Eight Reasons Why You’re Losing

(and eight things you can do about it)

I don’t know that you’re losing at spread betting, of course, but it’s a fact that most spread bettors do lose money. If you are one of them then it might be because you are exhibiting one or more of the following behaviours:

1. You lack the discipline to learn the ropes, preferring instead to listen to expert “advice” from other people.
2. You are impatient and you’re looking for action rather than making rational trading decisions..
3. You are emotional rather than objective, preferring to hold onto the losers (because you hope for a recovery) and cash-in the winners (because it feels good to bank a profit).
4. You are greedy, trying to eke out the last ounce of profit that really isn’t there.
5. You are in denial, imagining that the market must be “wrong”, and not accepting that price action is the only truth.
6. You are impulsive so you jump into a trade on the first piece of news, before anyone else gets the chance (or so you think).
7. You spend your winnings before you’ve won them, which leads to complacency, disappointment, and the despair — which is not an ideal recipe for trading success..
8. You assume that what happened before will happen again exactly, but as Mark Twain is quoted as saying “History doesn’t repeat itself, but it does rhyme.”

So if you want to win at the spread betting game, you need to avoid those psychological traps and realise that:

1. It takes a lot of time, effort, and sometimes money to learn the spread betting ropes; just as it takes many years of study to become a brain surgeon.
2. You don’t have to trade, and sometimes it is better to not take a trade than to “marry in haste and repent at leisure”.
3. However painful and counter-intuitive it seems, it is usually best to cut your losers and run your winners — as long as you’re not too greedy.
4. You could achieve a better trading outcome if you leave a little potential profit on the table for the greater fool (er, trader).
5. Everything is reflected in the price, and at any given time something is only worth what someone else is willing to pay for it.
6. You can’t beat the “professional” day traders with their fast information streams, fast trading terminals, and fast computer algorithms. So don’t try.
7. A “paper profit” is only a real profit when you’ve banked it or locked it in with a guaranteed stop order; but a “paper loss” should always be regarded as a real loss.
8. Support and resistance levels, and other chart “patterns”, suggest what might happen — not what will happen.

If you’re one of the many spread betting losers, it may be worth re-reading the list to determine with of those psychological traps you’re falling into. If you’re one of the few spread betting winners, do tell us how you do it!

Tony Loton is a private trader, and author of the book “Position Trading” (Second Edition) published by LOTONtech.