Can I Lose Money Spread Betting?
I think the most simple answer to this question is… Yes, you can lose money spread betting. Most traders will tell you that they have lost some money at some point during their trading career.
The benefit of Spread Betting is that you have complete control on how much you are willing to risk on each trade
However, one benefit of Spread Betting is that you have complete control on how much you are willing to risk there are also lots of tools and techniques available to help you manage that risk.
1. Expect some losses
A lot of information you read doesn’t cover this when look talking about spread betting. If you are prepared mentally for the fact that you will at some point lose a trade then you will know how this feels and also be in a position to take the emotion out of it. If you stick to your trading plan and strategy then cut the loss, keep objective and move on to the next trade. The key is that in the long run you win more trades than you lose.
90% of traders lose money… So how to be in the top 10%?
2. Get to know a market
As we have mentioned Spread Betting gives you the ability to trade lots of markets and types of markets. We covered the major markets you can trade in an different section. However, just because you can trade thousands of markets, it doesn’t mean you should.
Just because you can trade thousands of markets, it doesn’t mean you should
A successful spread bettor will only trade a small number of markets. Get to know the markets, become familiar with them and study them. These markets will become your best friends.
With more experience you will gain the ability to identify and understand events influencing your markets like economic data, and their likely impact on the price action of the market. If you have a better understanding of the market then you are less likely to get caught out and lose money.
3. Don’t overtrade
Our advice would be that no trader should ever trade beyond their financial means. This means that you should never use up your entire cash balance as margin for a single trade.
Market volatility is unpredictable and could easily leave you with little surplus in your account to allow for price fluctuations, if the market moves against you. Always have extra margin to cover your position should prices move against you.
Market volatility is unpredictable and could easily leave you with little surplus in your account.
Also, try to resist the temptation to make too many trades if you are winning or loosing. A lot of amateur traders will battle with the two key emotions…..fear and greed. If you are winning don’t get greedy and think you are master of the universe. If you are loosing don’t keep trading a loss hoping it will turn. Make sure you stick to your trading plan. Always.
4. Discipline is key
Try as best as you can not to get emotionally involved in a trade. We can’t lie when you see profits going up is is very exciting. Similarly seeing losses rack up is also quite distressing. Don’t become a ‘whim trader’, where you are getting in and out of a trade to early. I know we keep saying it but stick to your trading plan and not let your emotions take over.
We can’t lie when you see profits going up is is very exciting.
5. Always use stop losses and manage risk
With every trade you should set a stop loss. This will always limit the amount you can lose on a trade. Most trading platforms will allow you to set your stop when you place the actual trade.
We also get feedback from traders about “psychological stops”. This is when you have a level and figure in your mind that you ideally don’t want to go beyond. Again, trading platforms also have the ability to set alerts when a market hits a certain price level, so consider setting these at your “psychological stop” .
Trading platforms also have the ability to set alerts when a market hits a certain price level
Also remember that a standard stop loss does not protect you if prices gap so always consider a guaranteed stop loss for added protection.
In conclusion
There are many ways to try and protect yourself from loosing money Spread Betting. One of the biggest factors is experience. The only way to build up your experience is by trying out some of the demo accounts provided by Spread Betting Brokers.
Set up a live account then you can monitor the markets using the charts provided by brokers without trading to start with
Even after you have set up a live account you can monitor the markets using the charts provided by brokers and use the tools they have for adding comments and annotation to indicate when you would have traded and what the outcome may have been. Why not check out some broker reviews to get started or maybe look to set up a demo account with a broker to get learning…
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