Into FSB? Check the forecast

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We all know that financial spread betting can be a highly lucrative way to derive value from a volatile market. What is less well known is quite how to make the sort of immediate short-term judgments that can actually produce returns on any sort of a consistent basis. FSB is a difficult trick to master.

The standard rationale – applied by serious investors who use FSB in preference to the more highly surcharged stock and currency markets per SE, just as much as the more recreational investors who make up the greater number of FSBers – is that there is no substitute for insight.

Insight, of course comes in many forms, and it is often only after the event that we can see which way the runes were lining up. If spotting those patterns was as straightforward as hindsight sometimes makes it seem, we would, of course, all have been soaking up the sun on the beach long ago.

There are multiple data streams that investors and would-be investors mine as they seek out the sort of short-term gains that FSB can deliver. There is one, however, that only intermittently hits the Tradefair dealing screens – and even then it only does so in the most unmissable manner.

Weather patterns and one-off events have always had an impact on markets – in terms of their impact on harvests, transportation or one-off disasters. Some of these events can be predicted, especially those associated with slow moving weather patterns, others – and their market impact – less so.

But those slow moving events are largely out of the picture when it comes to the immediate time-scales that are part and parcel of FSB.  The essence of FSB is that it is the ideal vehicle to capitalise on surprises in the market place. Long-term prediction is anathema to this particular activity.

However, when all else fails, there is one aspect of the weather that has, time and again, been shown to have a direct and immediate impact on market movements. Serial psychological studies have found that market investors and traders are more bullish when the sun shines, and more conservative when their local conditions are overcast.

Within that overall finding, it has been suggested that the correlation between market optimism and sunny weather is particularly strong amongst private investors. There are two aspects to this which are worth separating out here.

The first is that this insight – if that is what we are to call it – will apply specifically in those instances where there is a high proportion of private as opposed to institutional activity. Keeping an eye on the weather may give a clue as to one of the easily overlooked marginal factors that may have a bearing on a stock, even – or perhaps especially – on a quiet trading day. In sum, if all other evidence leaves your judgement pending, take a note of the weather, it might just be the marginal difference that can take an investment that one or two points further than might otherwise be the case.

The other key point that this insight brings into focus is less about the markets than it is about the investor him or herself – that means us! In crude terms, what the evidence suggests is that however dispassionate and calculating we might tell ourselves we are being, there is always a degree of our thinking and decision making that is conditioned by our mood.

If you are tempted – on a fine balance of evidence – to take a position on a trade, just stop for a minute to check the weather. If your state of mind is in key with the conditions, maybe you should think again.

If your optimism does blossom in the sunshine maybe you should be wary of getting carried away. As parents on beaches the world over tell their kids, you always need to take extra care in the sunshine.

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James is a financial expert who has contributed several business and finance related articles. His expertise and first-hand knowledge of economics makes his blogs and articles informative and helpful for those looking out for guidance and assistance in matters related to finance. He has an active schedule of TV and radio interviews He is co-host of the popular VT Radio show Jim and Gordie Show. latest-articles-buttonJim comes from an old military family dating back to the American Revolution. Dozens of Confederate ancestors fought for the South in the War Between the States. Uncles fought in WWII and Korea. His father was a WWII P-40 and later P-51 Mustang fighter pilot. Vietnam found several uncles serving, a cousin, and brother Wendell as a young Ranger officer. His mother was a WWII widow at 16, her first husband killed with all 580 aboard when the SS Paul Hamilton, an ammunition ship with 7000 tons of explosives aboard, was torpedoed off the coast of Algiers. He has been writing, speaking and doing public relations, television, consulting and now multimedia work for a variety of American heritage, historical, military, veterans and Intel platforms. Jim’s only film appearance was in the PBS Looking for Lincoln documentary with Prof. Henry Lewis Gates, and he has guest lectured at the Army Command and General Staff School at Fort Gordon. Currently he is working to take his extensive historical video archives on line to assist his affiliated organizations with their website multimedia efforts, such as the Military Order of World Wars, Atlanta, Sons of the American Revolution, Sons of Confederate Veterans , Assoc. for Intelligence Officers, the Navy League, Georgia Heritage Council, National Memorial Assoc.of Georgia.

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