How To Trade Effectively & Strategically

Gamble Responsibly

First and foremost, trading on the Slicethepie exchange is GAMBLING.  It is a recreational activity for members aged 18+ and comes with financial risks.  Whilst the potential gains could be huge, they are unknown and by no means guaranteed.  The potential losses however, are easily quantified.  Put simply; you could lose every penny!

PLEASE NOTE: U.S CITIZENS ARE RESTRICTED FROM USING THE TRADING EXCHANGE DUE TO U.S GAMBLING LAWS

“NEVER GAMBLE MORE MONEY THAN YOU ARE PREPARED TO LOSE”

Understand the Exchange

Having invested in an artist who successfully reaches their £15k financing target, you will be entitled to 1 contract for every £1 invested (if eligible).  The contracts go live on the trading exchange shortly after the artist is fully financed.  You now have the option to wait until the contracts are redeemed for a cash return 2 years after the artist’s album is released.  Alternatively, you can sell your contracts on the trading exchange.  The trading exchange at its most basic level, is a platform that allows the buying and selling of contracts between investors/traders.

We recommend reading the official Slicethepie FAQ which has a section dedicated to the trading exchange.

“YOU DO NOT HAVE TO KEEP YOUR CONTRACTS FOR 2 YEARS TO MAKE MONEY”

Understand The Contract Value

Contractual value can be divided into 3 phases.  The ‘Pre-ordered’ phase, the ’Trading’ phase, and the ‘Redemption’ phase.  The initial cost of obtaining contracts through investment (pre-ordering) provides the original cost of the contract.  In most cases this will be £1.00.   By making a mental note of a contracts original price, a mental ‘base’ value can be formulated, in which any contract offered below this threshold might be deemed good value.

The contract value will then fluctuate once on the trading exchange, based on speculation and investor confidence.  The prices being determined by how much traders are willing to buy/sell contracts for.

Finally, 2 years after album release, the contracts are redeemed for a cash sum (see official FAQ for details) and the contract pays out its true value.  As the ultimate value of a contract cannot be realised until the end, the redemption value remains speculative, based on your own confidence.

By understanding these 3 contractual value phases, you will be better placed to make trading decisions on the exchange.

“THE CURRENT CONTRACTUAL PRICE IS ONLY WHAT THE LAST PERSON WHO TRADED IN THAT ARTIST, THOUGHT THEY WERE WORTH”

Theoretical Loss

Contract prices will go up and down.  In order to make money, you simply have to buy low and sell high, or in the case of the investor looking to sell his/her pre-ordered contracts; sell for more than the initial cost of pre-ordering the contracts.

Sometimes the price will drop and your portfolio will show you have made a loss.  It is very important to understand this is a purely theoretical loss.  As long as you do not sell for a loss, you have not actually made a loss.  Similarly, if your portfolio is showing good growth, you are only being shown theoretical profit.  You need to sell your contracts for profit to make profit.  A contract that is worth £2.00 can be valued at £1.00 tomorrow, £3.00 the next, but £2.00 cash is always £2.00 cash!!

“A LOSS SHOWN IN YOUR PORTFOLIO ONLY BECOMES A REAL LOSS IF YOU DECIDE TO SELL”

Reinvest

Money makes money! Use your trading profits to buy more contracts, either through the exchange or via the investment stage.  Small profits continually reinvested can significantly increase your portfolio’s growth over time.

“YOU WILL BE SURPRISED HOW QUICKLY YOUR PORTFOLIO CAN GROW THROUGH CONTINUAL REINVESTMENT”

When The Going Gets Tough – BUY!!

A fall in contract price provides an excellent opportunity to purchase more.  Buying additional contracts at a lower price than you originally paid will lower the total average price you have paid for your contracts, resulting in a lowering of the contractual price needed for you to break even or move into profit.

Example; I have 2 contracts bought at £1.00.  The value crashes down to 50p, whereby I purchase 2 more at 50p.  I now have 4 contracts costing me £3.00 in total.  Previously, I needed to sell a contract at £1.00 to break even.  Having bought more contracts at the lower price, I can break even by selling my contracts for £0.75

“BUYING MORE CONTRACTS AT A LOWER PRICE INCREASES THE PROBABILITY AN ARTIST WILL RETURN A PROFIT FOR YOU”

Life Is a Rollercoaster

Contract prices can go up and down.  Look to sell at the ‘peaks’ (before a fall) and buy during the ‘troughs’ (before a rebound).  Remember, prices never move in straight lines (graphically), tending to zigzag, forming an upward or downward trend.  Whilst it is important to try and predict the highest and lowest points of any ‘trend’, it is equally important to gauge the many peaks and troughs that can occur throughout a trend, thus maximising your trading profits.

