June 29, 2009
Posted: 1945 GMT
LONDON, England - A bright and sunny Monday morning and I’m off to work. But my morning commute today takes me not to my usual central London destination, but to the financial heart of the capital, the Square Mile. The City, where fortunes are made and lost. I feel strangely nervous, like the new boy at school.
At CMC Markets, market strategist Ryan O'Doherty introduces me to the concept of CFDs or Contract for Difference. A CFD would allow me to trade on a financial instrument such as a share or a commodity without having to physically own it. They are a leveraged product which requires a trader to deposit only a fraction of the overall value of their trade. This is called trading on margin.
Markets fall as well as rise. CFD traders can potentially profit from falling markets too because they are trading on the price movement of an instrument. This is known, Ryan explains, as "going long" if you expect the price to rise - or "short" if you expect it to fall.
Ryan is at pains to point out that while margin trading can magnify returns, losses will also be magnified, so CFDs aren’t suitable for everyone.
A couple of hours later and my head is buzzing. It seems incredibly complicated. Ryan gives me my coursework to read and sends me on my way. I stumble out into the sunshine wondering whether I'm up to this.
Fortified by coffee and a sandwich I'm welcomed into the offices of IG Index and another classroom where chief market strategist David Jones outlines the concept of spread betting. David explains that spread betting is very similar to trading CFDs but with certain tax advantages for UK citizens.
David then goes on to teach me about currency pairs, one of the most popular spread betting and CFD instruments. It’s the volatility of the currency market that makes it so attractive. Whereas stock markets can trade within a narrow range for days, currencies often present trading opportunities many times a day.
David points out that, as a leveraged product, the potential for losses as well as gains while spread betting is magnified. He says that due to the extreme volatility I might like to think about getting to know the currency markets well over time and gaining much more trading experience before venturing in.
More coursework to tuck into my briefcase and my school day is done.
Before joining the swarm of evening commuters streaming away from the city, I pop in to see David Buik of BGC Partner, a man I’ve interviewed hundreds of times on television over the years and someone whose expertise I value.
David has kindly offered to give me "independent" advice as I attempt to become a competent trader.
Sitting in his 19th floor office, admiring the view over the Thames, David drops a bombshell. "If money isn’t one of your gods, you’re wasting your time in this environment," he says.
You see, money never has been a great motivating factor in my life. Broadcast journalism is a vocation for me. I’m fortunate enough to have a fantastic employer who rewards me handsomely for what I do and I rarely give money a second thought. Sure, I'd like to have a bit of extra cash now and then - but who doesn't? Does this mean then that my attempt to become a successful trader is doomed from the start?
Perhaps it is. Perhaps I just haven't got the right attitude and never will. No time to worry about that now though. I've got several hours of coursework to get through before I can rest my weary bones.
* How does Adrian Finighan fare in his career as a rookie trader? Watch Quest Means Business Monday to Friday: 1800 GMT London, 2000 CET, 0300 HK.