suggest that you should risk no more than 1% of your pot per trade, which implies that the total pot should be 100 times bigger than the size of each trade. While this may seem excessively cautious – especially if you don’t trade that often – I wouldn’t stake more than 10% of your trading fund on each trade.

Having less capital will restrict the type of trading that you are able to do. For instance, if you want to spread bet the FTSE 100 at 50p a point (the minimum at many providers), having a limit of £100 per trade will mean that you can only absorb 200 points worth of losses before you need to close the trade – so you are likely to be very focused on short-term trades. 

Providers will also require you to have a minimum amount of money in your account to back each trade. The exact amount you require varies between markets and is usually expressed as a leverage ratio (eg, 5:1) or a margin requirement (eg, 20%) of the face value of the trade. For example, if you are trading a market that has a leverage ratio of 5:1, you will need £100 in capital to open a position with a value of £500. 

Overall, if you can’t afford a trading fund of at least £4,000, then spread betting might not be for you.

2. Come up with a trading plan

Trying to trade without a strategy is a certain route to failure, so you should come up with a trading plan before putting your money at risk for the first time. This should detail the factors you will use to decide when to buy and sell. It should also include more general things such as the markets you will be trading in, whether you will be going both long and short, or long only, and the length of time you will hold positions. The plan should also include the amount of time, energy and money that you are willing to commit to spread betting. 

For instance, do you want to trade every day, or are you going to just check your positions for an hour or so every week or so? Are you going to do lots of research on potential trades, buy the latest trading software or stick to a simple system that requires minimal updating? All these things are worth considering, and the process of writing things down will force you to clarify things in your mind before you start doing things for real, as well as checking whether your plan is realistic. For example, day-trading multiple markets isn’t a good idea if you work during the day and have an active social life. Finally, a plan can serve as a reminder of what to do when you eventually start trading.

3. Look at a range of providers

There are a large number of spread-betting firms offering the ability to spread bet over the internet, each with pros and cons. However, there are three things that you should look for: 

Regulation
First, you want to make sure they are properly regulated by the UK Financial Conduct Authority (FCA). FCA regulation comes with a series of protections (such as negative balance protection) and will give you up to £85,000 worth of protection if the firm holding your money goes under (though, obviously, this won’t compensate you for any losses you make due to poor judgement). 

Markets
You should also make sure they offer the markets you want to trade in. While virtually all the main companies offer things such as the FTSE 100 and the dollar/sterling exchange rate, coverage of more obscure markets varies, so check what is listed on your chosen provider’s website before signing up. 

Size of spreads
Another key variable is the size of the spreads – the difference between the buy and sell price. Since spread-betting firms don’t charge upfront fees, they make their money on the difference between the buy and sell price, which can eat into your capital over time. Everything else being equal, lower spreads work out to smaller costs, so you are looking for a provider that offers tight spreads in your chosen markets.

4. Open some demo accounts

At this stage, you may be raring to go. However, many spread-betting firms allow you to practise with a demo account for free. For instance, IG’s demo account simulates trading with a capital of £10,000, as well as running various seminars walking you through the process of trading. You may think that this is only for complete beginners, and it’s true that nothing can fully prepare you for the experience of risking your own money. However, practise accounts can help you make sure that you are comfortable with the strategy that you have selected, (as well as with spread betting in general) and fine-tune your approach. 

At the very least, using a demo account, and taking the time to read through the documentation provided, can get you familiar with the controls so you don’t end up accidentally placing a much larger bet than you intended, and can take advantage of all the features available. One key feature that should become a part of your process is learning to use stop losses.

5. Always use stop losses

Stop losses are a crucial weapon in the armoury of spread bettors. They work by instructing the spread-betting firm to close a position that is going against you if it falls below a certain point (in the case of long positions) or rises above it (in the case of short positions). Many long-term investors don’t like stop losses because they force you to close your positions. However, when it comes to trading, where every price movement against you has a direct impact on the bottom line, it is a very different story. Despite the rules limiting leverage and eliminating negative balances, it’s still possible for a sudden move to end up taking a large chunk out of your trading capital. 

Even using an ordinary stop loss may be insufficient in certain circumstances. During periods of high volatility, the market may suddenly jump from one price to another without stopping at a point in between. If this happens, the stop loss will not trigger at the price you set it at. For example, assume you are trading the FTSE 100 at £1 a point and your stop loss is at 6,500. If the market suddenly fell from 6,501 to 6,480, because of some bad economic data, you would end up losing £21, rather than just £1. The only way to get around this is to use a guaranteed stop loss, which triggers at the point at which you had set it. This comes at an additional cost (sometimes called the stop premium) that is charged if your stop loss is triggered.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

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Labour’s victory in Batley and Spen last week has eased pressure on Keir Starmer’s leadership, which had previously been called into question. With £1,866 matched on Smarkets, the odds on him leaving in 2021 have lengthened from as short as three (33.3%) to seven (14.2%). Punters still think his stay as leader is likely to be relatively short, however: you can get 4.1 (24.3%) on him departing in 2022 and 3.9 (25.6%) in 2023. Indeed, the odds on him surviving to 2025 are still a relatively long 5.3 (18.7%).

Interestingly, Smarkets also runs a separate market on whether Starmer (pictured) will survive to the start of 2024. In that case they put the odds of a departure by the end of 2023 at 1.77 (56.4%), which is slightly better than the combined odds of a departure in 2021, 2022 or 2023, which work out at 64.3. I don’t think that he will go this year, but after that much will depend on the timing and outcome of the next election, so I’d hold off betting for now.

One thing that is more certain is that Starmer is unlikely to make major changes to the most senior shadow cabinet roles in the next few months – he will want to avoid upsetting any faction within the Labour Party. I therefore suggest that you bet that the shadow foreign secretary, Lisa Nandy, will still be in place by the end of the year at 1.37 (72.9%), and that Rachel Reeves will still be shadow chancellor at 1.11 (90.9%).

Norway is due to go to the polls in a general election in a few months’ time. With £2,009 matched on Betfair, punters expect Labour leader Jonas Gahr Støre (pictured) to emerge triumphant, giving odds of 1.18 (84.7%) on him becoming the next PM. Sitting prime minister Erna Solberg is at 4.6 (21.7%) to remain in office. Punters also suggest Labour will come top of the polls, with Smarkets putting the party at 1.68 (59.5%) to get the most votes and the Conservatives at 2.26 (44.2%).

Although a Labour victory, in terms of both the number of votes and who ends up as prime minister, is more likely than not, neither is assured. Labour does have a small lead in the polls at the moment, but the two parties are almost neck and neck – the Conservatives were in front in the first few months of the year. With Norway’s vaccination programme finally picking up some steam, it’s possible Solberg’s poll rating could bounce back, causing the Conservatives to take the lead once more.

Norway’s complicated electoral system means that the composition of the next government will depend on the performance of the smaller parties. With major divisions between the left parties over Norway’s relationship with Europe, it’s possible Støre could be unable to form a government, even if Labour does end up with a viable route to power. I therefore suggest that you bet against Støre becoming prime minister at 1.39 – equivalent to betting on him not to become PM at 3.55 (28.1%).

The surge in US technology shares has prompted many analysts to draw parallels with the technology bubble of 1998-2000. While many of today’s hot tech stocks are at least making money, which most dotcoms weren’t, there are several similarities between the two booms.

At the height of the dotcom era, for instance, many people were quitting their day jobs to trade the stockmarket full-time as day traders. Today, the rise of commission-free trading apps, most notably Robinhood, has enticed many ordinary investors into the market, causing shares in certain firms to go haywire. One big winner has been video-game retailer GameStop (NYSE: GME).

Not long ago, GameStop’s shares seemed to be in terminal decline. They had gradually slipped by 95% from their price of around $40 in 2015 to a low of $2.57 last March. In August they were around $4 a share. However, since then they have taken off, reaching $20 by the end of the year.

This attracted many prominent short-sellers to start betting against GameStop. However, instead of falling back, GameStop’s shares have surged, with many ordinary investors doubling down on their original bets and driving the price as high as $101 at one stage (though it was $88 at time of writing).

Squeezing the stock higher

One reason behind this surge is the hope that the short-sellers will be “squeezed”. Because short-sellers are effectively betting on the price of a share falling, any increase in price will cost them money.

A short squeeze occurs when the share price rises so much that the losses become unbearable, causing short-sellers to throw in the towel and start covering their positions. Because covering involves buying back the shares that they have borrowed in order to sell, a squeeze should (in theory at least) drive the prices of GameStop’s shares even higher. It’s an alluring idea, but short squeezes rarely work for long and even when they do, they are usually followed by a dramatic fall as the shares’ supply and demand dynamics return to normal.

GameStop’s fundamentals are also very weak. Since it makes almost all of its money from selling physical copies of computer games in its 5,500 stores, its business has been eroded by the shift towards online sales, not only through Amazon but also owing to downloads of video games from the internet.

As a result, sales have declined from $9.3bn in 2016 to $6.4bn in 2020 – and are expected to go on falling to around $5.8bn in 2022. The company has also lost money since 2019. Note too that even if profitability were somehow to rise to 2018 levels, the stock would be trading at over 30 times earnings.

I therefore recommend that you short GameStop. However, given the chance that the attempted short squeeze could lead to further price rises in the short run, I would take the precaution of waiting until the price had fallen below $50 before pulling the trigger. In that case, I’d short it at £40 per $1, covering the position if it rises above $75. This would give you a total downside of £1,000.

Trading techniques... graduates from Aim

The Alternative Investment Market (Aim) was established in 1995 to make it easier for small companies to raise capital by floating on the stockmarket. The criteria companies need to fulfil before they list on Aim are less stringent than on the main market of the London Stock Exchange. Many people thought that Aim would also play a role as a “nursery” for smaller companies, with many becoming big and established enough to graduate to the main market. Indeed, between 2008 and the start of 2019, 65 companies moved from Aim to the main market, while 56 moved in the opposite direction.

In theory, moving from a smaller market (such as Aim) to a bigger one should boost a company’s share price, while a move in the opposite direction should bode ill. Firstly, since many investors will avoid Aim because it is seen as a risky market, moving to the main market should boost a share’s liquidity, making it easier for investors to buy and sell without moving the price. Moreover, because the regulatory requirements for the main market are more onerous, a move to the less tightly regulated Aim could be a sign of trouble that the firm’s management wants to hide.

However, a 2008 study by Oxford’s Tim Jenkinson and Tarun Ramadorai found that this was only half right. Between 1996 and 2006, the share price of firms shifting from Aim to the main exchange typically rose by an average of 6% after the switch was announced, while the stocks of those moving in the opposite direction fell by an average of 4%. But while the performance of the upward movers was neutral (compared with the market as a whole) in the year after they started trading on the main market, the downward switchers actually outperformed Aim by an average of 20%.

How my tips have fared

It has not been an encouraging fortnight for my long tips, with four out of five falling. Media group ITV declined from 110p to 102p and building company Bellway fell from 2,970p to 2,803p. Transport group National Express slipped from 258p to 244p. Cruise-ship company Norwegian Cruise Lines also dipped from $24.14 to $23.97. The only pick to buck the trend was pub group Mitchells & Butlers, which climbed from 238p to 277p. My long tips are now making a total net profit of £4,583, compared with £4,936 two weeks ago.

Most of my short tips went against me too, with five out of six appreciating. Online insurance broker eHealth went up from $70.98 to $82.97, electric-truck company Nikola advanced from $17.08 to $20.74, online furniture store Wayfair increased from $259 to $294 and online grocer Ocado rose from 2,478p to 2,800p. Food delivery firm DoorDash also gained – from $173 to $191.

The only exception was social network Twitter, which remained steady at $48. Overall, my short tips are making a total net profit of £1,490, compared with £2,066 two weeks previously.

I now have five long tips and seven short tips, which means that the portfolio is slightly biased toward short positions. All my five long tips are making money, so I’m not going to touch them, although I will increase the stop-losses on National Express to 200p (from 190p), Mitchells & Butlers to 220p (from 190p) and ITV to 80p (from 75p).

However, since Wayfair is losing money after nearly six months, I’m considering ditching it if things don’t improve. I’m also cutting the price at which you should cover your position in eHealth to $95 (from $100) and Nikola to $30.

This has been an extraordinary year for markets on both sides of the Atlantic. My trading tips coped well with the volatility, with my portfolio finishing the year in a much better position than 12 months ago. I started 2020 with 12 ideas. There were seven long positions: Safestore, Bellway, Bausch Health Companies, International Consolidated Airlines Group (ICAG), Taylor Wimpey, Volkswagen and DS Smith. There were also five shorts (bitcoin, Netflix, Uber, Wayfair and Twitter).

All of these were closed, most of them in the first three months of the year. Twitter was closed out at a loss of £1,005 in issue 983. In issue 985, I recommended that you take profits of £250 and £1,320 on bitcoin and ICAG respectively, and losses of £340 on Netflix. In issue 989, Safestore and Bellway were closed at profits of £932 and £1,782 respectively.

In issue 991, I recommended that you take profits of £2,643 on Wayfair, making it my most successful short tip of the year. In issue 993, Bausch Health Companies was closed out at the break-even point. Taylor Wimpey, DS Smith and Volkswagen were also closed out at losses of £840, £840 and £800 respectively. Finally, in issue 999 I closed out Uber at a profit of £170. Overall, of the 12 closed positions from 2019, six made a profit, five made a loss and one broke even. However, the gains outweighed the losses with a net profit of £2,462.

The year’s 24 trades

In addition to the tips taken over from 2019, I made a total of 24 recommendations this year. Thirteen were closed during the course of the year, and one was never triggered. My

Philip Morris International short, which I tipped in issue 981, broke even when it was closed in issue 995. My National Express long from issue 983 was closed in issue 993 a loss of £960. I had better luck with my recommendation that you short aerospace giant Boeing in issue 985; it made a profit of £1,633 when it was closed in issue 993: global pessimism was rampant in April.

My long recommendation on United Rentals, an industrial-equipment rentals company, in issue 987 was closed in issue 993 at a loss of £900. My suggestion to short Shake Shack, an absurdly overpriced burger joint, in issue 989 was closed in issue 995 at a loss of £20. My long ICAG tip in issue 991 was closed in issue 1011 at a loss of £930. My long Shell in issue 993 was closed in issue 1019 at a loss of £750.

The year’s best idea

My decision to revisit industrial-equipment rentals firm United Rentals in issue 995, owing to hopes of an infrastructure stimulus, was more successful as it was closed in issue 995 at a profit of £3,672. This proved to be my most successful tip of the year. My short online-dating agency Match idea in issue 999 was closed in issue 1007 for a loss of £990. My long JD Wetherspoon in issue 1001 was closed ten weeks later for a loss of £214, as restrictions and mandatory closures of pubs and restaurants continued to hit profits. My suggestion that you short Chinese online tutor GSX Techedu over concerns about the accuracy of its user count and overvaluation, in issue 1007, was cancelled in 1021, never having reached the price below which it would be triggered. This was a pity because it did eventually fall.

My tip to short Peloton, because I felt that its pricy bikes and online gym classes were a fad, in issue 1009, was closed ten weeks later for a loss of £990 as its sales and stock kept rising. My long ICAG in issue 1015 was closed in 1017 for a loss of £990. My long cruise operator Carnival Corporation in issue 1017 was closed in 1027 for a loss of £300. Overall, of the 13 tips made and closed this year, two made a profit, 11 made a loss and one broke even. But the losses only outweighed the gains by £990.

Open positions in the money

The real gains have come from the ten positions that I tipped this year and still have open – five longs and five shorts. All my long tips, and two out of five of my short ones, are making money. My long tips are mostly bets on life returning to normal, and all have gained from news of the vaccine. Media group ITV, tipped in issue 997, is making £1,044. Builder Bellway (issue 1019) is making £886. Transport company National Express (issue 1021) is making £897. Pub group Mitchells & Butlers (issue 1023) is making £720. Norwegian Cruise Line (issue 1027) is making a profit of £278.

Most of my short tips are tech shares: valuations are frothy and due a fall. Online insurer eHealth, tipped in issue 1003, is making £921. Electric-truck maker Nikola (issue 1005) is making £1,066. Online furniture retailer Wayfair (issue 1011) is losing £91. Social network Twitter (issue 1025) is losing £873. Online retailer Ocado (issue 1029) is losing £75. Overall, my open long tips are making a net profit of £3,825, while my short tips are £1,896 in the black, for combined profits of £5,721 – or in other words, a pretty good year.

Trading techniques: what I learnt in 2020

Markets can be more resilient that you think

Global equities rallied quickly after the initial plunge. The S&P 500 had fully recovered by August. I should have taken profits on my shorts more quickly.

Listen to short sellers

My tips to short electric-lorry company Nikola and online insurance broker eHealth are making large profits. In both cases the initial idea came from short sellers. As they risk their own money it gives them a strong incentive to get the research right.

Dividends are crucial

In April I advised buying Shell, based on the fact that it had vowed to protect its dividend. A few weeks later it suspended the payout for the first time since World War II. I closed my position at a loss.

Avoid returning to failures

At the start of the year, I vowed that I would avoid revisiting tips that had lost money. Yet I returned to ICAG, not just once but twice, with poor results both times. Still, at least I avoided shorting Tesla, which rose sixfold.

Adjust stop losses to the situation

Ironically both Shell and ICAG are now higher than the price I tipped them at. But because I had set my stop-losses too tight, I took losses on both those positions. It might have been better to have had a looser stop-loss and a smaller stake.

One of the big winners from the restrictions induced by the pandemic has been the online food-delivery firm Ocado Group (LSE: OCDO). Faced with long queues outside supermarkets, people switched to shopping online. As a result, Ocado’s sales surged by 43.7% during the six months to 6 October and at one stage the group’s market value had more than doubled from its level at the start of this year, briefly eclipsing Tesco as the most valuable retailer in the UK. Even today it is up by 75% year-to-date. Despite this, I think it is heading for a fall.

The first problem with Ocado is that it is not very good at actually making money. It last turned a profit in 2016 and is forecast to increase its losses in 2021; analysts suggest that it may be 2024 before it starts generating cash. While part of this is due to spending on overseas expansion, if it can’t make money during conditions that are ideally suited to an online retailer, one has to wonder when it will. By contrast, traditional supermarkets such as J Sainsbury and Wm Morrison have still been able to make money this year, despite the extra costs associated with Covid-19. Tesco’s profits have risen.

What’s more, while the crisis has strongly boosted online shopping in the UK, this has only encouraged the large supermarkets to invest money and resources developing their online delivery arms, which benefit from the fact that they can select goods from their extensive network of supermarkets. As a result, despite its surge in sales, Ocado has lost market share in the online delivery sector this year. The entry of Amazon into online delivery, in the form of Amazon Fresh, which is already available in certain parts of the UK, is another competitive threat that could not only erode market share further, but also drive down margins, making it even harder for Ocado to turn a consistent profit.

A tech bet

With the core operations unprofitable, Ocado is now pinning its hopes on being able to sell its delivery technology to supermarkets around the world in exchange for royalties. But agreeing deals has proved a protracted process and their potential profitability is uncertain, especially as they involve large upfront investment in warehouses. Nor is Ocado the only technology company in this field. It is also being sued in the US over possible patent infringement. Viewed in this context, Ocado’s valuation of 5.9 times 2021 sales seems extremely high.

With the shares down by 15% from their peak at the end of September, the market seems to be tiring of Ocado, so this is a good time to short the company at the current price of 2,259p, at £1 per 1p. Given the risks associated with shorting tech stocks, I suggest that you cover your position if it goes above 3,159p, giving you a total downside of £900.

Trading techniques: how debt affects stocks

Analysts are divided about the impact of issuing debt on a company’s share price. Some argue that it should have no effect, as while it makes the shares riskier, it also increases the potential returns.

Others think that the favourable tax treatment of debt (with interest payments at least partially offset against taxes) means that increased leverage should boost share prices.

Finally, there are those who claim that taking on more debt should be negative since it can be a sign that a company’s management is unable to use its existing resources effectively.

However, most studies suggest that issuing more debt has no impact on a firm’s stock, at least in the short term. A 1991 study by Dartmouth College covering 297 US debt offerings between 1980 and 1984, found that they had a statistically insignificant impact of -0.27% on share prices in the days following the announcement.

A more recent analysis by the University of Wisconsin in 1996, which examined 164 US bond issues in 1995, also found no statistically significant effect.

But this rule does not apply to companies that issue convertible bonds. As these bonds can be converted into shares if a company’s share price rises above a certain point, diluting existing shareholders, the market reacts negatively.

