Spread Betting’s popularity is in part due to the potentially high profits that can be made. However, there’s no such thing as free lunch and losses can be as high as the wins. If you are new to the game please read through our tips which are designed to reduce your potential losses, and increase your potential gains. If you are not new, read on anyway, its always good to ‘recap’.
Go Slowly Spread Betting Newbie!
Follow the snail – its easier than chasing a cheetah! Don’t start with betting on fast movers like the Nikkei, you will get wiped. Who are the snails and who are the cheetahs? Well – this is lesson 2, look at all the charts that come free with your spread betting software, observe which ‘product’ has the highest peaks and troughs, they will show you the way! (If the graph is leaping all over the place leave the stock or product alone until you are a bit more experienced).
And by small, we’re talking £1 stakes here – the markets can move pretty quickly, a £10 stake can move £200 in five minutes – either for you, or against you!
Stick To Your Guns.
If your AK47 keeps jamming learn how to fix it, don’t change guns – be a problem solver. One beauty of spread betting is that there is the opportunity to bet on all the markets. The problem is that the temptation is there to do exactly that. If you are continually losing in e.g. the indices, figure out what you are doing wrong. If you switch markets without understanding why you made your mistakes, you will carry your mistakes with you and continue losing in market after market.
Get Used To Losing Bets.
Everybody loses bets, if they didn’t it wouldn’t be called gambling it would be called ‘taking candy from a baby’. So knowing that you are going to lose, you should manage this situation through minimising your losses by placing small bets with stop losses (to begin with). The loss/win ratio should decrease with experience, its just a slightly painful part of the learning process.
Take It On The Chin!
If you’ve taken a jab to the head, don’t put all your energy into throwing a big punch, your guard will be down leaving you open for another, even bigger whack that will put you on the canvas. If you’ve lost do not be tempted to up your next stake in an effort to recoup your losses. Biggest mistake in the book!
Stay Out Of The kitchen
The first and last half hours of some markets ‘trading day’ can be the most hottest and therefore the most confusing. Very exciting for a trader, but a newbie can easily get burned – avoid until experienced! (remember to check the open hours of your chosen market, and note the international time differentials)
Manage Your Money
How much can you afford to spend on spread betting on a monthly basis? The answer to this is crucial – it forms the basis of your money management system. You have to ask yourself how many bets you can afford to make and of what size per month? Figure it out, create a rule, and don’t break it. Do not figure your wins into the equation as that money will be needed to cover losses.
There’s a demo account out there for you – use it!
There are loads of demos, and they are a good way of getting to know trading software, and the markets without parting from your hard earned cash.
“It’s going up, Oh My God! it’s not stopping, Deidre, Deidre stop watching that bloody QVC channel, and put the house on the market, sell it a quick as you can” – DON’T. Keep a cool head, there is frequently the temptation to believe you are on to the big one – get over it and live to fight another day – when these situations occur people do all sorts of ill-considered things.
If you are onto a good move in the market, then maybe you should consider hanging in there, but have a plan. For example, you could close your current trade and take the profit, whilst simultaneously opening another trade with a stop loss set at a point which your other trades winnings would cover if it swings. Simple example; you’re up $100, close the bet and bank your $100. Open a new bet and set your stop loss at $100. That way you will be open to more profit, without laying yourself open to any losses other than your wiping off your $100 win. You need to do this open/close method as most Brokers will not allow movement of stop losses on open bets.