Think back a couple of weeks to that drunken New Year’s party, waking up with a banging headache and your auntie’s knickers on your head, wondering what resolutions will come back to haunt you…

One of mine was to reach outside the comfort zone of currencies and indices and find a couple of shares to trade from time to time.

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Let me set my stall out here. This blog is, hopefully, going to be the first of a set of three that covers the basics of stocks and shares. It’s gonna cover what a share is, how to measure the size of a company and what I reckon are the two most important ratios investors use to pick shares: EPS and P/E. Now I know that some of you guys who regularly read my blog will find this topic a bit too simple. But if you are new to that great big bowl of custard called the financial markets, read on!

So what is a share? In simple terms it is a small portion of a company, a slice of the pizza if you like. Bit too simple huh? Ok. In concept it is similar to, say, if you were to start up a gardening business with your brother-in-law.

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Shouldn’t you be out looking for leprechauns to interrogate or chasing rainbows, dusting off your miner’s helmet or preparing to melt down that gold tooth that Granny left you?

If you have been watching the price of gold recently then you probably have the wee fellow strapped to the rack already and are just getting out the thumbscrews. Overshadowed by the headlines concerning Northern Rock and the US sub-prime crisis, gold has been climbing higher. Yesterday it touching a 27 year high. Over the last 10 years it has almost tripled in value and so far this year it’s up 16%.

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Rather than the usual in-depth opinion pieces, over the next few weeks I’m gonna be stepping back a bit and aim a few articles at newbies. This one ‘ere covers a miscellaneous set of lessons which I’ve learnt the hard way and that I wish someone had handed to me when I started out.

I’m kinda hoping that this will turn into a ‘living document.’ So if you have some experience of spread betting let us all know what your ‘golden rules’ are. Don’t be shy! If they aren’t covered here (and I know there are plenty missing) then stick them in the comments area below. If I get enough comments I’ll edit this post and stick it back up.

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Have you looked at the oil market recently? No wonder Roman Abramovich can afford Chelsea and his own Airbus Superjumbo; just take a look at the chart below. Despite an increase in supply by OPEC, Brent Crude is tickling its all-time high, showing a 200% gain over the past 5 years.

But forget all those pictures of muscular men covered with squelchy, mucky stuff as they fight to cap a leaking oil pipe (unless there’s any female traders amongst us). The easiest way to trade oil is through Spread Betting; you need hardly any equipment and once you’ve placed your trade you’ve got time to do what old JR did best.

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With the UK and European central banks announcing their decisions on interest rate changes at lunchtime today, the big question is, “Do we need lower rates now?”

“Durr! We always need lower interest rates so we can spend more, which is good for the economy. The stock market’s a mess and all those city types are calling for the Bank of England to pull its finger out”

Well, I’m not so sure, but before I get on my soapbox let’s keep it simple and start with the official interest rate and how it affects you and me. Then I’ll tell you why I don’t think it’s the most important interest rate at the moment.

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OK, OK. It’s not going away so I’m going to have to muse over the sub-prime debacle, but how can I make it interesting?

I know, think of one of your mates, he’s probably the stalwart of the rugby team or the life and soul of your group, a really good mate, but you wouldn’t lend him a tenner. Well, you might coz he’s a good mate but you wouldn’t expect to see it again. He’s not a crook; he’s just hopeless with money. It might be that he’s a self-employed sofa-warmer or just that he treats his credit card like a gift from the benefits office, but he ain’t gonna get a mortgage.

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Little did I know when I was asked about Support and Resistance lines that I would have the chart, readily supplied today.

I’m a fan of support and resistance lines coz I’m a simple bloke and these are straightforward lines, not long winded mathematical equations. Do they work all the time? Nope, but neither does anything else. There is no Holy Grail, but these lines are a great starting point.

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My first article and I immediately faced a dilemma. The ‘Topicality’ section was screaming at me, “ Sub-primes! You gotta write about sub-prime mortgages you moron, it’s the biggest story in town.” But the ‘Diary’ section made more sense, “ If you’re going to talk about trading foreign currencies for the next three weeks you’ve got to give people a chance. They’re comfortable with stock markets rising and falling and making a few quid trading RTZ, but what will they make of Cable, Loonies and Kiwi Yen? How about some helpful hints?”

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In the first part of this post I said I would talk about what makes the price of bonds go up and down, and try to unravel some of the spaghetti linking the bond and stock markets. 

So let’s jump straight in. What causes a bond price to vary? Several things. One is how reliable people think the issuer is, i.e. what are the chances the issuer won’t be able to make the bond payments.

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