A 2012 study led by Eric Duca of Colegio Universitario de Estudios Financieros found that between 1984 and 1999 US companies that issued convertible bonds saw their share price fall by 1.7% when the issue was announced. Between 2000 and 2008, the reaction was more negative: the share price fell by an average of 4.6%.

How my tips have fared

This has been a good fortnight for my long tips, with four out of five of them appreciating. Media group ITV climbed from 95p to 100p, train and bus operator National Express advanced from 240p to 247p, pub group Mitchells & Butlers increased from 238p to 243p and Norwegian Cruise Line Holdings rose from $22 to $26.

The only exception was homebuilder Bellway, which fell from 3,112p to 2,885p. Overall, my long tips are now making a combined profit of £4,559, more than they were earning a fortnight ago.

Interestingly, my short tips have also done well, with three of the four falling. General Motors’s decision not to take an equity stake in electric-lorry maker Nikola has caused the latter’s shares to fall from $29.41 to $18.44.

Online health insurance firm eHealth also went down from $75.19 to $74.76, while online furniture retailer Wayfair also declined, from $256 to $236. The only share to buck the trend was social network Twitter, which advance from $44.94 to $48. Overall, my short tips are making a combined profit of £2,106, compared with £1,738 two weeks ago.

My nine open tips are making total profits of £6,665. I now have five long tips (ITV, National Express, Norwegian Cruise Line Holdings, Mitchells & Butlers and Bellway) and five shorts (Nikola, eHealth, Wayfair, Twitter and Ocado), which is a good balance.

With all but Twitter in the black, I don’t recommend that you close any positions. However, I suggest that you increase the stop-loss on Bellway to 2,725p (up from 2,700p) and do the same on both National Express and Mitchells & Butlers to 185p (up from 180p). My roundup of 2020 will be in the Christmas double issue, dated 25 December.

This has been a dismal year for the cruise ship industry. Not only was it shut down as soon as Covid-19 became a major problem, but the second wave of the virus has dashed hopes that sailing would be allowed to resume in the autumn. Most companies have not only cancelled all their remaining cruises this year, but they have also indicated that there will be few (if any) sailings taking place in the first three months of 2021, with some trips in the late spring also called into question.

Given this horrible backdrop, it’s not surprising that shares in Miami-based Norwegian Cruise Line Holdings (NYSE: NCLH), the third-largest cruise line in the world, have been crushed. At one point in March they were down by 85% from the start of the year. Even though they have more than doubled since then, they are still 66% below their 2020 high. To add insult to injury, the group has announced that it is going to issue more shares in an attempt to raise cash, which will result in its shareholders being diluted.

Buy at the bottom

Nevertheless, I think this is a good time to buy into the troubled company. Not only are several vaccines showing high levels of efficiency, but it looks as though the notoriously cautious US Food and Drug Administration, as well as the regulatory bodies of other countries, will start granting emergency approval to at least some of the most promising vaccines as early as mid-December.

Thanks to Operation Warp Speed, this will mean that millions of elderly and vulnerable Americans will be vaccinated before Christmas, with a large proportion of the population receiving the jab by Easter 2021. Given that the median cruise ship passenger is in their 60s, this should make large-scale cruising possible again. Even if the vaccination programme takes longer than expected, or officials want to wait until most of the population has been vaccinated, Norwegian has more than enough cash on hand to survive without having to tap shareholders again. The proposed dilution is only around 15%, a relatively small amount compared to companies in sectors that have also been hit badly (such as airlines).

With signs that there is a strong appetite for cruises, its 2019 price/earnings (p/e) ratio looks very attractive, especially given that the company more than doubled its sales between 2014 and 2019.

With Norwegian’s shares trading above both their 50-day and 200-day moving average, they are clearly benefiting from positive momentum, so this is a good time to go long on Norwegian at the current price of $22 at £100 per $1. Given the volatility associated with the market, I suggest that you have a looser stop-loss than normal of $12 to avoid being stopped out by sudden swings in price. This limits your total downside to £1,000.

How my tips have fared

The bullish overall market mood over the past fortnight has boosted my long tips, with four out the five appreciating. Media group and broadcaster ITV has climbed from 89p to 95p and homebuilder Bellway has risen from 2,831p to 3,112p. Train and bus operator National Express has gone from 218p to 240p and pub group Mitchells & Butlers from 218p to 238p. However, cruise operator Carnival Corporation not only fell from $19.25 to $18.18, but also briefly dipped below $15, which is the price at which I suggested that you set your stop-loss, so you would have sold it at a loss of £300.

Sadly, some short tips have also gained, eating into my net profits. Online insurance broker eHealth increased from $74 to $75.19, online furniture retailer Wayfair jumped from $235 to $256 and social network Twitter went up from $42.20 to $44.94.

Electric truck company Nikola rose from $18.63 to $29.41 owing to mounting speculation that it may be close to agreeing a deal with GM, while a bullish research note from a broker provided additional momentum. My short tips are making total profits of £1,738, compared with £2,124 two weeks ago.

My open tips are making combined profits of £5,970. With five long tips (Norwegian Cruise Lines, ITV, Bellway, National Express and Mitchells & Butlers) and four short (eHealth, Wayfair, Nikola and Twitter), my portfolio is reasonably well balanced. However, I’m going to lock in some profits by suggesting that you increase the stop-loss on Bellway to 2,700p (up from 2,650p) and on both National Express and Mitchells & Butlers to 180p (up from 175p). I would also lower the price at which you cover the eHealth short to $110 (from $120).

Trading techniques: are new bosses a buy?

Given that CEOs play a large role in determining a company’s strategy and operations, it’s no wonder that the appointment of a new CEO can have a significant impact on a firm’s share price. It can cause a rise in the stock price if the market thinks that the new CEO will improve the company’s performance. It can also cause the share price to fall if the market thinks the newcomer will either fail to live up to their predecessor or that the departure of the previous CEO suggests undisclosed problems.

However, a 2012 study by James M. Citrin of consultancy Spencer Stuart suggests that the initial reaction may not be that accurate, and may provide a poor guide to the subsequent performance of the firm’s share price. Between 2004 and 2009, 314 companies in the S&P 500 named a new CEO, with 49% rising, 49% falling and 2% essentially staying the same after the first day of trading.

Of those that saw their share price rise, a small majority (55%) saw their share price go up in the longer term. But of those that saw their price go down, a bigger proportion would see long-term gains after the first day. This effect was particularly marked when the announcement of a new boss led to dramatic moves. Indeed, of the 20 companies that saw a rise of more than 5% on the new CEO’s first day, less than half (40%) would see the share price continue to rise during the rest of time that the new CEO was in office. However, nearly four-fifths (79%) of the 14 companies whose shares plunged by 5% or more saw long-term gains.

This suggests that a contrarian strategy of waiting a day to gauge the market’s reaction to the change, and then buying the shares that fall by a large amount (and selling those that rise by a large amount) can work well.

This year has been a nightmare for the hospitality industry. One company that has seen its share price suffer a particularly brutal beating owing to Covid-19 is Mitchells & Butlers (LSE: MAB). When the stockmarket collapsed in mid-March, Mitchells &Butlers’ (M&B) shares fell to less than a quarter of the level they had reached at the start of the year.

Although they rallied strongly over the next few months, they have now started to fall again owing to the return of strict social-distancing measures and regional lockdowns. M&B’s share price is now two-thirds below its level of 1 January.

Still, there are some reasons to think that things aren’t as bad as the price would imply. The government’s furlough scheme has allowed M&B to cut costs drastically during the time its pubs and restaurants were shut, while the government’s Eat Out to Help Out scheme in August helped it recover some lost ground.

While total revenue has fallen by a third over the last nine months, compared with the same period last year, September sales were only down by around 7%. Meanwhile, M&B’s management has managed to persuade creditors and bankers not only to restructure existing debts, but also to increase lending facilities, thereby greatly expanding the group’s financial breathing space.

Of course, the latest wave of restrictions across large party of the country are hardly good news. However, their impact has been cushioned by the fact that the government has allowed pubs and restaurants that serve significant amounts of food to keep operating, even in areas under the tightest restrictions. Given that M&B derives much of its revenue from food sales, this has helped keep closures to a minimum, although some pubs in the North have had to be shut. With growing hopes that a vaccine could be approved in the coming weeks, there is a good chance that the restrictions could be relaxed in time for Christmas.

The bad news is in the price

If M&B does manage to get through the current crisis, then the upside for its shareholders could be very large. Not only does it trade at only nine times 2021 earnings (and just four times 2019 earnings), but its shares are also at a huge discount of 57% to the value of its net assets. While many of these assets are in the form of leases, it also owns the freehold of many of its pubs, which could potentially be sold to property developers in order to meet demand for houses and flats.

With M&B’s share now trading above their 50-day moving average, its looks as though market sentiment may have bottomed out and begun to improve. I suggest that you go long on the group’s shares at the current price of 163p at £12 per 1p. Given the stock’s volatility, I recommend a looser stop-loss than usual: 80p. This gives you a total downside of £996.

Unlike the US stockmarket, the FTSE All-Share has only partly recovered from its March collapse. It is still in bear market territory (defined by a decline of 20%), down by nearly a quarter from its peak at the start of the year. Many stocks have barely recovered at all from the collapse seven months ago.

While the reason for this poor performance is obvious in some cases, in others low valuations are harder to explain. One company that falls into the latter category is the homebuilding firm Bellway (LSE:BWY), which is still down by more than 40% from the level at which we closed our long position just before the crisis. It has slid by 45% from its peak this year.

Lockdown restrictions hurt developers such as Bellway by both slowing construction and freezing demand, which is why revenue is expected to fall by about a third this year. However, the construction industry is now back to normal, while all the signs suggest demand is also bouncing back.

Meanwhile, the pandemic has made remote working more appealing, and the trend will encourage people to consider living further from their offices. There has already been an increase in the number of people who are thinking about moving out of the cities (especially London). If this trend holds up it should be good news for Bellway given that most of its current and future developments are outside the major cities.

Boost from planning changes

In the medium term, Bellway also stands to benefit from changes to planning regulations being implemented by the government. These should make it easier to get approval to build more houses, especially in rural areas and small towns. Of course, the extent of these changes has proved controversial with some MPs, especially those representing seats in the south-east of England, who argue that they go too far. However, since there is a general recognition across the political spectrum that more homes need to be built to meet demand, they are unlikely to be watered down too much.

Given this backdrop, Bellway’s valuation looks even more attractive than when we tipped it last year. The developer trades at just under nine times 2021 earnings and is on a 9% discount to the value of its net assets. This is despite the fact that even if the expected fall in revenue this year materialises, sales will have grown by an annual average of 8% over the past six years, which is a solid track record.

Bellway has managed to use its resources efficiently, with a double-digit return on invested capital (a key gauge of profitability). Bellway also offers an impressive dividend of 4%. I suggest that you revisit Bellway by going long at the current price of 2,360p at £2 per 1p. Set a slightly looser stop-loss than usual at 1,760p, which gives you a potential downside of £1,200.

How my tips have fared

My four long tips have not fared especially well over the past fortnight, with three falling and one unchanged. Royal Dutch Shell’s decision to slash oil and gas production saw its shares fall from 1,078p to 978p, which meant the position was automatically closed out at 1,000p.

Industrial and construction equipment company United Rentals slid from $178 to $176, while cruise operator Carnival Corporation declined from $16.50 to $15.10.

Media group ITV, however, remained at 65p. Overall, counting Royal Dutch Shell, my long positions are making a net profit of £1,022.

My short tips were much more of a mixed bag. Exercise bike manufacturer Peloton increased from $81 to $96, which means you would have closed your position at $90. Online retailer Wayfair rose to $300 from $270.

However, online insurance broker eHealth stayed steady at $75, while electric lorry manufacturer Nikola fell from $35 to $19.30 in the wake of fraud allegations.

Online education provider GSX Techedu appreciated from $91 to $98, although since I suggested that you wait until it falls below $70 before shorting, this won’t have any impact on the overall profit and losses. Counting Peloton, profits on short tips fellto £646.

I now have four long tips (United Rentals, Carnival, ITV and Bellway) and three short ones (eHealth, Wayfair, Nikola and Peloton).

Since United Rentals continues to make a lot of money I’m not going to close it, though I will increase the stop-loss to $155 (from $150).

Given that the price of GSX Techedu is now substantially above the price at which I suggested you should start shorting it, I am close to suggesting that you should simply cancel the position.

The rally in US equities, with the benchmark S&P 500 index now up 40% from its low in mid-March, has left many stocks trading only slightly below their level at the start of this year. However, some technology shares have surged by even more as investors think that the crisis could lead to many activities traditionally carried out face-to-face being conducted online instead.

One of these is GSX Techedu Inc (NYSE: GSX), a Chinese company that specialises in after-school online tutoring. A year ago the shares were trading at barely $10. However, by January they had risen to more than $23. They are currently at $66: a 750% rise in a single year. But the firm’s meteoric rise, which follows the implosion of Chinese companies such as Luckin Coffee, has attracted attention from short-sellers, who have argued that things are not quite what they seem.

Do the numbers add up?

In particular, they claim that GSX is exaggerating the number of people attending its classes, with noted short-selling hedge fund Muddy Waters Research estimating that at least 70% of users are fake “online bots” (internet robots). Muddy Waters also claims that the group is understating its costs. As a result, it alleges that far from making a profit, GSX is actually an “empty box” that is making a loss.

Naturally, Larry Chen, the founder and chairman of GSX Techedu, disputes the allegations, claiming that the hedge fund doesn’t understand its business model. Still, even if you assume that the allegations are false and take GSX’s numbers at face value, the stock seems to be priced absurdly optimistically at 409 times trailing earnings. Even if earnings and revenues explode in the way that the company predicts – hardly a certainty, as once restrictions are removed people can access schools and tutors – it will still be trading on a 2021 price/earnings ratio of 80.

Another problem that should give investors pause for thought is potential competition. GSX isn’t the only company trying to make money from online tutoring. The sector has low barriers to entry (it is easy for potential rivals to get established), so GSX will be vulnerable either to losing business or to having its profit margins squeezed. So even if online tuition expands at the rate that Chen expects, GSX won’t necessarily be the one to profit from the trend.

I think that GSX is a prime candidate for shorting. However, with the stock price doubling over the last six weeks there is always the risk that it could surge higher before it starts to fall, especially if the short-sellers end up being “squeezed” (a manoeuvre where people buy shares in a company in an attempt to drive the price up and force short-sellers to cover their positions). So I’d wait until it falls below $50 before shorting it at £40 per $1. In that case, I’d also cover the position if it rises above $75, implying a downside of £1,000.

How my tips have fared

This last fortnight hasn’t been kind to my long tips, with all five declining. International Consolidated Airlines Group (ICAG) slipped from 264p to 225p; energy giant Royal Dutch Shell declined from 1,376p to 1,314p.

Television group ITV fell from 80p to 70p. The pubs were allowed to reopen in England last weekend, but pub chain JD Wetherspoon failed to profit; the stock slipped from 1,161p to 1,002p.

Even equipment company United Rentals, currently my most profitable recommendation, went down slightly, from $158 to $151. Overall, the profit on my long tips fell from £2,128 to £700.

The performance of my short tips was more mixed. On the one hand two out of the three went in my favour, with health insurance broker eHealth declining from $107 to $104 while electric truck manufacturer Nikola depreciated from $70 to $49.

However, online dating firm Match Group surged from $95 to a peak of $107. While it later fell back to $95, if you had taken my advice you would have automatically covered your position at $102, for a loss of $990.

This demonstrates that while stop-losses can prevent you sustaining large losses, they can also mean that you get stopped out of volatile positions. Counting Match Group, the overall losses on my short tips are $710.

I now have five long tips (ICAG, Royal Dutch Shell, ITV, JD Wetherspoon and United Rentals) and three short tips (eHealth, Nikola and GSX).

With my ultimate goal being to balance my long and short tips, I plan to add some more short tips in the next few weeks. However, since my oldest position was taken out in March, I’m not going to close any of my existing tips or suggest that you adjust any of the stop-losses further.

The jury may still be out on the long-term prospects of electric-car maker Tesla, with even founder Elon Musk admitting that it may be overvalued. But it has been one of the most successful investments of the past decade. The stock has risen 50-fold since it first went public in July 2010. No wonder, then, that investors have snapped up shares in similar companies, no matter how shaky their business model.

One such Tesla wannabe is lorry maker Nikola (Nasdaq: NKLA). Its founder and CEO Trevor Milton says that he wants to move both pick-up trucks and the haulage industry from petrol and diesel towards hydrogen power (hydrogen fuel cells convert the hydrogen into electricity, and there are no harmful emissions). The group also produces battery-powered electric vehicles. Milton claims that Nikola has already secured 14,000 orders for its trucks. Investors seemed to have hitched themselves to the company, with Nikola’s share price surging from $13 in May to a peak of nearly $80 before slipping back to the current price of $70.

Courting controversy

Despite this initial success, Nikola has already courted controversy, with Milton threatening to sue Bloomberg for libel. Milton claims that a Bloomberg article alleging that he misled investors in a presentation four year ago (by implying that a prototype Nikola articulated lorry that he showcased could be driven, when it was in fact missing key parts) is “misleading”. Prominent short-sellers such as Andrew Left of Citron Research have argued that Nikola is extremely overvalued. Nikola has even incurred the ire of Tesla’s Musk, who called its technology “staggeringly dumb”.

Criticism from competitors and short sellers is one thing, but there are some solid reasons to be sceptical of Nikola. Firstly, it hasn’t actually produced anything yet. While it claims to have a significant number of pre-orders, it won’t start low-volume production of battery-powered electric pick-up trucks until next year, with the hydrogen-powered heavy goods lorries not arriving until 2023. Even its own projections admit that it will take time to build enough hydrogen fuel stations to make the technology attractive to haulage companies.

Nikola’s vehicles will also be launching into a market that is already extremely competitive. In addition to Tesla, big manufacturers such as GM and Ford are planning to launch electric pick-up trucks next year, alongside offerings from startups such as Lordstown, Rivian and Bollinger. Similarly, Tesla, Daimler and Nissan have either launched electric heavy lorries or want to do so soon. The upshot is that the shares should fall further. I recommend shorting them at the current level of $70 at £20 per $1. Given the high degree of volatility, I suggest a looser stop loss than normal, covering your position if they go above $115. This gives you a potential downside of £1,000.

The sort of volatility we’ve seen during the coronavirus outbreak tends to draw new traders to the stockmarket like moths to a flame. Spread-betting firm IG Index recently reported an influx of 22,500 clients in just 36 days. The problem is, most new traders are ill-prepared to cope with the realities of trading. Understanding the five concepts in this article won’t turn you into a stockmarket wizard overnight, but it might help you to avoid being the proverbial moth – and give you a better idea of whether trading would suit you or not.

1. Position sizing: don’t bet the house on one stock

The two most important concepts to understand before trading are “position sizing” and “risk management”. The size of your positions determines your level of risk – your potential capital loss. Many new traders pile in with a large percentage of their portfolio, which is their first mistake. They then see those positions gradually eroded, because new traders aren’t prepared to cut their losses. This is their second mistake. “The first cut is the cheapest” is one of the best-known market mantras for a reason. Of the traders I know who have blown their accounts, every single instance was due to having either too much exposure to one position, a failure to cut losses early, or both.

The goal when position sizing is to make your position big enough to mean something, but not large enough to do serious damage. You will inevitably get hurt when trading. Avoiding overexposure to any one position is the only way to significantly mitigate the very real risk of blowing your account. I never put more than 10% of my total account into a single stock – not even for a short-term trade. For example, many traders piled in after seeing the directors of beer, wine and spirits supplier Conviviality buying the stock in March 2018 in the wake of a profit warning– yet just four days later the listing was suspended and eventually the share price was written down to 0p. The total loss of 10% of a portfolio is painful – but it’s not fatal.

A further trick with position sizing is to scale your positions. When you’re winning consistently, you want to be gradually increasing your position sizes in order to compound your account faster. For example, if your overall portfolio grows by 10%, you can increase your position sizing by 10% too. Remember, however – this is even more critical when losing. By scaling down your accounts when losing, you increase the number of trades you can place before you blow your account. Remember: capital preservation is key in this business. Downside risk must always come first.

2. Risk management: always know the downside

The size of your positions may vary depending on the placement of your stop-loss (the point at which you will exit the trade if it is going against you), but you should aim to keep the risk per trade a consistent size. If you are not consistent about how much money you can lose on any one trade, then how can you expect to make consistent profits? Losing isn’t a choice – but the amount you lose is always a choice. If you can keep your nicks and cuts small, and minimise your risk each time, then you give yourself the opportunity to stay in business.

