Practical Spread Betting Tips and Tricks
- Start on a very small scale and also strictly limit your gearing at this stage! Remember: if you are a beginning trader or new to spreads, leverage always works against you! Always start smaller than you think you can handle as you will make little mistakes at first. When you use larger sums and stake sizes, especially if you are a beginner, you could make rash decisions that could cost you more in the long run.
- If you are new to spread betting I would advise you against going out looking for quick profits of 5 to 10 points – it is better to try picking your entry and making up to 25 to 50 points.Those trades might come around 2 times a week but it’s worth waiting for them.
⇑ ⇑ ⇑ ⇑ Listen to our top 10 Spread Betting Tips for Beginners
httpv://www.youtube.com/watch?v=sAB_kKMoKaM
- Resist the urge to start gambling on Indices, Oil, Gold, Currencies, Presidentials, Big Brothers…etc. This is where the spread betting companies make all their profit, and to a certain extent the shares service is just a feeder to get people to punt on stuff they know nothing about and will lose money on.I would not want anyone to suffer the feeling of complete catastrophe that I’ve suffered after losing £10k in a few hours trading the Dow online after too many shandies. My own losses on the Dow have been substantial, although this year it’s actually been pretty profitable, so hopefully I can put the these mistakes behind me now (yeah right!!).Or if you find it impossible to resist the urge to do these trades, then at least be honest with yourself that it’s gambling, not investing.Also, I would suggest you to avoid spread betting on currencies if you are a beginner, as you need a large wodge of capital to make sure you can set a stop-loss that will not get hit too easily by the volatile price action.
- Inexperienced trading of the indices is like learning to drive in a formula 1 car, once you have a reason to trade, then you need to master trade management, all instruments that you trade go on search and destroy missions for your stop, this is even more prevalent in index, forex and commodities trading; cable can go 100pts in one direction taking out all stops and then continue in its trend, so the key here is to really adjust your stop loss into positive territory asap, then you’re on a free trade, I will give an example ofa typical trade – eur/yen £20pp enter trade goes 8-10 pips against me;do I panic and exit – No!My stop is placed at 25pips and the reason for the trade is still valid, trade then goes into profit at + 10, I take £5pp off and bring my stop in to 15 pips past my entry, trade fluctuates then goes to 20pips profit, so I remove another £5pp hoping to run the next £10, I move my stop up to be, trade continues in my favour to +35 I take another £5pp off as the move was not strong and took some time, I then move my stop 10 pips inside my entry, price goes against me taking out my stop and carrying on past my breakeven point, so if I had not managed the trade I would have been stopped out for nothing – this just an example from an actual trade where you creep the stop to breakeven (as soon as you can sensibly) and hope it helps to show how you need a strategy and it needs to be a strategy that fits your persona!I know many traders who use this strategy and do well.
- Markets tend to move the most during the first 30 to 60 minutes of a trading session and particularly when the USA market opens during the UK mid-afternoon. Whether you trade or not in such periods depends on your appetite for risk. Likewise avoid any extreme high risk/wide spread punts e.g binary hourlies. Stick to sectors that you understand and have a real interest in. If you are not able to constantly remain updated on the company and ready to put the time necessary to remain in-focus on the sector then you are only gambling! Trading during periods of volatility requires extra monitoring. Trying to make a quick punt on sectors you don’t understand can often turn to be an expensive mistake.
- Stick to the KISS principle.It is good practice not to complicate things, so sticking to a simple trading plan is generally sound advice.This means familiarising yourself with the markets you want to trade, how long you intend to hold a position and how much you are willing to risk -:
- You should stick with markets you know and are comfortable trading. You should know everything there is to know about these markets, what these markets consist of, their trading hours, how much margin you need to open the position, what factors influences their price and in the end acquiring research or information on them is paramount. If it’s a stock you should know things like when its about to announce a trading update or when it goes ex-dividend. For indices, forex pairs and commodities you should keep abreast of key macro economic data announcements. If you study and watch a market day in, day out you will start getting a feeling of how it tends to trade and how it moves. So whether you follow charts or fundamentals, the longer you trade a product the more you spot its idiosyncratic behaviour. Know why you are invested in the share and understand the company’s fundamentals. If you are looking at single securities, then make sure you are practically an expert and could easily bore someone to tears with what you know. For instance if you trade Ryanair Holdings plc you need to appreciate that oil prices have a heavy effect on its shares. Likewise, everyone knows that copper is an industrial metal but if you want to speculate in the commodity or a copper mining stock, then you have to know about geology and the driving force behind the market before taking the plunge.