“BUY LOW, SELL HIGH”

Board Control vs. Financial Risk

The more contracts you own in an artist, the higher the level of ‘board control’ you have.  The number of contracts you own in an artist will determine the level of influence you are able to exert on the exchange and which strategies are available to you.  Needless to say, owning 1000 contracts will allow you to adopt certain trading strategies not available to someone with 5 contracts.   Remember, the more contracts you have, the more you have to lose as your ability to influence the exchange is linked to the risks you are willing to take.   It’s a careful balancing act.

“BALANCING THE RISK IS A STRATEGY IN ITSELF”

The Price Is Flexible

If you are looking to purchase a contract on the exchange, you do not have to buy at the going rate.  If you feel the price of a contract is too expensive, simply place an offer to buy at a lower rate and wait for someone to meet your offer.  Similarly,  if you are looking to sell a contract and are unhappy with the low price  offered  by others, place an offer to sell your contract(s) for higher.  Accepting the current price results in an instant transaction, where as placing offers can land you some great deals and increase your profits, though it can take some time for your offers to be met, and it is not guaranteed that they ever will.

“All GOOD THINGS COME TO THOSE THAT WAIT.  A LITTLE PATIENCE CAN PAY OFF IN THE END”

Knowledge Is Key

Prices are dictated by investor confidence.  Good news will generally result in an increase in prices.  Bad news may result in a fall in prices.  No news is usually bad news!  Be sure to watch the Slicethepie Trading News segments for price sensitive information.  Be aware that once the news has been released by Slicethepie, it is usually too late!  Many investors will already be aware of price sensitive information well before it ever hits Slicethepie and have their strategies already in play.   Be sure to keep up to date with artist sites, blogs and tweets.  If you are invested in an artist, join their mailing list.  For a comprehensive list of all financed artist’s sites, check out our ‘SLICETHEPIE ARTIST LINKS‘ page.

“HAVING A STRATEGY BASED UPON KNOWLEDGE AND INFORMATION IS BETTER THAN A GAMEPLAN RELYING ON INSTINCT AND LUCK”

Ready Steady Trade

The pace of trading varies from day to day, hour to hour, minute to minute.  Trading can be slow and uneventful one day only to be fast moving, volatile and unpredictable the next.  Be prepared for the sudden changes in pace that can occur at any time.

“I MADE £175.50 PROFIT WITHIN 5 MINUTES OF MY CONTRACTS GOING LIVE ON THE EXCHANGE” THE SPEN

Silly Offers = Savvy Transactions

Have a look at the contractual offers of any artist on the exchange and you will notice exceptionally high/low offers at the extremes of the board.  At first glance, it may appear that these are ‘silly’ offers, but they are in fact savvy offers, lying silently in wait for an extreme movement in price (i.e. sharp rises or crashes).  It is not unheard of for a contract sat at under £2.00 to rise to £10.00 overnight, only to fall back down again sharply.  Similarly, it is not unheard of for a contract above £2.00 to crash below £0.20 only to rebound shortly after.  Traders that have ‘silly’ offers on the board stand to make a lot of money during times of extreme market volatility.

“AN OFFER MADE JUST IN CASE IS BETTER THAN NO OFFER AT ALL”

The ‘Under 10′ Rule

Whilst there is no definitive rule, there is a general consensus among Slicethepie traders that individual offers over 10 contracts have a habit of temporarily suppressing prices one way or the other.  By keeping individual offers below 10 contracts, market fluidity is encouraged and price fluctuations can occur freely.  That’s not to say traders should refrain from putting in individual offers of 10+ contracts.  Indeed, certain strategies such as ‘buffering’ rely on this very rule.

“OFFERING 1 CONTRACT ENCOURAGES TRADERS TO BUY IT QUICK OR MISS OUT,  OFFERING 100 CONTRACTS  ENCOURAGES  INVESTORS TO WAIT FOR SOMEONE ELSE TO BEAT YOUR OFFER”

The ‘Bolstering’ Technique

This strategy involves putting up offers for large amounts of contracts in order to create a false buffer, in the hope of influencing a price trend in a specific direction, or in order to slow or reverse a current trend.

Example 1) Putting up an offer to buy 250 contracts at a certain price, sets a temporary ‘floor’ whereby the price will not drop below this unless someone sells 250 contracts at that price

or the offer is removed.  The idea is that other traders wishing to purchase contracts are forced into making higher offers, which could turn into an upwards momentum.  The strategy relies on a bluff.  In most cases the trader does not wish to actually buy 250 contracts at that price but there is always a risk that this may happen.