Here’s an example. Say we have two trading positions of £2,000 and £4,000, with a 10% stop on each. In trade one we will lose £200, and in trade two we’ll lose £400. However, in some positions, a looser stop will be required. If “support” (a technical analysis term referring to a level at which the share price has historically rebounded) is 15% away and we are running a 10% stop, then it’s likely we’ll be flushed out of the position.

To adjust our position size for risk, we first take our monetary risk on the trade (the amount that we are prepared to lose on the position) and divide this by the difference between our entry price and intended exit price (or stop loss). This gives us the number of shares that we need to buy.

So say we wanted to buy shares in Sammy’s Sandwiches at 20p and if it falls to 16p, we’ll cut our losses. This would give us 4p risk per share (the difference between the entry and exit). Now say we want to risk a maximum of £500 on the trade. Our calculation would be £500 / 4p = 12,500 shares to buy. Using this calculation, you can keep your risk constant, while adjusting your position sizes for better entries.

3. Be consistent

One of the most poorly understood aspects of trading is this: you need to be consistent in order to be successful. Many get-rich-quick marketers push the idea that traders can work whenever they want, wherever they want (I discussed this in my previous MoneyWeek article looking at scam artists promoting binary options “signal” schemes). However, while the market gives potential traders unlimited freedom and creativity of expression – which is one of its most attractive features – the reality is that you are restricted. You must focus your creativity in certain areas. The best traders follow the same routine, day in, day out, and they’ll trade the same set-ups over and over again. Many spread-betting providers have flashing lights all over their platforms, designed to entice you into taking a position. But trading is about working outside of market hours and the mechanical execution of the strategy you have already mapped out.

One trick I use to remain consistent is to create checklists and reminders on my laptop. A simple reminder that the opening auction is starting means I’m less likely to miss it because I was too absorbed in a piece of news. Human beings are terrible at multitasking – the brain can hold only a few pieces of information in its working memory at any one time. Having a checklist of questions such as “does this trade meet my criteria?” and “is this trade a part of my strategy?”, will help you resist impulsive “boredom trades” and ensure you are trading in line with your goals.

4. Keep a trade journal

If you don’t get into the habit of journalling or tracking your progress, you’ll struggle to improve. It is very hard, if not impossible, to identify the consistent failures in your trading if you are not logging them – you can’t fix a problem if you don’t know that you have one. Noting small successes as well as areas for improvement will give you tangible opportunities to improve. Trading can also be an emotional sport. A journal will help keep you accountable for your mistakes. By keeping yourself in check, you avoid the risk of trading on “tilt” – that is, trading on emotional reactions rather than logical judgement. Many accounts have been blown by traders who were no longer thinking straight for extended periods.

One trick to avoid becoming too emotional is to think of the money in your account as points, not pounds. I also write down notes about what’s going on in the world and how it may be possible to profit from the various scenarios. When Covid-19 started ravaging Italy and it was clear this was a serious global threat, I began to look for stocks that would suffer in order to short them. It’s also useful to think of, and write down, three trading ideas to explore. If you can consistently create fresh ideas, some of these will eventually move from being intangible thoughts in your journal to becoming tangible profits in your account.

5. Don’t pay up for a good story

As any good salesperson knows, stories sell. Firms often attract investors using a good story, typically involving a bold claim about owning world-changing technology, for example. The technology may exist – it may even work – but owning a working technology and commercialising it are two different things. However, as with any good story, there are usually plenty of keen listeners to be found. Fever can strike any stock and bring hordes of delirious punters bidding it up to stratospheric levels. Riding this fever can be profitable to trade – but don’t get left holding the baby when it comes back down to earth. Focusing on your strategy will give you a much greater chance of success than listening to the siren stories of the stockmarket.

The key points to remember

Trading isn’t easy, but proper preparation raises your odds of success. If you are tempted to dabble in trading stocks, only do it with money you’re fully prepared to lose, and remember these six key practical tips.

• Never risk more than 10% of your account in a single position, but be prepared to lose 100% of every position you trade – because one day you will.

• Scale position-sizing up when you are winning and down when you are losing.

• Keep your risk levels constant – use the equation “monetary risk/risk per share” to work out how many shares you need to buy.

• Use checklists and alerts or reminders to keep a consistent routine and to avoid relying on working memory – this decreases decision fatigue.

• Keep a trading journal for accountability and generating trade ideas.

• Know how to spot a good story but never fall in love with a stock – don’t overstay your welcome.

For more from Michael, visit shiftingshares.com

Since the US stockmarket collapsed two months ago, it has enjoyed a massive rally, with the benchmark S&P 500 index gaining 30% from the trough. As a result, shares in many companies are now trading close to their pre-crisis highs. One of these is Match Group (Nasdaq: MTCH), which owns a portfolio of dating websites, notably Tinder and Match.com. The stock has rallied by 70% and is now nearly 25% above its level in early March and a mere 15% below January’s record peak. Yet the company has been beset by regulatory and structural difficulties.

Some of the regulatory ones are relatively minor. They include claims that it didn’t follow proper guidelines when sharing users’ data with third parties. However, others appear much more serious and could threaten Match’s “freemium” business model. For the past three years the US Federal Trade Commission (FTC) has been investigating allegations that Match.com has knowingly turned a blind eye to scammers contacting members of the free service, because it knows that they play a large role in getting irritated users to upgrade to the paid version.

See you in court

After talks between the FTC and Match over a settlement broke down last summer, the FTC said that it would sue Match, while the Department of Justice has announced an investigation. These lawsuits risk drawing Match into a protracted legal battle that could prove expensive as well as damaging to Match’s reputation. Match.com may ultimately be forced to make changes to the way it operates, which could hamper its ability to convert users of its free services into paying customers.

Meanwhile there is evidence that the Match Group’s year-on-year revenue growth is starting to slow drastically, falling from around 18% between 2014 and 2019 to single digits in the last month. It is now increasingly depending on Tinder to fuel future expansion, with growth in the rest of the company broadly flat.

Some of this may be temporary: lockdowns and social distancing mean people are unwilling to spend money on dating services when they can’t meet people in person. But there is also growing evidence that Match’s core North American market has reached saturation point, with even Tinder peaking.

And there is another sign that Match’s prospects may be less rosy that they appear. Its major shareholder, holding company InterActiveCorp, announced a few months ago that it would cut its ties with Match. As a result the dating group’s debt will increase substantially.

Given all this, its valuation of 33 times 2021 earnings and 6.7 times 2021 sales is excessive. Consider shorting it at the current price of $80, for £45 per $1. I suggest you cover your position if it goes above $102, well above its all-time high, giving you a potential downside of £990.

Americans may disagree on many things, but most tend to think that more money needs to be spent on the nation’s decrepit infrastructure. Governments at both state and national level face huge bills for fixing ageing roads, dams and bridges; they also need to build more in order to meet the needs of a growing population and economy. Last year the American Society of Civil Engineers estimated that $4.5trn needed to be spent to bring America’s infrastructure up to what it considered to be an acceptable standard by 2025.

While such plans may seem ambitious, President Trump’s potential opponents in November are now talking about spending around $1trn on repairs and upgrades over the next four years. Earlier this month, Trump himself floated the idea of a $1trn ten-year plan concentrating mainly on highways.

While Trump’s plan is less ambitious than the Democrats’, he seems to be coming around to the idea that these investments should be directly financed by the US government instead of being partly funded by the private sector. This means that whoever wins in November there will be a large increase in spending.

A fast grower at a reasonable price

All this is good news for United Rentals, Inc. (NYSE: URI), which stands to benefit from any increase in construction spending. United Rentals specialises in renting industrial equipment and aerial platforms to the construction industry. While it has a small presence in Europe, it gets most of its revenue from the US and Canada, where it has approximately 13% of the market.

A combination of acquisitions and organic growth has enabled it to increase revenue by nearly two-thirds from $5.86bn in 2014 to $9.61bn last year. This represents an average sales growth rate of around 10% a year, while it achieves a return on capital invested of around 10%.

While United Rentals’ growth potential looks exciting, its valuation looks extremely reasonable. The company is trading on a mere 7.2 times estimated 2021 earnings. For comparison, the S&P 500 as a whole has a 2021 price/earnings ratio of 23. The reason for this low valuation is that many people worry that if the economy starts to slow down, construction spending will be first to fall.

While construction is normally a very cyclical industry, as it tends to do worse than other sectors during recessions, the backlog of work means that the government may try to use infrastructure spending to stimulate the economy. United Rentals also looks auspicious from a technical perspective, with the share price above the 100 and 200-day moving averages, and reasonably close to the 52-week high. I suggest going long on United Rentals at the current price of $153 at £25 per $1 (compared with IG Index’s minimum of £8 per $1). Cover your position at $117, giving you a downside of £900.

Trading techniques: what’s in a name?

While companies can change their names for legitimate reasons, such as a merger, sometimes they have a more cynical motivation. During the late 1990s, many firms rebranded themselves as “dotcoms” in an attempt to cash in on the craze for internet stocks.

Even though the core business of these firms didn’t change, they still subsequently saw their prices rise before crashing back to earth when the market soured on tech stocks. Similarly, while Long Island Iced Tea’s stock briefly tripled in value after it changed its name to Long Blockchain in late 2017, reflecting the craze for the digital ledger technology underpinning bitcoin, this didn’t stop it being delisted a few months later.

There is further evidence that name changes can boost share price in the short term. A 2013 study by Robert Mayo of George Mason University of 25 such name changes in 2010 found that the share prices of these companies outperformed the market by an average of 4.4% in the 30 days after the name change was announced.

A 2011 study by Farooq Durrani of Brock University found similar short-term positive returns for Canadian shares between 1997 and 2011, both when the name change was approved and when it came into effect.

However, the evidence also suggests that in the longer run a name change bodes ill. A 2007 study by the universities of Coventry and Portsmouth examined 803 name changes in the UK between 1987 and 2002. It found that companies that changed their names lagged the market for up to three years.

Investors may have decided that managers were either overconfident about the future or trying to use the name change to hide the fact that the firms involved were in trouble.

How my tips have fared

My long positions have done well over the last fortnight, with six of the seven tips rising. Storage firm Safestore climbed from 801p to 855p, homebuilder Bellway increased from 4,077p to 4,243p, car manufacturer Volkswagen advanced from €163 to €172, building firm Taylor Wimpey climbed from 219p to 232p and recycling firm DS Smith rose from 357p to 358p. Coach and bus company National Express ticked up from 441p to 442p. The only share to decline was drug company Bausch Health Companies, down from $27.91 to $27.74. Five out of seven of my long tips are making money, with overall profits of £4,819.

Sadly, four out of my five short tips also appreciated. Ride hailing service Uber rose from $37.15 to $39.66 while social network Twitter increased from $32.85 to $37, which means that you would have covered your position at a loss of £1,006.

Tobacco company Philip Morris International advanced from $83.20 to $88.50, while aircraft manufacturer Boeing climbed from $318.27 to $338.37. The only short tip that fell was retailer Wayfair, down from $99 to $82.60. Counting the losses on Twitter, my short tips are in the red by a total of £662, up from £324.

I now have eight long tips and four shorts, while I would much prefer to have a portfolio that is evenly balanced. The two most obvious targets for closure are Safestore and Bellway, which I tipped nearly a year ago, but they are doing so well that I can’t really justify suggesting that you close your positions.

Instead, I’m going to lock in some profits by increasing the stop losses on Safestore to 800p, while also increasing the stop losses on Bellway to 4,000p. I will come up with more short ideas in the next few columns.

It’s been a lousy year for shareholders in Boeing (NYSE: BA). After the Ethiopian Airlines 737 Max disaster last March – which came shortly after a Lion Air plane of the same model crashed – regulators around the world quickly moved to ground the plane. Boeing was forced to suspend the delivery of orders, which hit revenue.

A recent release of internal emails revealing a lack of confidence in the troubled aircraft and an apparent attempt to mislead regulators has only thrown fuel on the fire. So it’s not surprising that shares have fallen by a third this year. However, it’s possible that there could be worse to come.

Boeing has three main problems. In the short term the return of the 737 Max may take a lot longer than initially anticipated. Although Boeing initially assumed that it was just a matter of fixing the plane’s software, as well as training pilots, it now looks as though the company may need to make more radical (and expensive) changes to the design before regulators approve its return.

Indeed, the derogatory comments about the US Federal Aviation Administration (FAA) contained in the internal emails, as well as a general perception that the FAA was just too close to Boeing, may prompt the regulator to impose stricter requirements, which could cause additional delays.

The long-term consequences

Then there are the longer-term ramifications to consider once the Max is allowed back into the air. The two disasters and subsequent events have badly damaged the reputation of the plane, so airlines will be reluctant to purchase aircraft that customers feel uneasy about flying in. Airlines are also starting to lose confidence in Boeing as a supplier, with Ryanair claiming that the crisis has curtailed its planned expansion. Both of these factors may lead to Boeing losing market share to its long-standing rival Airbus, which recently surpassed Boeing’s rate of production for the first time in nearly a decade.

All these problems wouldn’t matter so much if Boeing’s space and military division, which accounts for around a third of its revenue, were doing well. However, despite a large increase in US military spending, defence and space sales actually fell at the end of last year, as the business lost market share to rivals Lockheed Martin and Raytheon. As a result, it is hard to see how the stock can justify a valuation of 31 times 2020 earnings, compared with 18.7 for Airbus, 17.7 for Lockheed, or 17.1 for Raytheon.

Boeing’s shares are close to their 52-week lows, so it’s clearly suffering from negative momentum. This is therefore a good time to short the aerospace company at its current price of $318.27 at £10 per $1, compared with IG Index’s minimum of £4 per $1. Cover your position at $400, which gives you at total downside of £863.

Trading techniques: are IPOs a timing tool?

An initial public offering (IPO) occurs when a privately owned company is floated on the stock exchange for the first time (as opposed to a secondary offering, where an already listed company sells additional shares to raise money). One theory holds that the number of IPOs on the market is a contrarian indicator; a high figure suggests that insiders are rushing to cash in on an overvalued market. Conversely, a low number of IPOs is an indication that insiders think that the market is undervalued, and they can get a better price in the future if they hold off.

There is some anecdotal evidence that the number of IPOs tends to increase during bull markets and fall during bear markets. For example, according to Jay Ritter of the University of Florida, there were 476 IPOs in the United States at the peak of the dotcom boom in 1999, but only 79 two years later. Similarly, while there were 157 IPOs in 2006, this had fallen to 41 by 2009. The amounts of money raised displayed a similar pattern: it fell by 85% between 1999 and 2003, and by over 60% between 2006 and 2009.

Sadly, using IPOs to time the market can lead to you getting out of the market too early. If you had sold up in 1996, when there were a record 677 IPOs, you would have missed much of the bull market that took place during the second half of the 1990s.

The same would have happened to those who moved away from shares when the number of IPOs increased from 41 in 2009 to 206 in 2014. In any case, it’s important to realise that the rise of private equity and venture capital has led to a long decline in the number of IPOs.

How my tips have fared

My long positions have generally been hit by the fall in the stockmarket triggered by the coronavirus outbreak. Five of the eight have declined.

Bausch Health Companies slipped from $30.45 to $27.91; Volkswagen from €182 to €163. International Consolidated Airlines Group dropped from 657p to 633p, while DS Smith went down from 380p to 357p. National Express slipped from 473p to 441p.

The only bright spots were Safestore, which went up from 777p to 801p, Taylor Wimpey advancing from 214p to 219p and Bellway rising from 4,055p to 4,077p. The overall profit fell from £6,254 to £5,204.

The good news, however, is that three out of my five short positions fell. Retailer Wayfair dropped from $107 to $99, social network Twitter went down from $34.22 to $32.85, and tobacco giant Philip Morris International decreased from $88.69 to $83.20.

However, the digital currency bitcoin rose from $8,659 to $9,275, which means that you would have covered your position at $9,000, for a profit of £250 had you taken my advice in the last column. Ride-hailing network Uber also advanced from $35.13 to $37.15. My remaining short tips are making a loss of £324.

Taking into account the latest tip to short Boeing, this still leaves us with eight short tips and five long positions, which is very unbalanced. With air travel likely to be hit by coronavirus, I suggest you take profits of £1,320 on International Consolidated Airlines Group. That cuts the number of long tips to a more reasonable seven. I also suggest you raise the stop loss on Safestore, which I have held for a long time, to 785p, as well as increasing the stop loss on Bellway to 3,800p (from 3,600p).

With the general election taking place on Thursday 12 December, I think you should bet on Labour to retain Edinburgh South at 2/7 (78%) with Bet365. While Labour is set to do badly in Scotland, the SNP is unlikely to overturn a majority of 15,514 in a pro-union constituency. I also think you should bet on Labour to retain Birmingham Egbaston at 4/9 (69.2%) with Bet365, especially as it would require a large Conservative swing in an area that narrowly voted to remain in the European Union.

While the Conservatives came within inches of ousting the then-MP Glenda Jackson in 2010, Hampstead and Kilburn is now a safe Labour seat. Given that the area voted heavily to remain in 2016, and the Liberal Democrats are going nowhere, the 1/4 (80%) with Bet365 on Labour looks very good value. Similarly, Westminster North, where Labour MP Karen Buck (pictured) has a majority of 11,512, is another London seat that Labour should retain, so you should take them at 1/6 (85.7%) with Bet365.

I'd also take Paddy Power's 1/5 (83.3%) on Labour to retain Bristol West. While the Lib Dems won this seat in 2005 and again in 2010, Labour's Thangam Debbonaire captured it in 2015, and then retained it two years later with a majority of more than 37,000 with the Lib Dems behind both the Greens and the Conservatives. Finally, I'd bet on Labour to win Leicester East at 2/9 (81.8%) with Bet365 as this is one of the safest seats in the country with a majority of 22,428.

Consumer packaging isn't one of the most glamorous industries, but you should still pay attention to it because it's currently undergoing considerable change. In the past few years consumers have realised that plastic packaging can be bad for the environment because it is very difficult to recycle and usually ends up buried in a landfill or even dumped in the ocean. As a result, supermarkets and retailers are coming under increasing pressure to reduce the amount of plastic packaging they use and find a way to eliminate it entirely from their stores.

This may be bad news for some retailers and manufacturers since it will cost significant sums of money to find alternative materials that are as effective as plastics. After promising to go plastics-free by 2023, Iceland recently had to go back to the drawing board, after removing plastics in one store reduced sales by 20%. However, the anti-plastic movement is also good news for DS Smith (LSE: SMDS), which focuses on making corrugated packaging (cardboard containers) for clients in 37 countries, mostly in Europe and North America.

A tailwind from online retail

Because cardboard-based products are much easier to recycle than plastics, as well as biodegradable, many retailers are embracing them as being more environmentally friendly. Environmental concerns aren't the only reason the volume of cardboard packaging has been increasing. The rise of online retailing, which requires packaging to be cheap, durable and light, has further boosted demand for cardboard.

DS Smith doesn't just make its money from packaging. It also helps companies pack and ship the containers and operates a recycling and waste-management division. The company is set to take advantage of the increased awareness of environmental issues by significantly expanding its recycling operations in Europe. This will help maintain its record of strong growth, with DS Smith's sales growing by over 60% over the past four years. Net profits have expanded even faster, rising by 75% during the same period. The return on capital, a key gauge of profitability, is a solid 7%.

Despite its strong growth, DS Smith is still valued at a relatively modest 10.7 times 2020 earnings, with a solid dividend yield of 4.6%.

There is always a chance that an economic slowdown could hit profits by reducing the volume of packaging needed. However, as Chris Hiorns, manager of the Amity European fund at EdenTree Investment Management, points out, most of its clients operate in relatively defensive sectors such as consumer staples and food. This puts it in a good position to weather any downturn.

With DS Smith's shares just below their 52-week high, I recommend that you go long at the current price of 384p at 10p per £1. I also suggest that you set a stop-loss at 289p, which would give you a total downside of £950.

How my tips have fared

This has been a good fortnight for my seven long tips, with all but one of them rising. JD Sports went up from 751p to 794p, Safestore surged from 697p to 736p and Bellway increased from 3,253p to 3,414p.

Bausch Health Companies rose from $26.21 to $27.70 and International Consolidated Airlines Group advanced from 541p to 569p. Taylor Wimpey also went up from 172p to 175p.

The only long tip that declined was Volkswagen, which fell from €181 to €176. Not only is every long tip making a profit, but collectively they are also making £6,433, up from £5,078 two weeks ago.

Most of my short tips moved against me, however, with four out of five of them appreciating. Netflix went up from $293 to $315, Uber from $26.71 to $29.11 and Wayfair from $81 to $85.