- Secondly, you need to have an idea as to what time horizon you intend to trade as this will influence your trading methodology.If you are looking to trade on a short-term bases, you will be placing several trades in one trading session.For medium term holds, it is likely that fewer trades within a week or month may be in order.Longer timeframes generally mean fewer trades again over a monthly or yearly period.
- Lastly, how much are you prepared to risk? You are best starting out small and once you have traded for sometime you could possibly start increasing your stake size. Ignorance or laziness can be very expensive when trading and if you don’t do the research you are essentially gambling, not trading.
- Never trade or invest in anything you do not understand. Make sure you know the market hours of the market you are trading and what typical ranges it covers during a trading day. Like all things in the markets there are good times and bad times to trade different markets, different timeframes and different strategies. Always remember to check the margins and check your total exposure on each spread bet you do.
- Read the news as well as the charts – do not rely on technical analysis alone and disregard the fundamentals.These include: dividend dates, annual meetings dates, quarterly reporting updates, scheduled launches, analysts ratings and competitor activity.
- Do not fight the trend; it is often wrong to go long while the market is still in a basic down trend. A basic grasp of technical analysis helps avoid common errors like selling into fairly straightforward uptrends or buying into downtrends. But equally, one’s judgement is not necessarily without relevance. The DOW has punched 1200 points to the upside, in a week. It’s stretching the limit of a highly predictable rally
- Further to the point above trying to pick up market tops and bottoms is often a futile exercise – what looks irrational can remain irrational for longer than you can remain solvent, lots of people said the Dow was at the top when it hit 5,000 and said the same when it hit 6,000, 8,000, 10,000 – likewise the opposite is true – the Dow has been in a downtrend since 2007, never try to fight the trend.
- Do educate yourself and research the market you are going to trade, choose a market you are interested in or perhaps work within. This will not only help you minimise the risks associated with spread betting but will also assist you to get around any boredom in reading all about the firms in that particular market, or perhaps keeping yourself updated of all the inflation data and political stability/instability (an economic calendar comes in useful here) that could affect foreign exchange rates. Monitoring newsflow is crucial as it can have a big effect on the value of existing positions and provide ideas for new trades. Know what the biggest move has been in that market and make sure your trading strategy is able to accommodate a bigger move. The key to developing a successful and profitable trading strategy is to research, research and do some more research. Follow the Financial Times, keep yourself abreast of company trading updates, maybe get a ticker in your browser that displays you all the latest breaking news that could have an impact on your market, study both long and short terms trends….etc. One well-known commentator recently declared that in all of his 10 years of trading, he had never experienced markets like those we are faced with today. He may have been surprised, but he only had to look back to 1987, hardly a blip in financial history terms, to see markets in a far greater state of chaos.
- Do not rely on trading tips. Often the person who has advised you of a good move will not be around to instruct you when to exit the position. Some of the most disastrous trades are made when somebody receives a hot tip, only for conditions to take the most unexpected turn. Because the tipster is no longer around, they don’t know when to cut. Information and situations change, but if you are not privy to those changes then you’re vulnerable.The only way to make money from following someone, is to take every trade because you don’t know which ones will or won’t work. You cannot cherrypick what a successful trader deals in, every trade has to be taken and that couldn’t be more true for me as well.I don’t worry much about individual trades, I look at the portfolio as a whole and the impact of every trade on that. A little bit of knowledge can be very dangerous in financial trading.
- Don’t think that just because you have been trading for a while and you are getting better at it that you have found the holy grail and unlocked the secrets of success. At this time you tend to start looking at other markets and chat to friends and online mates perhaps taking a few tips here and there without doing your own research. The time when you start taking on more risks is when you will get your fingers burned. Go steady, phase in the trades, keep a healthy margin and make sure that each trade comes with a decent risk/reward set up.
- I would strongly recommend reading ‘High Probability Trading’ by Marcel Link.It’s a great beginners book. Very down-to-earth and realistic approach. If that’s too heavy, you could try ‘The Naked Trader’ by Robbie Burns, which is really a starter book for anyone thinking of trading, all about stocks rather than indices or other more complex securities.
The market does not give you what you want or what you deserve. It gives you nothing. It is a benign entity without consideration for you or anyone for that matter. What you gain or lose from the markets is what you earn, fullstop.
Join the discussion