Hochschild Mining is now a leading gold and silver mining company. This market sector usually yields good volatility, much loved for spread betting, and the daily price chart below shows that this stock does not disappoint.
Note particularly the long wicks on most of the candles, showing that the price has varied a great deal over the day.
Some of this variation is because the current Executive Chairman, Eduardo Hochschild, who assumed this position in 2006, is a major shareholder, and this means that fewer of the shares are available for public investment.
The company was founded in 1911 by Mauricio Hochschild, a Peruvian businessman. It started mainly dealing with commercialization of minerals, and not with the mining of them which did not begin until the 1940s. It was a major supplier of tin and other metals to the Allies in the Second World War.
The company operates exclusively in North, Central, and South America, with mines in Peru, Argentina, Mexico, and Canada. Its current position has been built up since 1995, when an extensive exploration program was started together with the employment of a number of mining professionals. It was only publicly listed in 2006, and the purpose of this was to raise more than £1/2 billion to fund further exploration.
Looking at the chart above, you can see that the major recent uptrend and downtrend were clearly signalled on the MACD. The current confusion on the right-hand side looks as if it will resolve into a continuation of the downtrend, after a few days testing the upper Bollinger Band, but on this scale of price chart it is a little early to commit to the trade. Given the volatility denoted by the length of wicks on the candles, this stock may prove better to spread bet on a shorter period chart, such as an hourly chart.
Hochschild Mining Rolling Daily
You may think from looking at the chart that it is worth betting on the price of the stock falling over the next few days. The current spread betting quotation for a rolling daily bet is 473.61 – 475.99, so your short bet would be placed at 473.61. Your bet should be placed on the basis of technical analysis, and not simply on a feeling that the price is too high, as this is unlikely to be successful. Say you decide to stake £8 per point.
Perhaps over the next week or two the price drops to 438.76 – 441.14, and you decide that you should take your profit. The starting price was 473.61 and the bet closed at 441.14. 473.61 minus 441.14 is 32.47 points. Multiplying by your stake of £8 per point, this amounts to a profit of £259.76.
If you are not so fortunate and the price goes up after you place your short bet, then you must decide when to close your bet and curtail your losses. Say you closed your bet when the price went up to 499.02 – 501.40. This time the point difference is 501.40 less 473.61, which is 27.79 points. That works out to £222.32 lost.
Quite a few spread traders use a stop loss order to help them keep control of their losing bets. That way, even if they do not have time to watch the chart, they know that their spread betting provider will close any losing bets for them. The stop loss order is usually placed when the initial bet is made, and only triggers if the price runs against you. In this case a stop loss order might have closed the bet when the quote was 491.36 – 493.74. The loss this time is 493.74 minus 473.61 points, which is 20.13 points. For your chosen size of wager, that would work out to £161.04.
Hochschild Mining Futures Style Bet
Despite the fact that there is usually a larger spread which can eat into your profits, futures style spread bets can be useful if you consider that you are likely to hold your bet open for several weeks or months while the price moves as desired. The current quote for Hochschild Mining for a far quarter bet is 474.58 – 480.31.
If you see bullish indications, you may choose to place a long or buy bet at the price of 480.31, staking perhaps £12 per point. Suppose that the price goes up as you had surmised, and that you are able to close your trade for a profit when it reaches 536.31 – 542.06. The starting price was 480.31, and the closing price was 536.31. That means you have gained 56.0 points. With a wager of £12 per point, your winnings would be £672.
It could be that the price goes down after you placed your bet, and you may be faced with closing your trade for a loss, simply to avoid further losses. Perhaps you choose to close your trade if the price drops to 435.65 – 441.18. The closing price this time is 435.65, and taking that away from the opening price you find that your bet has lost 44.66 points. With a stake of £12 per point, that is a loss of £535.92.
If you do not have time to watch the markets continually, you may well consider taking out a stop loss order when you place the bet. Often a stop loss order will close a losing bet more quickly than waiting until you notice the price drop then taking action. In this case a stop loss order might have closed your bet when the price dropped to 447.92 – 441.54. The difference in points is 480.31 minus 447.92, which is 32.39 points, and that would lose you £388.68.