Twitter also went up from $29.21 to $30.54. The only tip that went in my favour was bitcoin, which fell from $8,723 to $7,094. Still, three out of my five short tips are still making money, with the shorts making a collective profit of £1,926. Nonetheless, this is down from £2,767 a fortnight ago.

Counting DS Smith, I will be bringing eight long tips and five shorts into the next fortnight. Not only does this mean that I have far more long tips than shorts, but having 13 different positions also makes my portfolio a bit unwieldy.

As a result, while I am not inclined to recommend that you close any of the positions immediately, I have decided to have a big clear out at the end of the year, with a view to taking profits on some long-standing long tips, some of which are nearly a year old.

Until then, I'm going to raise the stop-losses on JD Sports to 750p (from 700p), Safe store to 675p (from 650p) and Bellway to 3,200p (from 3,000p).

Trading techniques: elections and sterling

Stocks usually rally the day after an election finishes. However, this doesn't seem to apply to sterling. On the last 12 occasions it fell against the dollar the day after the vote seven times, barely budged three times and rose only twice. While the two increases took place after unexpected Conservative victories in 1992 and 2015, the falls occurred after hung parliaments (1974, 2010 and 2017), Tory landslides (1983 and 1987) as well as Labour victories (2001 and 2005).

The good news for those considering backing sterling is that in the medium term the position is reversed. In nine out of the last 12 elections sterling has ended up higher against the dollar three months after election day, rising by as much as 9.1% between May and October 1979. Sadly for tradersthere doesn't seem to be any consistent pattern to the times that it falls, with the declines occurring in 1983 and 1987 (when the Tories won largemajorities), as well as 2005(when Labour won a comfortable majority).

Increasing the time frame to a year after election day changes the picture further, with sterling up against the dollar in seven out of the last 12 elections and down in the other five. Again, though, the winning party or the size of any majority doesn't seem to have any impact on sterling's performance, with sterling up on the one-year anniversary of the Conservative victories in 1979 and 1987, but down a year after their wins in 1983, 1992 and 2015. These results suggest that there is unlikely to be any special benefit from buying or selling sterling during, or immediately after an election.

With just a fortnight to go in the UK election campaign, several things are starting to become clear. Firstly, the Liberal Democrats are going nowhere. Next, Labour is slowly but surely closing the gap with the Conservatives, a process that may be speeded up by recent revelations regarding trade discussions with the US. Thirdly, the Scottish National Party (SNP) surge is likely to be modest, perhaps because Scottish voters are strongly opposed to another independence referendum.

I therefore suggest that you bet on the SNP getting under 45.5 seats (45 seats or less) with Ladbrokes at 5/6 (54.5). I'd also take Ladbrokes' bet on them getting either 30-39 seats at 5/1 (16.7%) and 40-48 seats at 4/7 (63.6%), for combined odds of 80.3%. In this case I'd put £2.08 on them getting 30-39 and, £7.92 on them getting 40-48.

In terms of individual constituencies, I'm going to bet that Labour will hold Eltham (where I live). This seat used to be pretty marginal, but has been moving towards Labour in recent years and is now down to 88th on the Conservatives' list of targets. I'd therefore take Paddy Power's 8/11 (57.9%) on Labour holding on.

Finally, I'm also going to tip Labour in Bermondsey and Old Southwark at 8/13 with Bet 365 (56.5%). At the start of the campaign many pundits assumed this would be an easy Lib Dem pickup, since Simon Hughes held it until the 2015 election. The truth is that this is now a solid Labour area, as shown by Neil Coyle's majority of nearly 13,000 at the last election.

Even though there may not be an election until next year, Ladbrokes recently extended the range of parliamentary seats that it is taking bets on.

One obvious opportunity is Burnley, currently held by Labour's Julie Cooper. She won the seat in 2015 and retained it in 2017 with an increased majority of 6,373. Ladbrokes put a Labour victory at the next election at evens (50%), with the Conservatives at 2/1 (33.3%). The Liberal Democrats are at 4/1 (20%) and the Brexit Party is at 10/1 (9.1%).

The Lib Dems won this seat in 2010, so you'd think that they would be in with at least a chance of victory. However, since the area is heavily pro-Leave with two-thirds of the constituency voting to quit the EU, it's no surprise that they did dismally last time around, getting only 15% of the vote. While the Conservatives still have an outside chance, they will have a long road to climb to clinch a seat that is number 97 on their target list, so I'd stick with the evens on Labour.

One seat that will definitely be remaining Labour is Manchester Withington, won in 2017 by Labour's Jeff Smith (pictured). While the Liberal Democrats prevailed there in 2005 and 2010, Labour won it in 2015 and again in 2017, with a massive majority of just under 30,000 votes. It's also important to note that even at the last European election Labour beat the Lib Dems in the Greater Manchester area. Overall, then, I'd take the 1/8 (88.9%) on the Labour candidate.

Punters had thought it a long shot, but now bettors have swung firmly behind the idea of Donald Trump being impeached by at least one House of Congress. With £578,000 matched on Betfair, the odds of Trump being impeached have shrunk to 1.53 (65.3%). Bookmaker Paddy Power is offering similar odds of 1/2 (66%), However, bettors still think that Trump will serve out his full term in office you can get odds of 4.4 (22.7%) on him leaving before the end of the first term.

Full impeachment still seems unlikely because it requires support from two-thirds of the Senate, which means getting Republican senators to support it. Many of them may be privately happy to see the back of Trump, but few will risk the wrath of Republican voters unless there is some new shocking revelation. It's easier for the Democrats to win a vote in the House of Representatives as they need a simple majority.

Of course, just because they could win it doesn't mean they will actually manage to do so. House speaker Nancy Pelosi is clearly worried about the potential public backlash, especially with the presidential election just over a year away. Still, on balance I would take Betfair's odds on impeachment by the House (but not the bet on him leaving office early). Even if there are no additional revelations, the Democrats have come too far to stop. Indeed, if they don't end up impeaching Trump, he will use this as evidence for his claim that the allegations were nothing more than "fake news" all along.

Even after recent regulatory changes designed to limit the risk to the punter, financial spread betting remains a multibillion-pound industry. Spread bets are an easy way for retail investors to take punts on price moves that would otherwise require you to buy exotic financial instruments, but you can also spread bet on politics. Sporting Index has an open market on the number of seats that each individual party could win at the next election, for example. As in ordinary spread betting, you buy or sell seats and then make (or lose) the difference between the purchase price and the final amount, multiplied by your stake per seat.

So if you buy Labour at 230 (the current buying price) at £1 per seat, and they get 300, then you make £70. If you sell at 222 (the current selling price), then you lose £78. If you think that the price no longer offers value you can close your position by selling (or buying) an equivalent amount to your original bet. There is no upfront charge, the spread-betting firms make their money on the difference (or spread) between the buying and selling price.

At the moment Sporting Index thinks that the Tories will fall short of a majority, but remain the largest party, at 302-310 seats, and that Labour will lose seats, slipping to 222-230. At the same time it expects the SNP (the party's leader, Nicola Sturgeon, pictured) to advance to 45-49, the Lib Dems to rise to 44-48, the Brexit Party to get 4-5.5 and the Greens2-3. I'd wait until an election date has been decided before placing any bets.

The ride-hailing app is still bleeding red ink and looks absurdly overvalued.

For the first five months of this year the only thing people were talking about was how much money Uber Technologies (NYSE: UBER) would raise from its initial public offering (IPO). At one stage many people were expecting the ride-hailing app to receive so much money that it would be valued at more than $100bn.

But while the IPO wasn't a total flop and remains the largest flotation this year, it wasn't a massive success either. The share price immediately fell to $41 a share from the $45 it listed at. Since then it has done badly, withthe price now falling to at $35. But it could goeven lower.

The reason why Uber's shares have been struggling is that it has failed to turn its sales into earnings, losing an estimated $5.2bn in the last three months alone, as well as being expected to lose another $6bn next year.

On the face of it, this shouldn't necessarily be fatal since many technology companies are currently seeing their share price soar despite not making a profit. However, while they at least can claim that they are still building up their business, Uber has been around for over a decade far beyond the point at which it should really have started to make money.

A hypercompetitive market

The real problem with Uber is that its core business, hailing taxis via smartphone apps, is highly competitive, with low barriers to entry and consumers who will switch service in the blink of an eye if they can find a slightly cheaper deal somewhere else. And it's not just a case of consumers switching: drivers are also beginning to demand higher pay and better conditions.

As a result, Uber has steadily been losing market share to rivals such as Lyft, despite reducing fares and increasing the amount of money it pays to drivers in order to keep them loyal.

It's therefore not surprising that Uber has tried to get around this by moving into food delivery through its Uber Eats service. However, this is a jump from the frying pan into the fire, as the move puts it in direct competition with a wide range of companies, such as Deliveroo, which are also determined to dominate this area.

While Uber appears to be hoping that it can outlast its rivals in the food sector by running its service at a loss, it's hard to see this strategy working against a firm such as Amazon, which can draw on the resources generated by its extremely profitable business. Given this, how can Uber's valuation of over five times current sales possibly be justified?

With Uber overvalued and its shares falling, this seems a good time to short them at the current price of $35.70, at £100 per $1 (compared with IG Index's £24 per $1), covering your position if it rises above $45.70. This gives a total downsideof £1,000.

How my tips have fared

This last fortnight has been a mixed bag for my tips, with exactly half the six longs rising and the other three falling.JD Sports climbedfrom 582p to 601 and Superdry from 389p to 392p. Safestore was the star performer, going up from 607p to 641p.

In the case of Hays and Bellway, the falls were relatively minor, with Hays declining from 147p to 146p and Bellway from 2,868p to 2,842p. However, Bausch Health Companies, which I tipped two weeks ago, did especially badly, falling from $24 to $21.72. This means that my six long tips are making a total lossof £42.

My four short tips were also split down the middle, with two increasing and two falling. Weis Markets rose from $38.38 to $39.40, while Netflix also increased from $305 to $309. However, Tesla declined from $228 to $224. The best-performing tip over the last two weeks was Bitcoin, which went from $11,500 to $10,695, although it is still above the level I originally tipped it at. Overall, three out of the four tips are making money, with my shorts currently making net profits of £908.

Both BeyondMeat and Zoom Communications are still trading above the level at which I recommended you should start shorting them. Counting the latest Uber tip on this page, there are now 11 open tips (six longs and five shorts).Taking into account the three tips that were closed a fortnight ago, I'm not going to recommend that you close any other tips.

Still, unless something improves with Hays very soon I'm going to suggest that you close it.I'm also going to keep my eye on the JD Sports long (tipped back in Issue 929), and the Weis Markets short (issue 919), even though both tips are currently in the black.

Trading techniques... the skyscraper index

A boom can easily become a bubble. One way to distinguish robust growth from the late stages of a bubble is through the skyscraper index. There are several versions of this, but they boil down to a simple principle: if a country is building the largest skyscraper in the world, then stay away from its stocks.The rationale is that large skyscrapers are usually poor investments, prompted by a combination of vanity and excessive optimism rather

than the reasonable expectation of healthy returns. Their appearance is therefore both a sign of irrational exuberance and an indication that there aren't any alternative investment projects with a higher capital return. Since large property projects usually require construction companies to borrow huge amounts of money, their presence also suggests that credit is too freely available (implying that the economic cycle is about to turn).

There is some anecdotal evidence to support the Skyscraper index. Avoiding the stockmarket during the construction of the Empire State Building between March 1930 and April 1931 would have saved you a lot of money. Similarly, the original World Trade Centre in New York and Sears Tower in Chicago were both started in the early 1970s, just before the stockmarket crashed.

Malaysia's Petronas Tower would also be completed just before the Asian Crisis, while Dubai's Burj Khalifa was still being constructed during the global financial crisis. Still, it's important not to take this index too seriously asthe shift to a services-based global economy means that skyscrapers are more of a necessity than a luxurythese days.

Early this year investors thought that bitcoin, the digital currency, was on life support. After peaking at $20,000 at the end of 2017, bitcoin had slumped to $4,000 by April 2019. However, since then it has tripled to $12,800. So is this the start of a longer, more sustained rally, or is this another bubble that is just going to end up as badly for bitcoin investors as the first one?

Bitcoin's cheerleaders argue that things have changed. In their view, the big rise during the last enormous rally was driven by ordinary investors hearing about the huge amounts of money that people were making, and then blindly buying bitcoin in the hope of getting easy money. When the price started falling, they dumped their holdings, driving it back down. But this latest appreciation has taken place on the back of a wave of interest from financial institutions and companies in digital currencies, with JP Morgan and Facebook announcing their own coins.

This is a reasonable point, but these currencies could end up hurting bitcoin as much as they help it especially if people decide that they'd prefer to use something backed by a respected company rather than some shadowy figures, and start moving to these new digital currencies instead. After all, from Netscape to Myspace, the technology sector is littered with pioneers who lost out when a slightly better product emerged to take the crown. The same can happen in the cryptocurrency market.

Even if competitors don't lure people away from bitcoin, the proliferation of new currencies could create a public backlash that leads to a much harsher regulatory crackdown. For example, Libra has generated a huge amount of anger, with several countries talking about banning it altogether. The European Central Bank has called Mark Zuckerberg's proposals a "wake-up call" for financial technology regulation in general.

Watch out for the regulators

Of course, overvalued assets can keep climbing. So I'd advise waiting until bitcoin has fallen below $10,000 before shorting it. Then short it at 25p per $1 (compared with IG Index's minimum of 20p per $1) and cover your position if it rises above $14,000. This gives you a maximum downside of £1,000. Note, too, that the FCA is contemplating imposing additional restrictions (or even banning outright) spread betting on bitcoin, although this could take some time to be implemented.

Trading techniques: watch the auditors

As investors in Enron and other companies that turned out to be frauds found out the hard way, the fact that an auditor has signed off on the accounts is not necessarily a guarantee that everything is above board. But when auditors raise questions, or decide to stop auditing the firm altogether, the market tends to sit up and pay attention.

For example, a US study by Messod Beneish, Patrick Hopkins and Ivo Jansen of the Kelley School of Business in 2001 found that when an auditor resigned from examining a listed firm, the stock price fell by an average of 3% in the next few days after the announcement. However, shorting all firms that have experienced an auditor resigning may not be the most efficient strategy when it comes to trading based on auditors. Betting against stocks where the auditor has raised concerns looks more fruitful. According to a 2013 study by Asad Kausar of Nanyang Technological University, Alok Kumar of the University of Miami and Richard Taffler of the University of Warwick, between 1993 to 2007 American firms where their auditor had queried their future as a going concern for the first time lagged the market by 14% over the next 12 months, even after the initial announcement.

How my tips have fared

However, JD Sports rose from 592p to 604p, Safestore increased from 630p to 643p and Bellway advanced from 2,697p to 2,728p.

Overall, my six long recommendations are making a total net profit of £572, with JD Sports currently my most profitable single tip.

In the last column I recommended that you short Beyond Meat. The strategy here is to wait until it falls below $120, and then short it at £15 per $1, covering your position at $185; that would give you a total downside of £975. In the past fortnight the stock has risen very slightly to $157. Similarly, at $91 Zoom Video Communications remains above the $68 level at which I think you should start shorting it.

As far as the four short tips that are currently active are concerned, three of them rose, though only by relatively small sums.

Weis Markets went from $35.66 to $36.49, Just Eat increased from 620p to 633p, and Tesla rose from $223 to $230.

The only short tip that actually declined was Pinterest, which declined from $26.77 to $26.72. Overall, the four short positions are making a net profit of £918, which is slightly down from £1,048 a fortnight ago.

At present I have three tips that are at least six months old: John Laing Group, JD Sports and Weis Markets. Although all three are making money, John Laing Group is the least profitable.

I have therefore decided that if it doesn't rise any further soon, I will be recommending that you close your position and take your profits.

With the contest to become the next Conservative leader heating up, punters are pouring money into the betting exchanges. In all, £3.85m has been wagered on Betfair on the identity of the next Conservative leader; on Smarkets £1.8m has been bet. At the moment Boris Johnson is the clear favourite, at 1.66 (60.2%) on Betfair, followed by Jeremy Hunt on 7 (14.2%), Andrea Leadsom on 9.4 (10.6%) and Michael Gove on 17 (5.8%).

There are also a lot of subsidiary markets to consider. A total of £53,000 has already been wagered on Betfair on who will make the final two, for example. In this case the leading candidates are Boris Johnson at 1.26 (79.3%), Hunt at 1.4 (71.2%), Michael Gove at 3.7 (27.2%), Rory Stewart at 3.9 (25.6%), Andrea Leadsom (pictured) at 6 (16.7%) and Dominic Raab at 10 (10%). There has even been £9,469 bet on the number of MP ballots, with four currently the favourite at 2.66 (37.5%), followed by three (36.2%).

As I have already made tips on the identity of the winner in the summer of 2017, and conscious of my rule not to bet on the same contest twice, I'm going to have to stand aside. I think it unlikely that Leadsom could make the final two, but the odds may have shifted by the time this reaches you, with the first ballot due to start to take place on Thursday, so I can't formally recommend betting against her.

Takeaway group Just Eat faces tough competition and slowing growth.

It's safe to say that my suggestion to short online food delivery firm Just Eat last September didn't work out particularly well. After I made the tip, it rose in price from 660p to 735p. Eventually I decided that, as it was making a loss after six months, enough was enough and that the best thing to do was to cover your position and close the trade at a loss of £228. In retrospect, I'd have been better off saying nothing, as the price subsequently crashed by nearly 20%, to below the original level of my "short" tip, at 620p. So why am I suggesting that you short it again now?

Just Eat has been hit by two key negative pieces of news. In the last few weeks, online behemoth Amazon announced it was making a major investment in Just Eat's rival, Deliveroo. While Just Eat acts purely as a portal linking consumers with restaurants, Deliveroo actually delivers the food itself, and is even starting to dip its toes into operating its own kitchens. While each approach has advantages and disadvantages, Deliveroo could use Amazon's money, logistical expertise and delivery network (especially the Amazon Prime service) to develop its model to the point where the group has an overwhelming advantage, especially among those who want their food delivered extra rapidly.

It's not just Amazon

But the tie-up between Amazon and Deliveroo isn't the only threat to Just Eat. When the minicab-booking app, Uber, listed on the stockmarket at the start of this month, it placed a lot of emphasis on Uber Eats, its online delivery service. With Uber under pressure to keep growing at all costs (which will only be increased by its disappointing performance after listing), it's possible that it could try to take market share from Just Eat by cutting the cost of Uber Eats. Indeed, there are already rumours that it is about to offer unlimited deliveries for a flat monthly price of £8 a month.

So the competition is growing increasingly aggressive. Which is why it's particularly concerning that growth at Just Eat also appears to finally be slowing. The company's latest quarterly earnings show that growth in the number of orders has fallen to just 7.4% year-on-year, a far cry from the double (or even triple) digit growth that it has been enjoying up until now. While the management team blamed the weather and also argued that the purchase of Hungry House distorted last year's figures, it suggests that Just Eat may be starting to reach saturation point.

Yet despite the recent fall in its share price, the company is still valued at 38 times 2020 earnings. That seems optimistic, given that it is facing both slowing growth and tougher competition. As a result, I would suggest shorting it again at the current price of 620p. Previously I suggested you go short at £3 per 1p this time I think you can be more aggressive, and increase this to £6 per 1p. Set a stop loss to cover your position if the price reaches 775p, which gives you a total downside risk of £930.

Trading techniques: the index effect

A lot of money is now invested in passive "index" funds that track a particular stock market index, such as the FTSE 100 or S&P 500 (see page 13). Despite their many advantages, one flaw is that if a stock is removed from the index they are tracking, the fund must sell it, and replace it with any stocks being added to the index. Some active funds also prevent their managers from investing in stocks outside a given index. While the index providers typically announce these changes in advance to avoid a mad rush of buying and selling, fund managers still have a very limited period in which to make the changes.

The boost that inclusion in an index provides to the price of a stock (or the negative impact of being booted from an index) is known as the "index effect". Several studies have confirmed that it not only exists but can produce significant returns. For example, a 2016 study by Cameron Scari of the University of Pennsylvania found that between 1990 and 2015, shares added to the S&P 500 returned an average of 5.64% more than the overall market between the announcement of their inclusion and when it formally took effect.

Given that this effect has been known for some time, it's no surprise that most of the excess return occurs on the day of the announcement. Still, even if you had waited until the day after the announcement before buying, you would still have made a pretty decent excess return of 1.8%. However, it's a bad idea to hold on for too long, as some evidence suggests that the market overreacts to the impact of the announcement. Indeed, Scari found that in the first 30 days after the changes took effect, newly added stocks typically lagged the market.