Example 2) Putting up an offer to sell 250 contracts will have the effect of creating a temporary price cap on the board.  Again, in order for contracts to rise above this threshold, traders need to buy out the 250 contracts or the offer needs to be removed.  On the face of it, it can look like someone is simply cashing out there contracts, but such a technique is used to mimic this and force prices down, by encouraging other sellers to undercut and shaking investor confidence.  This is done primarily to obtain cheaper contracts by the instigator.  Again, there is always a risk that all 250 contracts are bought up at a price lower than wanted.

“NUMBERS HAVE THE POWER TO INFLUENCE”

Creating False Trends

Another strategy that is sometimes adopted is to cause a sharp crash or rise in contract prices by buying up, or selling down the board.  The idea behind this is to create a sharp upwards or downwards trend that then gains momentum.  It relies heavily on the ‘herd’ mentality of other traders and is sometimes used in conjunction with the Bolstering technique in order to strengthen the illusion of other traders jumping on this apparent upwards/downwards trend and filling the contractual price void accordingly.  This strategy is not without risks.  There is no guarantee that traders won’t simply fill the void back with similar offers, bringing the board quickly back to it’s original position.

“IT IS DIFFICULT TO TELL IF A SHARP RISE OR FALL IN PRICES IS THE INFLUENCE OF ONE INDIVIDUAL OR THE COLLECTIVE CONFIDENCE OF MANY TRADERS – OR BOTH!”

The 2 Up 1 Down Strategy

This is a very simple strategy for penny trading.  When selling a contract, place a sell offer 2 pennies higher then the current best buy offer.  When this offer is met, immediately put an offer in to buy it for 1 penny cheaper, which (fingers crossed) should still be 1 penny higher than the next best buy offer.  There is always a risk that you might not be able to buy your contract back cheaper, but if you sold it for a profit in the first place, this strategy is risk free. This strategy is basically a reverse take on the golden rule of ‘BUY LOW, SELL HIGH’.  In this case we are selling high and buying back low.  We have provided an example of this strategy in its most simplest form.  We’ll leave you to figure out variations.

“WHETHER YOU BUY LOW AND SELL HIGH, OR SELL HIGH AND BUY LOW, YOU HAVE STILL MADE MONEY”

The Collect and Forget Strategy

The easiest strategy to adopt on the exchange is to simply not trade.  Invest in an artist, collect your pre-ordered contracts and when they go live on the exchange, simply hold them till redemption.  It’s the ‘Hit and Hope’ strategy, but a great strategy if you have confidence in the redemption price and do not wish to be sidetracked into making a potential error or misjudgement through trading.  That said, it is worth considering whether you have a price at which you would definitely sell your contracts before they are redeemed.  If so, make a sell offer accordingly.

“EVERYONE HAS A PRICE”

You Don’t Need To Invest To Trade

The Piewatch team encourage everyone to invest in Slicethepie artists whenever possible.  However, it is not a prerequisite to trading.  You are able to go directly to the exchange and purchase contracts without the need to have invested in an artist.  Please Note; buying contracts off the exchange does not give you the same additional benefits that investing does.  When you buy off the exchange, you are buying the contract(s) only.

“I NEVER INVESTED IN 51/50′s OR THE ALPS, BUT THROUGH CAREFUL TRADING OF THEIR CONTRACTS I’VE MADE £70 PROFIT BETWEEN THEM” THE SPEN

Go Virtual!

If you are a little unsure, confused or plain baffled by the trading exchange, why not try your hand at Virtual Trading.  It costs nothing and is risk free, allowing you to trade in a safe and fun environment.  As an added incentive, Slicethepie run a Virtual Trading league, with the top ten weekly traders sharing £100 worth of vouchers.   It’s not only a great way to learn how to trade, but a great way to make some money for the savvy traders out there.

Never Reveal Your Strategies!

Admittedly, we have given you examples of basic strategies you may wish to adopt on the exchange.  However, the best strategy is to not let anyone else know what your personal strategies are.  Piewatch investors are individually aware of many other strategies that we can unfortunately not reveal, given that they would compromise our own individual game plans on the exchange.  We will however leave you with this little piece of advice……

“ALWAYS QUESTION THE MOTIVES OF ANYONE REVEALING THEIR PERSONAL TRADING STRATEGY”

DISCLAIMER: The opinions and statements made in this article are those of the authors, intended to provide insight and information based on their experience.  We advise you to carefully consider the inherent risks of any investment or trade you make and recommend you read the Slicethepie gambling policy.

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