How my tips have fared

The last fortnight has been mixed for my seven "long" tips. Five of them have risen, with John Laing Group advancing to 387p (382p); JD Sports rising to 618p (from 611p); Hays increasing to 150p (from 146p); and Somero rising to 367p (from 365p). Superdry also rose to 480p (from 455p), while Safestore stayed steady at 643p.

However, the small gains on most of my long positions have been outweighed by the slide in housebuilder Bellway's share price, from 2,998p to 2,792p. This wiped out my profits on the trade, and cut the overall profit on my longs to £1,064.

On the short side, recently-listed Zoom's share price hasn't fallen enough yet to make it worth shorting. Pinterest did fall beneath the $25 a share level at which I suggested going short, but it has since rebounded to $25.50, so you would currently be making a loss of £100. Online estate agent Rightmove has also risen, from 549p to 559p.

The good news is that Weis Supermarkets has fallen from $40.22 to $38.46. Meanwhile, Tesla's operational and financial problems mean its share price has dropped from $231 to $190. This means that my open short tips are making a collective profit of £484.

The overall profits from the remaining short and long tips come to a total of £1,548, which is still more than the losses of £854 that I've made on the closed positions. While I won't close any positions this week, I'm going to suggest tightening some of the stop losses on my positions.

So you should increase the stop loss on John Laing Group to 350p, and raise the JD Sports stop loss to 500p. At the same time, given how far Rightmove has risen, I'm going to recommend that you cover the position if the share price goes above 580p.

The last 15 months have been a disaster for shareholders in the fashion chain Superdry. After several profit warnings, the stock has fallen by 75% from its peak in January 2018. What's more, the company has been buffeted by a very public fight between the original founder Julian Dunkerton and the management team that took over from him in 2014. Accusing chief executive Euan Sutherland of destroying the brand, Dunkerton tried to return to the board of directors.

However, after he was narrowly elected in early April, the other directors, including Sutherland, quit en masse, so Dunkerton became the new chief executive.

Superdry's problems certainly make for entertaining reading, but the collapse in its share price seems overdone. Not only has it enjoyed strong growth over the past five years, with sales more than doubling from £360m to £872m between 2013 and 2018, but the trend looks set to endure for the next few years.

While margins have been narrowing, the firm is still profitable enough to make a return on capital of nearly 20%. Debt levels are also very low, with profits more than 2.5 times larger than interest payments, so it's unlikely to end up in financial distress anytime soon.

Back to basics on clothing

Of course, there is always the risk that consumers could tire of Superdry's style of clothing. Indeed, shortly before he resigned, Sutherland admitted that there had been a "lack of innovation" in the type of products the company was offering. However, if anyone can breathe new life into the franchise, it is Dunkerton, who built the company up from a market stall more than

30 years ago. In particular, his strategy of refocusing on hoodies and jackets, getting co-founder James Holder involved with design again, and improving the range of online choice, seems to offer a clear way forward. Dunkerton has also come up with several ideas for improving Superdry's overseas performance. His basic strategy of focusing on the branded clothing that the chain is known for makes a lot more sense than trying to reinvent the company as a "global lifestyle brand", which was Sutherland's approach.

Besides, at current prices it's a bet worth making. Superdry trades at only 7.7 times 2020 earnings and is at a 10% discount to its book value (the value of its net assets). It also has a very generous dividend yield of 5.8%.

Next, by contrast, which is growing at a much slower rate, trades at 12.2 times 2020 earnings and has a much lower dividend of 3%. Perhaps the only argument against investing in Superdry is that the shares could go even lower in the short term before they start to recover.

I'd therefore suggest that you wait until the price hits 500p (at £8 per 1p) before buying in, which you can do through a buy stop order. In that case, I'd set the stop-loss at 375p, giving you a downside of £1,000.

Trading techniques: IPOs fizzle fast

Uber's flotation next month is a huge event, with the ride-hailing service releasing its prospectus last week. Investors who manage to buy into initial public offerings (IPOs) during the subscription phase tend to do well, at least initially. Research by Jay Ritter of the University of Florida has found that from 1980-2015 shares in 8,178 newly listed US firms would rise on average by 18% in the first day of trading. In 2001 and 2008, both dismal years for the US stockmarket, investors would have made money if they had blindly bought into IPOs at the subscription price and held for a day.

The main reason for this is that, since investment banks agree to buy any unsubscribed shares, they have a clear incentive to keep prices low. Some banks may also wantto use the allocation of sharesto reward their clients. The management may also want to keep the offer price low in order to keep shareholders happy.

However, IPOs' performance after that glorious first day tends to be much worse: Ritter also found that those who had bought at the first closing price and held on to the stock for three years would have lagged the market by a total of 18.4%.

Shares that do either very badly or very well in their first day of trading are particularly good short-selling candidates. Laurie Krigman, Wayne Shaw and Kent Womack found that between 1988 and 1995 the best subsequent performance came from shares that rose in price between 0% and 60% on their first day. Those that did either better or worse had much lower returns.

Finally, look at the behaviour of large institutional investors who subscribed to the public offering: if they promptly dump their stock, it bodes ill for the share price.

How my tips have fared

Over the last four weeks, most of my long tips have moved in the right direction, with six of them rising and only two falling. Cineworld has risen from 297p to 308p and John Laing Group from 391p to 399p.

JD Sports has shot up from 495p to 520p, Hays has gone from 155p to 159p, Safestore from 593p to 627p, and Bellway has increased from 3,104p to 3,174p. The only stocks that declined were Greene King (to 664p from 673p) and Somero (from 391p to 360p). Collectively, then, my long tips are making a combined profit of £3,293.My recommended shorts turned in a more mixed performance. One the one hand,Just Eat fell from 739p to 735p, while Tesla's share price declined from $269.49 to $267.70.

But on the other, Rightmove increased from 500p to 529p. Bitcoin also increased from $3,970 to $5,070 and Twitter is now $34.37 (from $31.08). The increase in both bitcoin and Twitter took them above the adjusted stop losses of $4,250 and $33 respectively.If you had followed my advice they would now be automatically closed, with the bitcoin position making a profit of £1,744 and the Twitter position making a small profit of £19.

Since the position in Just Eat is making aloss after six months,I suggest you close it, taking losses of £207. You should also increase the stop losses on the long positions in Greene King and Cineworld to 625p and 275p respectively. The stop loss on John Laing Group should also be raised to 325p. I still have 12 open positions (nine long and three shorts) when you include Superdry, so others will need to be culled as well. Overall, my open tipsare making a profit of £3,136, which is comfortably morethan the £1,808 inlosses from all my closed positions.

This week, I'm turning my attention to the forthcoming mayoral election in the North of Tyne combined area, due to take place in May. The area, which was created by a 2018 devolution agreement, spans three local authorities: Newcastle Upon Tyne, North Tyneside and Northumberland, with an elected mayor taking responsibility for areas covering development, education and transport.

There are four candidates: Labour's Jamie Driscoll, Tory Charlie Hoult, Liberal Democrat John Appleby and independent John McCabe. The fight is considered to be a two-way contest between Driscoll, who made headlines when he defeated the current leader of Newcastle City Council to be selected as Labour's candidate, and businessman Hoult. At the moment Ladbrokes has Driscoll as favourite at 1/3 (75%) and Hoult in second place at 9/4 (30.7%), with McCabe at 16/1 (5.8%) and Appleby at 50/1 (1.9%).

The Tories will be hoping that Driscoll's low profile enables them to pull off an upset, but this is unlikely. The big problem for them is that, while Northumberland is currently controlled by a minority Conservative administration, the

other two councils are solid Labour territory, Indeed, Conservatives don't have even a single councillor in Newcastle and control only six of the 60 seats on North Tyneside. I'd therefore take the 1/3 on Driscoll being elected mayor.

We don't have the best record where Tesla is concerned. Twice this column has recommended that you short the electric-car company and twice the shares have risen. Last year, we were convinced investors were going to desert CE Elon Musk after his claims about taking Tesla private turned out to be hot air, prompting regulators to intervene. Instead, he went and pulled a rabbit out of the hat in the form of Tesla's first quarterly profit since 2016.

A crowded field

Still, the fundamentals are unchanged: Tesla is overvalued as it is a barely profitable player in a sector facing intensifying competition. Indeed, almost every car company is now pouring large sums of money into electric vehicles (EVs), and models are starting to reach showrooms. Honda's budget Urban EV is getting all the attention, but there are also models from Mercedes, Kia and Audi. So it's no coincidence that Tesla announced dramatic cuts to the cost of its cars in January.

While Tesla is trumpeting this move as a way to boost sales volumes, it is likely to reduce margins dramatically, even if the group follows through on its plans to close down its showrooms and move sales online in an attempt to cut costs. And the online-only sales idea could backfire badly as most people will not be content with merely viewing a car online before buying it.

While Tesla has said it will increase investment in service centres there are suspicions that these could be scaled back, a risky move given the numerous faults that have plagued its models. Meanwhile, Tesla is also talking about launchinga sport utility vehicle (SUV), which will mean taking on companies with much more experience in this area.

More trouble in the boardroom

At the same time there is further turmoil in Tesla's boardroom, with chief financial officer Deepak Ahuja leaving at the end of last month for the second time. Ahuja's departure appears particularly significant, given that most experts agree Tesla needs to issue more shares in orderto pay bonds that are due to expire over the next 12 months.

The latest storm over Elon Musk's tweet about production figures won't help matters either, and if the Securities and Exchange Commission succeeds in getting Musk barred from being a director (unlikely, but possible) Tesla's shares could end up plummeting.

Overall, I'm going to recommend you short Tesla's (NYSE: TSLA) shares at their current price of $285 at £10 per $1. I'd suggest you cover your position if they rise to more than $385, giving a potential downside of £1,000. This is a slightly lower degree of leverage than I'd normally employ and reflects the fact that the shares have been volatile in the past, as well as my previous record with the company.

How my tips have fared

It has been a good fortnight for me. First, six out of seven of my long positions increasedin value.

Greene King went from 625p to 662p, Cineworld climbed from 260p to 284p, John Laing Group went from 354p to 385p and JD Sports rose from 467p to 481p. Bellway increased from 2,812p to 3,056p.The only share that went down was Hays, which fell very slightly from 160p to 156p. Overall, five out of my seven positions are making money, withJD Sports and Greene King leading thepack at 810p and812p respectively.

Meanwhile, three out of my six short positions went down in price. Bitcoin declined from $3,807 to $3,722 and Twitter slipped from $31.23 to $30.50.After coming within pennies of breachingthe stop-loss level of $53.50, Weis Marketsfell to $46.59 (from an original level of $52.81). Snap increased to $9.92 (from $9.12), Just Eat went up to 769p (from 731p) and Rightmove appreciated to 500p (from 477p).

At present my bitcoin and Twitter positions are making money, Snapis breaking even and Just Eat, Weis and Rightmove are making significant losses. Profits of £2,438 and £1,079 on my long and short positions respectively mean that I'm making a total of £3,622 on my open positions. Clearly, this has to be offset against losses of £3,255 on my closed positions, but at least the former total eclipses the latter, with a small profit of £367.

I'm not going to close any positions at this stage, but I recommend you should reduce your stop loss on my short positions on Twitter and Snap to $33 and $11 respectively. As far as my long positions are concerned, I have also opted to increase the stop-loss on my punt on Greene King to 575p.

Trading techniques... when CEOs are axed

Despite their large salaries, chief executive officers (CEOs) in large listed companies have a surprising degree of job security. Stockbrokers AJ Bell found that while more than half the clubs in the top four English football divisions have replaced their managers over the past year, only ten FTSE 100 companies have seen their bosses depart.

Boards tend to wield the axe if a company's share price is doing badly. A 2008 study by Steven Kaplan and Bernadette Minton of CEO tenure found that between 1992 and 2005 the worse a company's stock did relative to its competitors and the overall market, the more likely a CEO was to be ditched.

Of course, the more interesting question for traders is: what happens after the person at the top is forced to walk the plank? One theory is that, because boards are so reluctant to act, the departure of the CEO suggests things are really bad. Still, some argue that the exit of the CEO is good news because it heralds a turnaround under a new leader. Contrarians argue that executive churn can make investors too pessimistic.

However, the evidence is contradictory. A study by Carl-Emil Lindholm of the Stockholm School of Economics foundthat in the week after the announcement of a CEO's exit, the stock price of Swedish firms fell by an average of 1.7%. Yet research by George Gianarikas, of Fundstrat Global Advisors has found a small majority ofUS firms that change CEOsbeat the S&P 500 index in thesix months after the new boss arrives. Interestingly, the outperformance gets bigger in the medium term. After a year the average stock outperforms the overall market by 6%.

The housing market is wobbly but housebuilder Bellway has solid foundations

After nearly a decade of strong growth, the housing market has definitely cooled over the past 18 months. In fact, according to the latest Nationwide House Price Index, house prices are now falling once you take inflation into account. Concerns about a potentially imminent Brexit and a slowing UK economy aside, some sort of correction was inevitable after one of the largest property booms in history. So it's no surprise that most of the major UK house-building and construction companies now look cheap, especially in terms of price/earnings (p/e) ratios.

For example, Bellway is trading at 6.4 times forward earnings, Redrow at 6.5, Crest Nicholson 7.5, Countryside Properties 7.7, Taylor Wimpey 7.7, Barratt Homes 8.2, and Persimmon at 8.8.

Of course, some or all of these companies could end up becoming "value traps" cyclical firms that look cheap thanks to their strong past growth, but are just about to see their sector fall off a cliff. Indeed, my investment in Redrow last year ended up costing this column dear (although, ironically, its price has rallied somewhat after I finally closed my position).

Value trap, or bargain?

Yet Bellway's current low price, alongside its strong record, looks inviting enough to take a risk. Between 2013 and 2018, revenue rose by 362%, while both earnings per share and dividends went up nearly fivefold. It also achieved a return on invested capital (ROIC) of 20%. Despite this rapid expansion, it has relatively low levels of debt, which are secured against ongoing projects, rather than in the form of bank loans that will require large annual interest payments.

Of course, even Bellway's management team admits that the environment is getting tougher. The percentage of would-be buyers who have ended up cancelling purchases has risen in the last six months, from 11% to 13%. Yet the business is still expected to grow by around 3%-5% a year over the next two years. And the company expects to sell a record number of houses this year.

A diversified customer base

You should always take management's predictions about the future with a pinch of salt. However, Bellway is also less dependent on the private housing market than many other builders around 20% of the houses it sellsare social-housing stock. These are sold at a lower price, but with the government acknowledging that more social housing needs to be built, this segment of its revenue looks secure, even if the wider market struggles for the next year or two.

In short, Bellway looks a good value play, with good growth potential. Go long at the current price of 2,812p. IG Index offers a minimumtrade of £1 I'd suggest you raise this to £1.50. With a stop loss of 2,109p, this would give you a total potential downside of £1,054.

How my tips have fared

With both the FTSE 100 and the S&P 500 indices moving upwards, this has been a good fortnight for my long positions and abad one for my short positions. Greene King rose from 599p to 625p, John Laing Group climbed from 354p to 371p, JD Sports rose from 450p to 467p, and Safestore also went up from 567p to 588p.

Meanwhile, the share price of Hays rose above the 160p level at which I recommended you buy it, although it has since slipped back slightly. Cineworld's share price also remained at 260p. Overall, my six current long positions are making a combined profit of £1,235.

The bad news is that six of my seven short positions also rose in price (whereas we want them to fall). Bitcoin rose from $3,411 to $3,807, Netflix rose from $347 to $357, Snap shot up from $7 to $9.12, Just Eat increased from 707p to 731p, and Rightmove also went up from 477p to 480p. Weis Markets came close to reaching the $53.50 level at which I recommended you cover the short, although it is now at $52.81.

The only share thatfell in value is Twitter, which declined from$34 to $31.23. Overall, the amount of money that I am making on my shorts has fallen to £672, which gives me a combined profit across all of my open positions of £1,906.

Given that my short position in Netflix, which I tipped exactly six months ago, has lost money, I recommend that you close it down, take your losses of £150, and wait for another opportunity to come along. I also suggest cutting the stop-loss on the bitcoin and Snap shorts to $4,250, and$12 respectively.

As for my position in Greene King, I'm raising the stop-loss to 550p in order to lock in more profits. I'm also increasing the stop loss on JD Sports to 350p for similar reasons.

Trading techniques the CAN SLIM method

Most trading systems rely on only one or two signals. However, the CAN SLIM system, developed by William O'Neil, and detailed in his book How to Make Money in Stocks, relies on ranking stocks using no fewer than seven different indicators.

The factors highlighted by O'Neil are: an increase in current quarterly earnings; significant annual earnings increases over several years; new products(or other catalysts); high demand (as shown by share buybacks and trading volume); high relative strength; and high levels of institutional ownership. O'Neil also advocates only buying shares when the major market indices are rising,and avoiding investing during bear markets.

O'Neil used the system to generate recommendations for his newspaper Investor's Business Daily, which he founded in 1984. In 2003 he set up the IBD 50 Index, basedon the performance of the top-50 shares (as ranked by his system). In the 16 years since the index started, it has produced a total return of 1,501%, compared with 325% for the S&P 500. That's a 19.1% annual return, compared with 9.6% for the overall market. Since O'Neil doesn't believe in investing outside America, he hasn't applied his system to any non-US stockmarkets.

Despite this impressive performance, there are several weaknesses with the system. Incorporating new products as a factor introduces a degree of subjectivity. The system also requires a lot of stock turnover, leading to high trading costs. Finally, it can be extremely volatile the IBD 50 fell by a third during the recent market decline. While such volatility can be mitigated by attempting to time the market, this can hurt returns: the CAN SLIM Select Growth Fund (which uses market timing) has lagged the market since March 2005.

Earlier this week we received some good news. Previously we had all but written off our 11/10 bet on Kyrsten Sinema being elected senator for Arizona. However, it appears that we were a tad premature. A combination of postal and early votes means she has managed to overhaul Martha McSally's election night lead, and the Republican has now conceded. There's even a recount going on in the contest for Florida governor, though Andrew Gillum is unlikely to be as lucky in his contest.

This week we're going to look at the contest for the Democratic nomination in 2020. At the moment the most liquid market is on Smarkets, with £42,747 traded (compared with £24,749 on Betfair). The current favourite is California senator Kamala Harris, pictured, at 5.9 (16.9%), followed by Beto O'Rourke at 6.6 (15.2%), senator Elizabeth Warren at 8.6 (11.6%) and former vice-president Joe Biden at 10 (10%). Longer shots include independent senator Bernie Sanders at 13 (7.6%) and Cory Booker at 13.5 (7.5%).

You can't really write anyone off in the age of Trump, but we don't think that O'Rourke really has much chance. While he ran Ted Cruz much closer than you'd expect, he still lost. Despite his undoubted charisma, he's never been anything more than a junior congressman (a role he had to give up to run against Cruz). While he has a bright future ahead of him, it's very hard to see how he could be nominated for president. So we'd tip laying him at 7.6, which translates to a bet against him at 1.15.

The results of the midterm elections in the US are in and they make for mixed reading for this columnist. I made 20 bets (22 if you count them individually). The Senate race in Arizona won't be officially called until after MoneyWeek has gone to press, but at the time of writing Democrat Krysten Sinema looked to be trailing Republican Martha McSally (pictured). Of the remaining 19 bets, I correctly called 15, including the bet on the Democrats taking back the House of Representatives and the Senate races in Delaware, Pennsylvania, Wisconsin, Michigan, Mississippi, Massachusetts, Maryland, Virginia, West Virginia, Ohio and Texas.

I also correctly predicted that Andrew Cuomo would be re-elected as governor of New York, though that was hardly unexpected. Republican Jon Carter narrowly triumphed over Mary Hegar in the 31st District of Texas. Finally, I was also correct to tip Beto O'Rouke getting between 40% and 50% of the vote in Texas.

I also made some notable missteps. Far from being reduced to 50 seats or less, the Republicans will in fact increase the number of Senate seats they hold. Andrew Gillum and Richard Cordray ended up coming short in their contests to become governors of Florida and Ohio respectively. Overall, my 19 combined bets made a profit of 7.5%, though if McSally ends up winning in Arizona it will fall to only 2.5%. If you count the bets individually, I ended up making 2.2%.

Online food and grocery shopping has taken longer to emerge in the US than in other developed countries. This is because America's sprawling suburbs present a logistical challenge to any would-be entrant, compared with countries with more densely populated urban areas. However, Amazon is trying to change this.

Last August it bought upscale retailer Whole Foods, which it is now using as a base of operations for rolling out its online delivery service. It has already announced same-day delivery to most of the largest cities, and is quickly expanding this to smaller cities across the United States.

While this may be good news for American consumers, it is bad news for US grocery chains who will now have to deal with a competitor who can offer both a greater selection of goods and greater convenience. Indeed, even if Amazon's new project doesn't end up stealing their customers directly, it could push prices and margins downwards, reducing their profits.

While all parts of the sector will be affected to a certain degree, mid-sized regional supermarkets are particularly vulnerable because they rely on local dominance rather than economies of scale to keep competitors at bay.

A sitting duck that's worth shorting

One such chain is Weis Markets (NYSE: WMK). Weis is a chain operating 205 stores in seven Northeastern and Mid-Atlantic states (Pennsylvania, Maryland, New York, New Jersey, Virginia, West Virginia and Delaware); more than half of these stores are located in Pennsylvania where it has a 20% market share.

Its prices are generally around 10%-25% higher than competitors', while it gets low ratings from consumer surveys. This means that it is vulnerable to competition, not just from Amazon, but also from low-cost chains such as Aldi, which is also expanding its offerings in the United States. Weis has also had several run-ins with the food standards authorities in Pennsylvania.

Despite these problems, Weis trades at 21 times current earnings, much higher than the sector as a whole. Revenue has grown by an average of just under 5% a year over the past five years a solid performance, but by no means spectacular.

While the company has said that it will spend $100m in an attempt to keep the firm growing, most of the money will be put into overhauling and refurbishing existing stores, rather than opening new ones. Indeed, the company plans to close as many stores as it will open, so it's hard to see how this will translate into significantly higher sales.

Overall, we think that you should short Weis at the current price of $44. While IG Index allows you to bet as little as £0.01 per $0.01 (or £1 per $1), we would suggest that you short it at £100 per $1 (or £0.10 per $0.01). In this case you should close your position if it gets to $53.50, which would give you a maximum downside of £950.

Trading techniques... split US government

On 6 November America goes to the polls in the mid term elections, voting for the entire House of Representatives and one third of the Senate. Some traders argue that the expected Democratic capture of the House will be negative because President Donald Trump will struggle to pursue his pro-business agenda. Others are more sanguine, noting that a Democratic victory could make it harder for the president to wage trade wars.

LPL Research has found that between 1950 and 2017 the strongest S&P 500 returns (18.3% a year) came from a Democratic president and Republican control of both the House and the Senate. Interestingly, the next strongest performance came from a Republican president with each party controlling one part of Congress (the most likely scenario in 2018), with annual returns of 15.7%.

The year of the presidential election cycle that you are in may be as important as the result. One theory argues that the first two years of a presidential term tend to produce poor returns, as politicians are more likely to implement painful measures. However, as the date of the presidential election gets closer, politicians become more cautious about doing anything that could hurt their chances of getting re-elected.

Although nominally independent, the Fed could also come under pressure from the White House to stimulate the economy before the election. Research by Charles Schwab found that while S&P performance was similar in the first, second and fourth years, market returns were typically double the average in the third year.

How my tips have fared

As you'd expect, the turbulent market conditions have hit our portfolio of long positions over the last fortnight. Of the six currently open, only Shire increased, from £43.67 to £44.86, thanks to Japan's Fair Trade Commission's approval of the Takeda bid, though it still needs approval from the EU.

The five remaining positions all declined, with Premier Oil falling by nearly 20% from 132p to 109p. Redrow fell from 561p to 500p, Greene King from 492p to 480p, Next from £54.26 to £50.51 and Saga declined from 137p to 130p.

The good news is that four out of our six short positions have declined. Bitcoin is now $6,387, compared with $6,579 a fortnight ago. After briefly rising to $379 on the back of better-than- expected subscriber figures, Netflix fell to $330 (down from $350) on the realisation that content costs are increasing too, forcing the company to borrow more.

Snap has also declined to $6.84 (from $7.48), while Just Eat has declined to 601p (621p). However, Tesla has risen to $261 ($251), while Twitter has also bucked the downward trend, climbing from $28.45to $29.18.

Added together our open long positions are now making a loss of £1,573. This is still more than balanced by our shorts, which are making collective profits of £2,229. If you take into account the losses of £427 from our closed trades, then you get an overall profit of £229.

We're not going to recommend that you close any positions now. However, we are going to adjust some of the stop-losses on our short positions downward to lock in some profit. So the Bitcoin stop-losses will be cut to $7,750 (from $8,000), the Twitter stop-losses will be reduced to $40 (from $42.73), while the Snap one rises to $15 (from $17.85).

I've been following the betting on the US mid-term elections over the past few weeks, and I'm pleased to see the number of markets has been increasing. In addition to allowing you to bet on control of both the Senate and the House, as well as the individual Senate seats, Betfair (Betfair.com) is now running markets on the outcome of the race for the governorships of New York, Illinois and Georgia.

While this is pretty good, even this effort pales in comparison with its rival Smarkets (Smarkets.com), which is offering markets on all 36 gubernatorial contests (although the market on the Oregon election is currently halted). What's more, it is also offering markets on what it considers to be 50 key Congressional races in states ranging from California to Vermont. Finally, it is offering markets on the range of seats that both the Democrats and Republicans can expect to get.

Of course, the big downside to Smarkets' offerings (as well as many of Betfair's) is that many of these markets are very thinly traded. I don't have any hard and fast rule, but I wouldn't normally consider a market to be liquid enough until at least £500 has been traded or £100 is behind a price (both Betfair and Smarkets reveal how much money is behind a specific price). This rule is designed to prevent me making tips that are impossible to follow through on. Sadly, this eliminates most of Smarkets' bets for now. However, with the voting less than two months away, this may yet change.

The online streaming giant is vastly overpriced and its growth is slowing.

For the past few years the US stockmarket has been dominated by the fast-growing technology giants known as the FAANGs (Facebook, Apple, Amazon, Netflix and Google). And while we've been sceptical about Facebook in the past, no company underscores both the promise and the pitfalls of tech stocks more than Netflix, which was founded in 1997 as a DVD rental service.

The big breakthrough came when it realised a decade ago that physical discs would eventually become redundant as faster internet speeds allowed people to watch films online. So the firm decided to reinvent itself as an online streaming service.

At first, Netflix just streamed existing films and TV shows. However, in the past few years it has invested large sums of money in creating its own content. This has proved to be extremely successful, enabling it to accumulate 130 million subscribers in 190 countries a threefold increase in five years. The stock has risen even faster, going from $85 in the summer of 2015 to a peak of $423 a few weeks ago.

However, after some disappointing news a few weeks ago, the price has fallen back to $345. So, is this a temporary blip or the beginning of a steeper fall?

Running into trouble

We suspect the latter. The big problem is that Netflix is very aggressively priced, trading at 110 times this year's earnings and 69 times next year's. Even if analysts are right about its future earnings trajectory, it will still be 2022 before the stock is trading at a semi-reasonable 25 times expected earnings.

This analysis is based on the assumption that Netflix will be able to triple revenues from 2017's $11bn in the same period. The idea is that this growth will allow it to spread production and other costs over a large user base, boosting profitability.

The problem is that Netflix is already seeing its subscriber growth starting to level off. In the US, the number of subscribers has risen by just 10% year-on-year. Globally, subscriptions are growing at an annualised rate of only 15%. The net number of new subscribers each quarter is starting to decline. This is partly due to mounting competition. Netflix's biggest rival is Amazon, which is pouring money into its own streaming service. Amazon's brand name and existing customer base make it a formidable foe, and it has deep pockets that could enable it to outbid Netflix when it comes to offering other content providers' shows.

Meanwhile, traditional media companies such as Sky are launching their own on-demand services. As well as stealing customers, they are bidding up the price of content. Netflix has had to cut its number of offerings and restrict some shows to its premium channels. We'd suggest that you short Netflix at $337.

While IG Index allows you to short the company for as little as 1p per $0.01 (or £1 per $1), we'd be a tad more aggressive and go for £7.50 per $1. In this case we'd set the stop-loss on the short (so you'd automatically cover your position) at $437. This would limit your potential losses to £750.

Should you continue to short Tesla?

We suggested shorting Tesla in late April (issue 893). We felt that its price was too high given its failure to make money, production problems and growing competition from other car firms. Since then the price has been on a bit of a roller coaster, rising to a peak of $370, followed by a decline to $290.

However, the stock has surged in the past few days on the news that Saudi Arabia's sovereign-wealth fund had taken a stake in the company and a surprising tweet from CEO Elon Musk: he said he is working with a consortium of investors to take the firm private at $420 a share.

Indeed, at one point last week Tesla was trading at $380, the highest level the electric-car company's stock has reached for nearly a year. While it has now fallen back to $355, this is still substantially above the $283 it was trading at when we first recommended the short.

Is it therefore time to close your position, or should you keep betting against the eccentric South African entrepreneur? Should you even go long in the hope that the deal will go ahead at a price that is nearly 20% higher than the current level?

In our view, it makes sense to stick with the short position (though we wouldn't recommend that you increase it). This is because we doubt that the deal will actually go through.

Owing to Musk's recent erratic behaviour, the markets will be sceptical that he can find anyone to pay $420 a share, which would cost around $70bn. That would be a severe stretch even for the Saudis. However, if the deal collapses, then Musk could end up in legal hot water and this would trigger a massive backlash against the electric-car giant.

How my tips have fared

All but one of our long positions have performed badly in the past fortnight. IG Group has gone down to 870.5p (from 908p), Micron has declined to $51.34 ($53.04), Greene King is now at 482p (516p), Redrow costs 528p (532.5p), Wizz Air £33.84 (£34.26), Next £55.46 (£59.06), and Premier Oil 119p. The saving grace is Shire, which has risen to £44.32. None of these shares have collapsed, but the cumulative effect of these changes means that we've gone from a position where we were making £569.25 to being £156 in the red.

However, while our long positions are looking a little worse for wear, our short positions have actually improved. As noted in the box at the bottom of this page, Tesla's price has surged thanks to rumours that CEO Elon Musk will take it private. This means we're now losing around £300 on our short on the electric-car company.

However, this is more than offset by the £1,297 in profits we are enjoying from Bitcoin's slump to $6,037. The upshot is that we're making a profit of £1,003 on our shorts, which produces a cumulative profit of £847 on all our open trades.

IG Group is making us a profit of £600 and is in the top 10% of the FTSE 350's best-performing stocks over the last six months. Still, we tipped it in May 2017, and changes to spread-betting rules since then will hamper growth. So I'm going to raise the stop-loss to 850p. This means that if the stock falls just a little further, we will automatically close our position and take our profits.

Many UK retailers are in dire trouble, but Next is beating expectations.

It's been a tough time for the British high street recently. Higher import prices are pushing up costs, while economic uncertainty could potentially hit demand. And that's before worrying about the real elephant in the room: the shift from bricks and mortar to online trading. Even five years ago retailers could kid themselves that the ability to browse clothes in person was something that no internet retailer could provide.

Sadly for them, all that meant was that people browsed the goods in person in their stores, only to buy them online. Indeed, the ubiquity of smartphones means you don't even need to wait until you get home to place your order.

Unable to adapt to the new environment, several retail dinosaurs have recently perished or are in trouble. BHS went bust spectacularly last year, while Carpetright, New Look and House of Fraser have been forced to enter into voluntary agreements, which have seen them close scores of shops up and down the country, shedding thousands of jobs. Debenhams is also struggling after recent disappointing trading figures.

An encouraging update

Still, even in a troubled sector it is possible to find companies that are thriving. Several weeks ago clothing chain Next surprised analysts when its latest figures showed that it had largely managed to sidestep the collapse in sales that the extremely harsh winter brought for retailers.

The firm's sales for the first quarter of this year were up by 6% on the same period a year ago. An unusual weak spell at the start of 2017 made that comparison a bit more flattering than it really is but sales were still 2.1% higher than the much stronger first quarter of 2016.

If you look at longer-term performance, Next has grown its profits by an average of nearly 9% a year over the last six years. At the same time it has managed to maintain an operating margin of around 20% and has a return on invested capital of nearly 40%.

Staying ahead of trouble

Part of this is due to its foresight in building up its online arm: all that first-quarter sales growth came from online sales, with store sales shrinking. However, it has also been taking steps to lower its costs, by downsizing and sub-letting those shops that are no longer paying their way. The management is also smart enough to realise the demise of competitors means retailers now have the upper hand with landlords, and the company has been renegotiating leases.

Despite its leading position in the retail sector and the strong performance of Next's shares over the last six months, the firm still trades at a reasonable 14.3 times earnings. This should fall to 13.5 times by 2020. I'd suggest that you buy Next shares at 5,946p at IG's minimum of £1 per 1p. In this case, I'd recommend that you put a stop-loss at 5,000p, giving you a downside of £946.

How my tips have fared

The last four weeks haven't been particularly profitable for this column, with seven out of our eight open positions moving against us. IG Group has fallen to 848p (from 870p), Greene King is now at 556p (previously 604p), Micron's shares are at $51.48 (down from $59) Redrow has gone down to 522p (from 601p), while even Wizz Air has fallen slightly to £35.38 (compared with £35.60 when I originally tipped it). This has had a knock-on effect on profits. Redrow is now £352 in the red, and the combined paper profits on the long positions have fallen from £1,425 to £663.

The shorts haven't done terribly well either. The S&P 500 rose to over 2,775 in mid-June. Although it has subsequently fallen back, this meant that trade was automatically closed out by the stop-loss, absorbing £480 in losses. Despite its continued production woes, Tesla is still doing well, trading at $310.86, which means that the position is losing £111. The only bright spot is bitcoin, which is now at $6,548, making us paper profits of £1,169. Overall, our remaining short positions are making a paper profit of £1,058, although the losses on the S&P 500 trade mean that the closed positions have made a cumulative loss of £77.

We've now been long IG Group for over a year, and Micron for nearly six months. They haven't done much over the past few months (or in Micron's case at all), so I'm contemplating closing both positions. However, for the moment I'm going to suggest that you merely tighten the stop-losses on these so if they fall significantly more we'll sell them. Specifically, I'm going to suggest that the stop-losses on IG Group and Micron increase to 775p and $39 respectively. I'm also going to close the bitcoin short position if it rises to above $9,000.

Trading techniques Dow Theory

Dow Theory is a trend-following approach developed by Charles Dow, the first editor of The Wall Street Journal, and later refined by his successor, William Peter Hamilton. Like other trend-following systems, it involves buying when the market is rising and selling when it is falling. The big twist is you should only buy (or go short) when both the wider market and the Dow Jones Transportation index (a sub index that covers transport stocks) are going in the same direction. A divergence between the two is a sign that the trend may be about to change.

The rationale behind this strategy is that transportation activity is a leading indicator of economic activity. For example, if firms see a recession on the horizon, they will cut down shipments of goods and raw materials and seek to draw down existing stocks. Similarly, if the economy is starting to recover they will begin ordering more goods and raw materials. This means that transportation stocks tend to move ahead of those in the wider economy.

One problem with this theory today is that in a service economy the relationship between transportation and wider economic activity may be less clear. More broadly, Dow Theory is often ambiguous, with many Dow Theorists disagreeing about when exactly you should buy and sell. Still, there is some evidence that it can be a useful trading tool.

A 1998 paper by Stephen Brown of New York University found that using Dow Theory to time your trades can cut the risk of investing compared with buy and hold without hitting returns, meaning that it did better on a risk-adjusted basis. Between 1930 and 1997 it also beat the market in absolute terms.

Redrow stands to benefit from liberal planning laws and pressure to build more.

If you live in London, you know that the property market is much cooler than it was a few years ago. During the recent boom, sellers would find themselves besieged by buyers and would end up having to fight them off. However, depending on what house-price index you use, prices in the capital are either static or even falling.

By contrast, outside of the M25 the market seems to be in rude health. At the same time, there is an increasing acceptance, from both the government and the wider public, that more houses need to be built, even if this means allowing home construction on parts of the previously sacrosanct "green belt".

This is good news for homebuilders such as Redrow (LSE: RDW). Redrow is one of Britain's largest homebuilders and has been pursuing an aggressive programme of expansion designed to take advantage of both pent-up demand around the UK and more liberal planning laws. These involve the construction of various "Garden Villages" in the UK.

The idea is that instead of building a load of houses without any consideration for the community created, these are properly planned developments in fast-growing areas where people want to live. For example, Redrow is heavily involved in the Ebbsfleet Garden City in the Kent commuter belt. This is a new town and development, originally the brainchild of former chancellor George Osborne, which should eventually contain 15,000 houses. At last count, 901 houses had been built.

For the past few years Redrow's strategy has paid off, with revenue tripling from £600m in 2012-2013 to an estimated £1.8bn in 2017-2018. While the rate of growth is expected to slow down over the next few years, the company is still expected to see double-digit growth for 2018 as a whole, while the housing shortage should provide fertile ground for future expansion. The expansion has not come at the expense of margins, which have actually increased. The homebuilder also continues to deploy its resources efficiently, and has produced returns on invested capital of around 15%-20% for each of the past four years.

Redrow also looks attractive in terms of valuation, since it trades at only 7.2 times forward earnings, and it has a solid dividend yield of 3.8% a year. Its is not excessively levered, with the £966m worth of debt less than the equity value of £1.24bn. This means that it is unlikely to face any major difficulties if interest rates end up rising faster than anticipated, or there is a UK-wide fall in housing prices. From a technical perspective, Redrow's price is very close to the 52-week high and comfortably above the 100-day moving average.

Overall, I'm going to suggest that you take a long position in Redrow £3.50 per 1p (which is more than the IG Index minimum of £1 per 1p). I also suggest that you put a stop-loss of 463p. Given a starting price of 623p, this gives you a potential downside of £560.

Trading techniques sentiment matters

The advance decline ratio is a popular trading technique related to sentiment. This compares the number of stocks that are rising during one day with the numbers that fall. So, if 66 stocks rise and 33 fall, then the ratio will be 2 (66/33). Similarly, if 33 rise and 66 fall then the ratio will be 0.5 (33/66). Because this reading can be very volatile, traders tend to take a moving average of a certain number of days (usually at least ten) in order to help smooth the data out.

Generally a high reading is considered bullish, and a sign that it is time to buy, while a low reading is considered to be bearish, and time to sell. The argument is that a market increase that is being reflected in the majority of stocks is broader, and therefore more sustainable, than one where the market is being dragged up by just a few outliers. As always, there are contrarian investors who argue the opposite, namely that a broad market increase is a sign that it is overbought and heading for a reversal.

A slightly more complicated version of the advance decline ratio is the advance decline line. This simply subtracts the number of stocks rising from the number declining. The resulting number is then taken cumulatively over a period of time. So, if 80 stocks rise and 20 fall on one day, the number would be 60. However, if only 60 rise and 40 fall on the next day, the advance/decline line would rise to 80. In this case, traders would be interested in the direction of the line, especially if it was behaving differently from the overall market. Several traders used this technique to anticipate the 1987 market crash, the biggest single-day drop in history.

How my tips have fared

This has been a pretty good fortnight for almost all parts of my portfolio. All four of my long positions have gone up. IG Group went up to 887p, which means that it is making a profit of £633. Petrobras has surged to $15.90, so it is now over £1,000 in the black. Greene King is now 468p, which works out at an overall profit of £468. Even Micron has gone up to $55.48, thanks to some good earnings figures. The total profits of all my long positions are £2,325, which is substantially more than the £1,621 they were making last time.

This good fortune has extended to my short positions as well. Despite Elon Musk promising another new model, the price of Tesla shares has fallen to $285. This is close to the $283 that I took out my short position at. After last month's rally nearly forced me to cover the bitcoin short, the cryptocurrency has also fallen to $8,242.

The only black spot was the fact that the S&P 500 has gone up to 2,733, which means I'm losing £270 on a trade that I was slightly ahead on. But I'm still making a profit of £468 on my shorts, which is only £20 less than two weeks ago.

Overall, five of my seven open trades are making money, which works out to net profits of £2,793. Even when you take into account the losses that I've made on our closed positions, this still works out at £2,311. Given this success, I'm going to keep things as they are for now and not close anything out. However, I am going to raise the stop-losses on some of my long-standing positions, in order to ensure that I lock in some profits. So, the new stop-loss on IG Group, which is my longest-running trade, will be 745p (from 700p) and Petrobras will be $13 (from $12). I'm also raising the stop-loss on Greene King to 375p (from 345p).

You should take advantage of the good cheer on offer at Greene King.

Here at MoneyWeek we generally tend to tip companies towards the value end of the spectrum. That's partly because we just like a bargain, and partly because we believe that, right now, stocks in general are overpriced. One British company that is currently an exception to that rule is Greene King, which operates more than 3,100 pubs, hotels and restaurants, as well as also brewing large amounts of beer at its breweries in Bury St Edmunds and Dunbar. At the moment, Greene King is trading on just seven times forward earnings, and at a discount of 28% to its book value. It also offers a very attractive dividend yield of more than 6%.

So what's going on? There are several reasons for this relatively low valuation. Firstly, there are fears that higher food (and wage) inflation will push up costs, even while economic uncertainty is squeezing demand over the past year, consumer spending on eating out has either fallen, or at best stagnated, depending on which measure you use.

There's also the issue of whether Greene King's business model, based on buying up smaller companies and cutting costs by exploiting economies of scale, will deliver the expected benefits or simply end up alienating consumers who resent the change of ownership at their local pubs. Green King's sales growth has lagged its rivals on a like-for-like basis, for example.

These are all valid concerns, but we also think that, at current levels, they are priced in. Greene King's operating margins have held relatively constant at 15%-20%, while return on equity is a solid 8%. There is certainly room for improvement, but the company looks a lot more solid than several other firms trading at similarly deep discounts. Free cash flow is also roughly twice the dividend, which should help it keep paying out, even while reducing debt.

Meanwhile, in an effort to boost sales growth and ensure it retains a wide range of customers, the company has been investing heavily in upgrading its customer service, hiring more staff and overhauling its range of food and beers. Even if sales growth continues to disappoint, the ambitious cost-cutting programme should help boost profits and give Greene King a cushion in the event of a serious downturn.

I'd suggest you buy Greene King at 459p. While IG Index has a minimum price of £1 per point, I'd suggest you go for £4 a point instead, and set the stop-loss at 345p (in effect a loss of 25% from the current levels). This gives you a potential downside of £456.

Trading techniques: the cover-story curse

Some contrarian investors talk about the idea of the magazine cover "curse" the observation that companies which become high-profile enough to make the cover of magazines often end up lagging the market later. The rationale behind this idea is that the media will only run a story when sentiment reaches an extreme, making positive coverage a negative indicator.

One infamous example of a magazine getting it wrong was BusinessWeek (now Bloomberg BusinessWeek) in 1979, with its cover story on the "Death of Equities", which came just before the epic bull market of the 1980s took off. Similarly, in late 1999, Time magazine made Amazon's Jeff Bezos its Person of the Year only for his company's stock to dive by 86% over the next 12 months amid the wider tech-stock crash.

Several studies suggest that there is something to the curse. Citigroup's Gregory Marks and Brent Donnelly studied 44 Economist covers between 1998 and 2016, and found that going against the image (though not necessarily the tone of the actual article) would prove profitable two-thirds of the time. Buy assets which had earned a bearish cover, and you'd make 18% over the next year; short assets on bullish covers, and you'd make 7.5%.

That said, it doesn't always work. A 2007 study by professors at the University of Richmond looked at companies featured on the covers of Fortune, Business Week and Forbes between 1983 and 2002. They found that once you compared them with the overall market, there was no significant difference in subsequent performance between those featured positively and those portrayed negatively.

How my tipsare doing

Despite recent market declines, our long positions are doing well: spread-better IG Group, car-maker Renault and oil firm Petrobras sit on paper profits of £503, £662.50 and £712.50 respectively. Despite falling back a bit, our positions in commercial property group Hammerson and computer-chip specialist Micron are still in the black, on small profits of £36 and £28.20. Overall, our longs are on a total profit of £1,942, slightly up on the previous profit of £1,784.

Unsurprisingly given the recent market turmoil, our short positions have also done well. Cryptocurrency bitcoin has continued to slide, falling to $6,783. It is now back to where it was in November, before the price doubled in less than a fortnight. This means our total profit from shorting the cryptocurrency is now £1,110.50. Ongoing worries about a trade war means the S&P 500 is at 2,642, slightly higher than it was a fortnight ago. However, the trade it is still making a profit of £185. This means that our total profits are £2,224 when you take into account the losses from closed positions.

I'm going to stick with Hammerson for the moment, on the back of the recent price rise. However, since we've held it for more than six months, it's definitely one we're considering dumping, and in any case it's pretty close to our stop-loss of 510p. While we've held IG Group, Renault and Petrobras for roughly a year, I'm going to stick with them for now although I'll adjust the stop-losses on IG and Renault upwards to 700p and €90 respectively.

While bitcoin has collapsed since the start of the year, I'm confident it will fall further. Still, I will move the stop-loss down to $10,000 to be on the safe side and lock in some profits. Similarly, I'm going to reduce the stop-loss on the S&P 500 trade to 2,775.

Incoming European rules will crack down on spread betting.

In December 2016, the City regulator, the Financial Conduct Authority (FCA), proposed sweeping changes to the rules on spread betting, with a particular focus on reducing the amount of leverage (borrowed money) that individuals could use to trade markets. This generated a furious response from both punters and firms, as well as threats to relocate to friendlier parts of Europe. However, before anything could be acted on, the European regulator the European Securities and Markets Authority (Esma) launched an inquiry too. In response, the FCA suspended its own, while reserving the right to take it up again if it felt that Esma hadn't gone far enough.

Having published draft proposals in December, Esma has now published the actual regulations, and it's safe to say that the FCA is unlikely to object. Some of the rules make a lot of sense. We've often argued that binary options (bets on whether a currency pair or index will close above or below a certain level) are poor value, and have attracted scammers. So, it's good that Esma wants to ban the sale, marketing or distribution of binaries to ordinary investors. It also makes sense for them to ban special incentives, introduce a special risk warning, and to ban accounts with negative balances, limiting losses.

Esma has also backed away from earlier proposals to impose a margin close-out rule (whereby a trade is closed automatically once it has lost a certain amount) on a position-by-position basis. This could have left investors in the bizarre situation where they would have had to close losing trades, even if their overall accounts were in profit, thus rendering perfectly valid strategies (such as long/short equity positions and paired currency trades) impossible. This has been replaced with a 50% margin close-out rule on a per-account basis.

The proposals on leverage are fairly draconian however. Esma has essentially taken the FCA's proposals for inexperienced investors and applied them to everyone. The limit of 30:1 (3.33%) leverage for major foreign currency pairs is more liberal than the FCA's 25:1 (4%), but in all other respects they are near-identical. So those who want to bet on individual shares will be limited to 5:1 (20%). And if you want to trade bitcoin, you will have to put up 50% as margin.

The rules kick in later this year. In all, they will limit losses but also gains for most spread betters, especially those with smaller amounts of capital. While it makes sense for the high-risk nature of spread betting to be highlighted forcefully by regulators, recognition of varying experience levels could have been more proportionate.

Trading techniques: what use is analysis?

As well as looking at price movements, and following short-sellers, one way to judge sentiment is to look at the research put out by banks and brokers. Generally "sell-side" research has a poor reputation. This is because, up until the start of this year when new reforms came in, clients hadn't paid for it directly, but received it in exchange for using a particular broker to buy and sell shares. However, some traders argue that, even if the analysts aren't very good, enough people take notice of the research for it to become a self-fulfilling prophecy.

A 2007 study by Valentyn Panchenko of the University of Amsterdam, looking at large-cap US stocks between 1997 and 2003, found that broker upgrades significantly lifted prices on the day the upgrades took place. Conversely broker downgrades immediately hit returns. The effect was stronger when stocks were upgraded and downgraded by several brokers at the same time. However, most of the effects (positive or negative) disappeared in subsequent days so unless you had prior knowledge of what the brokers planned to do, it wasn't of much practical use.

In the longer run, however, analyst recommendations seem to be good contrarian indicators. J Randall Woolridge of Pennsylvania State University found that between 1993 and 2002 the average stock tipped by the largest 15 brokers in the US lagged the S&P 500. A similar study by Cornell's Susan Krische and Charles Lee in 2000 agreed that analysts' tips subsequently underperform, though Krische says that this is mainly due to their preference for recommending stocks with high price/earnings ratios.

How my tipsare doing

It's been a pretty good fortnight for this column's tips. Up until recently, shopping centre operator Hammerson was one of the laggards of our portfolio. Indeed, we were seriously tempted to close our position in it. However, a takeover bid from French company Klpierre has seen its share price soar to 534p. This means the position is now £172 in the black. Indeed, all five of our long positions are now making profits, with oil giant Petrobras, spread-betting company IG Group and car maker Renault making profits of £730, £477 and £505 respectively. Semiconductor group Micron has fallen back a little, but the position is still £177 in profit.

Our short positions are also doing well. After appearing to rally a bit, cryptocurrency bitcoin is now at $7,886, its lowest level for several weeks, and far below the $11,225 it was when we first suggested you start shorting it. At £0.25 per $1 this works out at a profit of £834. Trump's decision to launch a trade war has hit the S&P 500, pushing it below the level at which we suggested you start shorting it, meaning that our S&P 500 short is making a tidy profit of £375.

So in all, our long positions are £1,784 in profit while our short positions are making £1,209 that works out at a total of £3,170. If you then deduct the £1,014 in losses from closed trades so far, this gives us a profit of £2,156 in just over a year (not counting dividends or interest charges).

So what should we do with our trades now? I'm going to stick with them all for the time being and I won't add any new ones yet, but I am going to adjust some of the stop-losses, in order to lock in some of our profits. So, I'm going to increase the stop on Hammerson to 510p, and the stop on Micron to $38; while reducing the stop-losses on bitcoin to 11,000 and the S&P 500 to 2,800.

Regulators have announced a possible ban on the riskiest products, sending the sector's shares into free fall. Ben Judge reports.

Shares in IG Group, CMC Markets and Plus500 slumped by up to a fifth this week. Blame "an early Christmas present nobody in the City's booming spread-betting industry wanted", says Ian King on Sky News.

The European Securities and Markets Authority (Esma) announced it was considering banning the sale of "binary options", which allow speculators to bet on whether a security or a market will rise or fall in a certain timeframe sometimes as short as 30 seconds.

Binary bets are not an important product for spreadbetters, but there will also be a clampdown on one of their main offerings, contracts for difference (CFDs). These allow you to make leveraged bets on the ups and downs of a wide range of financial assets. Esma said it would carry out "a brief public consultation" in January on the measures, which go further than those previously proposed by the UK's Financial Conduct Authority.

"There are limits to how far regulators are obliged to save individuals from their own stupidity," says Nils Pratley in The Guardian, "but binary options represent a clear case for intervention." It's basically a bet on a coin toss. Companies have enticed gullible punters by letting them think they can "trade like a City professional".It's a "sham" and there is no way this product is suitable for retail investors.

Online brokers trading in binary options have been "engaged in a business model best understood as trawling the internet for idiots with cash to burn", agrees Lex in the Financial Times. Punters sign up, "lose money and move on".

As for CFDs, says Alistair Osborne in The Times, wagers can come with leverage of 200:1 or more: in other words, you need only put up 0.5%, or less, of your notional exposure. This kind of leverage explains why 82% of retail punters lose money around £2,200 typically. Esma is now suggesting limiting leverage to between 5:1 and 30:1, depending on the volatility of the underlying asset.

The CFD industry may now insist that "restrictions will drive traders offshore", says Lex in the Financial Times. "No dice. Having spent millions to encourage the world's football fans to play with dangerous financial instruments", they cannot complain "when a referee shows up at last".

The industry could have pre-empted a "painful drop in [CFD] volumes", says Alistair Osborne, if it had put its own measures in place to protect punters from bets they don't understand. "The latest case in point?" Bitcoin CFDs.

Unilever gets a tasty price

US private-equity group KKR is to buy Unilever's spreads business for €6.8bn in a deal that marks the "end of an era", say Scheherazade Daneshkhu, Javier Espinoza and Arash Massoudi in the Financial Times. The sale is the result of an overhaul of the business promised by chief executive Paul Polman in the wake of Kraft Heinz's aborted £115bn takeover in February. But it waves goodbye to one of Unilever's roots. The global consumer-goods giant was created out of the modest merger of Dutch firm Margarine Unie and the UK's Lever Brothers, way back in 1932.

In betting on spreads, KKR is taking a gamble. While it hopes to "highlight the health benefits of margarine to consumers", says the Financial Times, "sales have been contracting over many years as consumers switch to more natural foods". The deal will certainly need "some full-fat ingredients to generate a decent return", agree Chris Hughes and Andrea Felsted on Bloomberg Gadfly. And Unilever's shareholders shouldn't grumble.

The "backdrop for the sale could hardly have been better". A bidding war between KKR and rivals CVC Capital Partners and Apollo Global Management "created a tense auction". At nine times earnings, the deal is "a little less than the average multiple of 10.9 in similar deals" and "far less" than the 20 times McCormick paid for Reckitt Benckiser's food business. But "given the unappetising prospects for spreads, it's no surprise records aren't being set".

City talk

Four Seasons Health Care, Britain's largest operator of care homes, in difficulty for many reasons, says Nils Pratley in The Guardian. Fees are under pressure; overheads are up; and Brexit "complicates staffing requirements". But the key is too much debt. Terra Firma, the private-equity firm run by Guy Hands, "overpaid for the business in 2012 and loaded it up with leverage". Of the £825m it paid, £500m was borrowed.

Now Terra Firma has fallen behind on its "punishing" interest payments. US hedge fund H/2 Capital Partners, which bought most of the debt, will "probably clean up" because "with a gentler debt structure, Four Seasons is a good business". The rest of us can only shake our heads. "It's a shocking way to fund provision of care homes for the elderly."

Michael O'Leary has long rejected Ryanair pilots' calls for unionisation, says Kate Burgess in the Financial Times. But with pilots threatening to strike unless their union was recognised, he's shifted his stance to "ingratiation". Shareholders were unimpressed, with €1.5bn wiped off the airline's market value, but O'Leary has made the right decision. Ryanair's cock up over pilot rostering has "taught [him] the price of a PR disaster". Keeping his passengers happy is worth more to the airline than €1.5bn. "If unionisation is the price of a smooth take-off and landing, it is a toll that is worth paying."

South Africa's Steinhoff, which owns of UK retailer Poundland, has discovered "accounting irregularities" that prompted an 80% slide in its share price. That's bad news for eight global banks who lent Steinhoff's boss Christo Wiese €1.6bn secured by €3.2bn of Steinhoff shares, says the FT's Brooke Masters. Those shares are now worth less than €400m. "Bankers and investors should be asking whether there are any other executives whose lifestyles and investments [depend] on share-backed loans."

As "Black Friday" amply demonstrates, the way in which we shop has been transformed beyond all recognition. Over the past decade we've grown accustomed to buying the majority of our goods over the internet.

Even things that were once assumed to be immune from e-commerce, such as our weekly food shop, are now increasingly ordered online and then delivered to our doorsteps. The proportion of our shopping done online has tripled over the past year alone, and now accounts for nearly one in every five pounds we spend.

This has not only thrown into question the future of the high street, which has been in decline for quite some time, but also of the large shopping centres and retail parks that were once seen as the future of shopping.

One company that has been particularly hard hit by these changes is Hammerson (LSE: HMSO), a commercial property landlord that owns and operates a range of shopping centres and retail parks across Britain, Ireland and Europe. Over the past two years its share price has plunged by a quarter from a peak of 700p in early 2015 to its current level of 516p.

However, there is evidence that this exodus could be overdone. Hammerson's argument is that, while we won't necessarily do as much shopping in shopping centres as we used to, we will still need them. Most people still like the option of seeing goods and in the case of clothes, trying them on even if they will ultimately go on to buy them online. Indeed, as JP Morgan points out, many companies have shut down shops, only to find that their online sales end up falling because their products are no longer visible. This suggests retail stores could help boost our awareness of brands, even if they are not making many sales.

The convenient location of Hammerson's shopping centres, which includes prime urban spots in London and Dublin, also makes them ideally situated for everything from leisure activities to office space.

At the moment, Hammerson is trying to boost footfall by investing in new technology (such as mobile-phone charging points) and creating an environment designed for shopping "experiences". These efforts are already bearing fruit, with double-digit growth in leasing volumes. Occupancy rates are now comfortably above the average for the sector.

And even if the sector's fortunes cannot be turned around, the fact that Hammerson trades at a 30% discount to the value of its assets gives the shares a relatively large margin of safety. It has also refinanced some of its debt, making it less sensitive to rising interest rates. I'd suggest a bet on Hammeron's shares at £4 per 1p with IG Index, with a stop-loss at 275p, giving a total downside of £964.

Trading techniques: 52-week high/low

As we've discussed here previously, many short-term traders like to buy shares that are trending upwards, or which exhibit positive price momentum. One simple way to spot momentum is to look at shares that are approaching their 52-week highs and buy them when they have broken through this limit. You can even do this automatically by setting a stop order at the level of the previous high, thus ensuring that your trade is only triggered if it makes a new high. Shares that are falling below their 52-week low are considered possible candidates for shorting.

It's important to note that some traders only consider a stock to be making a new high if it closes (ie, ends the trading session) above the previous high. Their argument is that if a high only appears during the trading day, then the market has not properly confirmed it.

Indeed, some think that if a share repeatedly comes close to making a new high, but keeps falling, then it has "topped out" and may be worth shorting. Similarly, if a share comes close to making new lows, but always bounces back, the worst might be over and it might be time to start buying it.

A study by Thomas George of the University of Houston found that stocks making new 52-week highs subsequently tend to outperform the market in the short term (this is the "momentum" effect, a well-known phenomenon in markets). As a result, some traders like to take this a step further and apply it to the index by looking at the NH/NL ratio. This is the number of stocks in an index that are making new highs (NH), compared with those making new lows (NL). A high NH/NL ratio is generally considered bullish (positive), a low one as bearish (negative).

How are ourtips doing?

Our five long positions have proved a mixed bag. IG Group is now at 66p, which means that you would have made £193 if you had bought into it in line with our recommendation in Issue 846. The ADR of the Brazilian energy company Petrobras, tipped in Issue 850, has jumped to $10.23, producing a profit of £300.

However, Barclays (Issue 856) is at 187p, making a loss of £193. AA (Issue 858) is doing even worse at 149.9p, a loss of £282; we are seriously considering closing the position. Nonetheless, Renault (Issue 854) now costs €85.26, making a profit of £121. Overall our long tips are making a net profit of £139.

Our short positions, sadly, aren't doing too well. Tesla (Issue 854) continues to fall, increasing our profits to £130.08. However, Facebook (Issue 864) is now at $183.67, so we have lost £461.04 on this trade. If Facebook were not so close to our stop-loss position of $200, we would probably suggest you close the trade down. We'll keep it open in the hope of a reversal, but it doesn't seem very likely. Thanks to Facebook, our short positions are losing £330.96, which means that seven open positions are losing a total of £191.96.

Speculators all over the world have been bedazzled by bitcoin's meteoric rise. Defying the predictions that we made in (Issues 866 and 868), the digital currency continues to rise higher and higher, and is now above $10,000. Had we not suggested that you wait until it fell below $4,500 (originally $4,100) before shorting it, we would be looking pretty foolish. However, we remain confident that eventually the bubble will burst and when it does the collapse will be as spectacular as the rise.

We're therefore going to stick with our suggestion that you should wait until it falls below a certain level before you sell it short. But we're going to increase that figure to $5,950 to take account of the recent price rise. Set a stop-loss at $6,800.

My last column suggested that the digital currency bitcoin was overvalued and due for a fall but also that you should wait until it had fallen back a bit before actually shorting it.

The latter strategy proved sound as bitcoin continued to surge, not only breaking the $5,000 barrier but also briefly surging past $6,000 for good measure. At the moment it trades at around $5,680. However, fans of the digital currency should be wary of seeing this as some sort of vindication. There have been many cases where an asset price has reached seemingly ridiculous levels, only for it to surge even higher.

Indeed, the trick in these sorts of situations is to keep your nerve, and above all resist the temptation to be sucked into the hype. During the South Sea Bubble of 1720, Isaac Newton made a handsome profit from selling his shares in the company, only to see his friends who hung on to their shares make large paper profits as the price continued to surge. Eventually, he got so frustrated that he plunged in again, only to lose huge sums of money when the bubble finally collapsed.

In any case, bitcoin's reckoning may come sooner rather than later. The community is becoming increasingly divided about how the currency should be run, particularly the process of "mining" bitcoins. At the moment new bitcoins are allocated depending on how many transactions a miner helps process.

However, many are complaining that the process favours professional miners who are able to spend large amounts of money on dedicated computer processing power. In an attempt to democratise the bitcoin production process, a faction has recently launched a new currency, bitcoin gold, using a different approach that favours ordinary computers.

This may seem a rather obscure dispute, and I don't really have a strong view either way. But the main point is that this sort of split could very easily undermine confidence in the crypto-currency, both for investors and users. After all, the whole selling point around bitcoin was that it was run on supposedly "objective" lines, rather than subject to the whims of a politician or central banker.

Once you take that away, then bitcoin loses a lot of its attraction, and you might as well put your money in a normal currency. I'd therefore suggest that you keep a stop-order to sell bitcoin at £1 per $1. However, I'd adjust the price at which it is triggered from $4,100 to $4,500 in line with a 50-day moving average. This means that the trade will only be triggered once the price falls under $4,500. I'd also increase the stop-loss on the trade to $5,300.

Trading techniques: Elliott wave theory

A more offbeat alternative to trend lines and moving averages is Elliott wave theory, developed by accountant Ralph Elliott in the1930s. He posited that markets follow a predictable pattern of a five-stage upwards trend, followed by athree-stage correction.

In the first wave, prices start to rise despite negative news and sentiment. However, the negative mood drags them back down, though not to their original level. That is wave two. Sentiment then improves leading to a rally that surpasses the peak of wave one. Wave four sees another, gentler retreat. By now sentiment has turned extremely bullish with many investors initially reluctant to invest piling in. As a result, there is another rally in the fifth wave pushing prices to new highs.

The downtrend is the reverse of the uptrend. It begins with a slight decline against a backdrop of positive sentiment, which ends up being largely reversed by a rally, leading many people to see it as just another part of the bull market. However, this then gives way to another, much larger fall, as sentiment becomes increasingly bearish. By the end of the third downward wave everyone is convinced that a bear market is taking place (ironically just as it may be ending).

The problem with Elliott wave theory is that it is extremely subjective. One Elliott wave theorist may believe that a share or index is in an uptrend, while another thinks the opposite. So it is very hard to devise a test of whether the theory works. Yet it has many supporters, including legendary hedge-fund manager Paul Tudor Jones.

How are our tips doing?

It's been a mixed fortnight for our recommended trades. As far as our five long positions are concerned, IG Group (Issue 846), Petrobras (850) and Renault (854) have all fallen slightly.

However, Barclays (856) has rallied a bit and the AA (858) has pretty much stayed the same. Despite these small fluctuations, IG Group, Petrobras and Renault remain in the black, while Barclays and AA are in the red. The net effect of all the movements up and down has been to slightly reduce our ongoing profits from £169 to £137, so there has been no significant change.

Meanwhile, it's been a better time for our two short positions or at least one of them. Up until now, our recommendation that you bet against Tesla (854) would have cost you £500. However, the fall in Tesla's share price from $356 to $342 would have cut those losses by £150 to £351.

Facebook (Issue 864), which we've been shorting for the past four weeks, has essentially stayed the same. Overall, we're losing £214. While this isn't ideal, it's not too bad given the profits that we've banked from trades that we made earlier in the year.

As a result, we're not going to make any sudden changes to our portfolio by closing any of our open trades. While it's nearly six months since we tipped IG Group, I'm still confident that the impact of the ongoing European regulatory review of the rules governing the spread-betting sector will be much less serious than people are anticipating. I'm still positive on the stock.

Similarly, I'm confident that increasing competition, production problems and higher-than-expected costs related to the release of the Model 3 will start to take its toll on Tesla's stock price. I would therefore suggest you stick with the Facebook and Tesla shorts.

It's been nearly four years since Royal Mail was privatised. Whatever the merits of the decision politically, it's been a poor investment, unless you were among the many small investors who "flipped" your shares early in the process. If you'd invested at the peak in early 2014, when the share price stood at more than 600p, you would have ended up losing nearly 40% of your money. The price has fallen to 376p, below the price at which it first listed. It recently suffered the shame of being demoted from the FTSE 100, which may force several funds to sell their holdings in it.

There are plenty of reasons for investors to be concerned. A dispute over changes to the pension scheme mean there is a strong chance that the company will face industrial action, which would hit revenues and reliability. In the longer term, it faces competition from Amazon, which has shifted from being a major customer to a competitor, investing large sums of money in its own distribution network. And in the longer run, drone delivery and 3D printing could make the whole idea of human beings delivering parcels an anachronism.

However, the fact remains that the company is making substantial strides in dealing with these changes. It has worked hard to cut delivery deals with retailers, including signing agreements with Marks & Spencer, and John Lewis. These contracts have enabled it to benefit from the rise in parcel volumes as retail sales continues to shift away from bricks and mortar towards online commerce. Royal Mail's GLS subsidiary also helps it to benefit from growth in e-commerce in continental Europe. There are also signs that its recent investment in information technology is helping it to streamline costs, making it more competitive with its rivals.

Even if Royal Mail proves unable to turn the core business around, it is sitting on a lot of valuable real estate, much of it in London. It has already sold some of its surplus property to reduce its debt, but it is still trading at a discount of around 10% to the value of its tangible assets. And if you include intangible assets, this widens to 25%. It also looks cheap compared to earnings it trades on a price/earnings ratio of around 9.6. Its ability to generate lots of cash means that even if the worst comes to the worst, it should be able to keep paying the generous dividend of 5.8%.

At these levels, the bad news seems priced in. So I'd suggest going long on Royal Mail at 377p. IG Index requires a minimum stake of £1 per 1p. I'd suggest increasing this to £2.50 per 1p, and putting on a stop-loss at 177p, limiting your total downside to £500.

Spread betting the forex markets

When it comes to spread betting, surveys suggest that foreign exchange (forex) accounts for around a third of total volume, on a par with stock indices. While virtually all spread-betting firms offer currency trading, there are a few things to watch when picking a firm for forex trades.

As with any spread betting firm, make sure they have UK regulatory approval. Regulated firms have to follow certain practices designed to protect the interests of their clients, such as holding enough capital to ensure they can cover any losses. Spread betting with a regulated firm also grants access to the Financial Services Compensation Scheme in the event that a broker goes bust (this only covers the balance of money in your account, of course, not losses you incur).

Because forex involves using high levels of leverage to make profits from relatively small price movements, low bid/ask spreads are vital. These are usually measured in terms of "pips", and usually to four decimal places (so one pip in GBP/USD is equal to 1/100th of a cent). The good news is that spreads are low for most big brokers. CMC Markets, IG Index and City Index all have spreads of 1 pip or lower for GBP/USD and EUR/USD.

We're not big fans of ultra-short-term strategies. The markets can move so quickly that the price at which you place an order may not be the price you end up getting, and stop-losses can be triggered at below their specified levels. However, as a guideline IG Index states that virtually all foreign-exchange trades are executed without slippage, and that only about 8% of trades with stops are affected for an average of 0.4 pips.

Portfolio report

It's been a little while since we checked our portfolio and we've got some good news to report. Driven in part by uncertainty over North Korea, gold prices surged to more than $1,350 an ounce a few days ago, the level at which we suggested you automatically take profits. While they have fallen back since, you would have made £882 in profit had you bought gold at the suggested level of £7 per $1 back in February (issue 832) when we first suggested the trade.

Not all of our trades have been as successful. Our decision to short Ocado is now nearly £250 in the red after the share price went up to 310p. Our punt on Virgin Money is also losing £147 thanks to a fall in price from 318p in late March, when we first recommended the trade, to 216p today. Some of our newer bets have also had a bit of difficulty, with our high-risk punts on Barclays and the AA managing to lose a combined total of £242 in the space of a fewweeks.

Still, there have also been some strong performers. The Brazilian political crisis may be ongoing, but oil giant Petrobras continues to be a star performer, thanks in part to a new partnership with oil major Shell. Overall, it is up £268 since we tipped it in June. Spread betting firm IG Group has also made £131, and construction firm John Laing Group is also doing well, up £112, having seen solid growth in the value of its net assets.

In addition to automatically closing out gold, we're going to suggest that you close out Mitchells & Butlers, which hasn't really gone anywhere. We also think that you should take losses on Virgin Money.If you've been following our recommendations about timing and position size, the closed trades should now have a cumulative profit of £1,113, while the open positions should be currently sitting on a profit of around £22.

Anyone travelling to the continent from the UK this summer will have, no doubt, winced every time they've had to pay for anything.

The euro has been strong surprisingly so while the pound (and the US dollar) have been weak.

Today, I want to consider the euro against the pound. We could be close to an inflection point.

The euro's relentless rise

But he has been extremely successful in achieving one of his stated goals: a weaker US dollar.

Whether he can actually take the credit for that or not is another matter. But the US dollar is down by some 15% this year against the euro, which has done very little else this year but surge.

People always seem to like to know why a market has done what it's done. An easy explanation for euro strength is the perception that the European Central Bank (ECB) is set to rein in its quantitative easing (QE) programme at some point soon.

That may or may not be the case. In fact, the euro was not particularly strong against sterling in the first five months of the year. So it seems that this surge was, at first, more a matter of US dollar weakness than anything else. By late April, sterling was actually up against the euro on the year.

What did for sterling was the disastrous (if you're Theresa May) general election. One euro could be exchanged for 83p in late April. It doesn't seem that unreasonable a price now, although bear in mind that once upon a time in 2000, a euro would fetch you a mere 57p.

Today one euro is almost 92p. Parity, it seems, beckons.

Let's take a look at a long-term chart so we can see where we are in the grand scheme of things. Here is the euro against the pound since its inception in 1991.

On an intraday basis, the euro went to 98p at the height of the financial crisis in November 2008. So 98p is as far as this forex pair is concerned the final frontier.

The next big line in the sand, I would say, is 94p. We got there in spring 2009, and we also touched that level on an intraday basis during the peak post-Brexit pound panic in autumn last year, when we got the so-called Flash Crash.

After that I would say 90p is the next pivotal figure it's been a point of resistance and support in the past although this month the euro breezed through that level like it wasn't there on its way to its current price just shy of 92p.

So the euro is now a penny or two off the extremities of the Flash Crash of 7 October 2016. It's just 6p from the extremities of the 2008 financial crisis. That is how far things have come. Those levels were panic extremes. This time around it's been more gradual.

Here's the euro against the pound over the last three years, for some more recent perspective.

My view is pretty basic: the euro is overvalued. The pound is cheap.

Such is the strength of the two currencies Britain's economy is now smaller than France's. Can you imagine the shame? Together with these latest ideas being touted about to tear down their statues, our ancestors must be turning in their graves.

How low can the pound go?

the euro is over-valued against the pound by 9%. In an email he tells me: "The strong euro is only 9% expensive against GBP which is still modest compared to its 23% overvaluation in late 2008 when EUR/GBP reached 1.02 (98p)."

Charles estimates that purchasing power parity (PPP) ie, fair value would be around 82-83p (although in late 2008, that figure would have been around 74p).

My instinct is that, despite these high valuations, we are not quite yet at the high and that this rally is not quite done. Trends often defy "sensible" thought if you can call mine that and right now the euro is in a strong uptrend.

The ECB next meets, I understand, in early September, so perhaps something will be attempted then to stem the tide if not before, when ECB boss Mario Draghi appears at the central banker jamboree in Jackson Hole later this week. I'm not sure a strong euro will be deemed that desirable a thing across Europe in this age of competitive devaluation.

Despite what you might read on Twitter, Britain is not falling apart. Our government may be insecure. We have too much debt, for sure. But the stock market is strong. Unemployment is low. Business is pretty good. And the argument could easily be made that, despite the political insecurity, Britain is actually in better shape than many countries in Europe.

So, my view is also that an opportunity is brewing. Perhaps 94p will be the turning point. Or perhaps we need to go back to 98p.

That said, on a PPP basis, if things were to get as over-valued as they were in late 2008, and Charles Ekins is correct that PPP then was 74p, then perhaps we have a final target beyond parity at somewhere like £1.10 to €1.

I find that most unlikely, but you never know.

My view is that somewhere in the not-too-distant future, long-sterling, short-euro is going to be the trade.

Indeed, I've already taken a small position, and I'm underwater. I'll be considering adding if we get to 94p or 98p, or even at parity if we get there. But I'm willing to wait.

Since late 2016, long-sterling, short-euro has been what they call a "widow-maker".

I don't quite know what the reverse of that is, but I'm hoping this turns out to be my "school-fees-payer" in the next academic year.

Banking is not a popular sector. But of all the banks in Britain right now, it's probably safe to say that Barclays has had more than its fair share of bad publicity this year. Six weeks ago the Serious Fraud Office surprised many when it decided to press criminal charges against four former executives, including ex-CEO John Varley, over actions related to their decision to seek funding from Qatar during the height of the financial crisis. Experts warn that the trial could drag on for years.

But it's not just former executives who are under the spotlight. Current CEO Jes Staley is under investigation for his attempts to unmask a whistleblower last year, something that he admits was wrong. The Financial Conduct Authority and Prudential Regulation Authority are still investigating what happened and a report on his behaviour is due out in the autumn. Experts believe that if the report is particularly critical, Staley could yet resign, throwing the bank into turmoil.

If the public side of Barclays has been under pressure, at first glance the business side doesn't seem to be doing much better. Indeed, recent earnings figures have been disappointing. Compensation payments from the mis-selling of payment protection insurance, and costs associated with the disposal of assets in Africa, saw the bank post a heavy loss this quarter. Investors in the stock have also had a turbulent time even a recent rally has failed to lift them back to where they were two years ago, let alone restore them to the post-financial-crisis highs.

Yet appearances can be deceptive. The sale of African assets should result in a more streamlined business and boost the balance sheet, increasing the tier 1 capital ratio (which increases the bank's ability to weather a downturn in the credit markets). That the process is being completed six months earlier than planned reflects positively on the management's commitment to further restructuring. The move out of Africa will also make it easier for Barclays to boost its return on capital (ROC) to 10%. Indeed, if you look at the core businesses, ROC is already a respectable 7.2%.

Barclays is also building up the investment-banking side of its business. Under Tim Throsby from JP Morgan, it's gradually increasing staff numbers and has decided to try to boost returns by moving capital that's currently tied up in poorly performing parts of its loan book elsewhere. Evidence that the investment-banking unit is turning a corner comes from the fact that share trading revenues rose 12% on the year.

Of course, turmoil in the executive suite could impede this process. But I'm confident that the CEO will be able to survive the investigation, especially since the bank has already formally reprimanded him and cut his pay. The changed regulatory environment in the US should also help the bank either settle remaining lawsuits around mortgage securities on favourable terms, or even avoid paying out altogether.

In any case, what really appeals about Barclays is its cheap valuation. It currently trades on 9.1 times forward earnings, and at a whopping 37% discount to the value of its net assets (and 27% to its tangible assets) rivals Lloyds and HSBC trade at premiums of 14% and 21% respectively, counting tangible assets. Even the beleaguered and still-nationalised RBS has a slightly lower discount of 25%.

So overall, this looks like a good opportunity. I'd suggest taking a long position in Barclays at 206.3p at£10 per 1p. I'd put astop-loss at 106.3p. This limits your total downside risk to £1,000. Naturally, if there are any adverse regulatory developments, I'll reassess the position, but I'm confident that Barclays should be able to weather any storm.

Understanding overnight charges

When you take out a spread-betting position you may notice that "holding costs" are deducted from your profit/loss. While the idea that you have to pay for the privilege of taking out a position may seem illogical, or even extortionate, there's actually a solid reason for it.

Spread betting involves making leveraged bets on a share, currency or commodity. This means that you are effectively borrowing money to bet on the asset. So, if you are betting £10 a penny on a share worth 100p, you are effectively buying £1,000 worth of shares and borrowing the money to do so.

To compensate for this, the spread-betting firm will charge you an interest rate equivalent to a percentage of the total trading size. This rate is linked to Libor (the London Interbank Offered Rate), the amount of money that banks have to pay when borrowing money from each other. Inevitably, an additional administration fee is tacked on. For example, both IG Index and CMC Markets charge 2.5% above Libor for long positions (when betting on a share). Short positions (ie, betting against a share) are slightly different in that IG Index will deduct the Libor rate from the 2.5% costs.

If you use a reasonable amount of leverage then holding charges aren't going to be that significant in terms of your account, especially in today's ultra-low interest-rate environment. Indeed, in the case of the above example, the total holding costs will be only £27.50 (£1,000 x 2.75%) a year and to be fair, £10 a point represents more than enough leverage for the vast majority of spread betters. However, if you are betting using much more substantial amounts for example, £100 per 1p then you would have to pay £275 a year in holding costs, which is more painful.

As holding charges are calculated on a daily basis, you might be tempted to try to avoid them by buying and selling the shares in the same day. However, this is a bad idea since the additional spread (the difference between the buy and sell prices) will more than make up for any savings not to mention the psychological hurdles involved in timing a daily entrance and exit from your trade.

Tesla has been on a roll. In four years the share price has soared from $40 to a peak of $383 last month. But since then it has fallen back around 20% amid fears that the stock has been overhyped. Last weekend even Tesla's founder and CEO Elon Musk warned that he felt that "our stock price is higher than we have any right to deserve" and that he wants to "tamp down those expectations".

What's getting investors so hyped up is the launch of Tesla's Model 3. Up until now the company has been a successful niche producer of luxury electric vehicles. However, this new version costs around $35,000, putting it within the range of the average family. The hope is that Tesla will bring electric cars to the masses in the way that Ford propelled car ownership itself into the mainstream.

So, is the fall in price a buying opportunity, or the sign of things to come? The company is certainly aggressively priced. It is currently making a loss, although analysts expect it to grow its revenue sevenfold by 2021, by which time it should be making money. Even if it achieves the projected sales and profit figures, however, the stock's 2021 price/earnings (p/e) ratio of roughly 18 times earnings looks high, given that most car firms trade on p/es of less than ten. The market cap of Tesla is nearly double that of Renault, even though the French carmaker has nearly ten times the revenue of the American company.

Tesla also has several problems. Firstly, staff turnover has been high, with many senior engineers and executives leaving. Major shareholders are also reportedly unhappy about the lack of independent directors on the board. The company is still burning a huge amount of cash, around $750m a quarter. While it's been quietly trying to reinvent itself as an electric battery company, its battery "gigafactory" has yet to be completed and its solar subsidiary is also losing substantial amounts of money.

An even bigger problem for Tesla is competition. Although it may be the most high-profile electric car company, it's not the only one putting a large amount of money into this area. Indeed, all the major carmakers have increased their efforts, with General Motors' Chevrolet Bolt already proving a major hit with US consumers. Volvo recently said that it will make only electric or hybrid cars from 2019. Its competitors are also investing large sums in assisted, and even fully autonomous, driving systems, nullifying Tesla's other main competitive advantage.

If Tesla looks overpriced, then Renault looks cheap, trading at less than six times earnings, and at a discount of around 20% to its net assets. It also has a 42% stake in Nissan. In the first three months of this year the two companies sold more electric cars than Tesla (36,723 versus 24,950). While the Model 3 may change this, Nissan has said that it will sell a new version of the Leaf, currently the top-selling electric car, in the autumn. This is expected to be able to do over 200 miles per charge, making it comparable with Tesla's flagship Model S (most petrol cars can do 350+).

Renault also stands to benefit from an increase in European sales as the eurozone economy picks up. French president Emmanuel Macron's proposed liberalisation of labour laws should lower costs. Overall, while Tesla looks extremely overvalued, Renault looks like a bargain. I suggest that you short Tesla at $329.3 at £12 per $1, with a stop-loss (cover) if it gets above $411. This limits your losses to £980.40. I'd also buy Renault at €82.90, at £50 per €1, with a stop-loss of €62 (a potential downside of £1,045). Because Tesla's shares are denominated in dollars and Renault's in euros, there is additional currency risk, but this can't be helped.

How our trades are doing

It's been a good week for this column's investments. IG Group's share price has jumped to 646p, which means that the trade is now over £150 in profit. The firm has reported an 8% increase in revenue for the year to 1 June 2017, while management reckons that the regulatory crackdown on the sector, especially in terms of leverage, might not be as tough as it originally anticipated.

Virgin Money has risen to 301p, which means that it is only £51 in the red. Petrobras is also £81.25 ahead. Overall, my long bets are now £383 in profit, a substantial increase from the position a fortnight ago where they were only making a profit of £62.

Even when you take into account my short position in Ocado, which is still £162 in the red, things look pretty decent. This is not to say that there isn't any need for changes. I've held gold for nearly six months and during that time it has moved in a relatively narrow range. Fed chair Janet Yellen has recently taken a more dovish tone.

However, with the crisis in the eurozone dying down (at least for the moment) and Donald Trump moderating his position on trade, there isn't any big near-term catalyst that could push it higher. I'm therefore going to recommend that you close the position, and take profits, though of course I might revisit the trade nearer the Italian elections next year if I think that there is a good enough trading opportunity.

In the last column I promised that I would come to a decision on IG Group (the owners of spread-betting firm IG Index). In contrast to my decision to ditch gold, I'm going to stick with my position on IG. The revenue growth suggests that the company's business model should be able to withstand the impact of any increased regulation. IG's move into more conventional broking is also a great way to leverage the brand name to get more money from its existing customer base.