Robbie Burns has a few tips for amateur spread betters. The former finance editor for Sky TV, Mr Burns left journalism in 2001 during the tech bubble to trade for a living. He continues to write and has written a book called Naked Trading, which is full of tips for novice spread betters.
Here are a few: The way to make money is to take your losses quickly. Don’t open a lot of positions at one time. The more positions you have open, the more time it takes to check them.
His own personal strategy tends to be to hang on to his holdings for three to six months as this gives them ‘time to grow’.
In addition, he likes to use spread betting to complement his share trading.
‘I might buy a share in the market and have a spread bet as well,’ he says. ‘I spread bet sometimes to top up my personal holdings.’
The benefit of spread betting is that it offers you the ability to make money by shorting. “If the market is looking toppy, you can make money on the downside,” Mr Burns says.
The downside to spread betting is that if you’re not good at it or you make mistakes, you can lose money quickly. “Ninety per cent of spread betters lose,” Mr Burns says.
Comment: Robbie Burns strategy is relatively simple to grasp – it basically suggests that the trader should hold onto winning stocks and let go of losing stocks. Burns suggests that often, a trader’s emotional side can cause them to do the exact opposite, i.e. sell stocks that are in profit to realise that profit (along with its associated feel-good factor), and hang onto stocks that are losing so as to defer the feeling bad about actually taking a loss -besides which, a losing share might pick up and then you won’t have to bear making a loss on one of your stocks after all! When I read about the approach, it immediately struck me as making sense because it sounded so Darwinian…
Robbie Burn’s Top 10 Tips For Surviving the Markets
Trading is a battlefield, and survival is the ultimate skill. As someone who’s weathered the storm, I’m sharing my hard-earned wisdom, complete with humor, realism, and actionable advice. So, cue up “Eye of the Tiger,” and let’s dive into my Top Ten trading commandments (yes, number ten might just be the craziest).
And I like thinking up Top Ten’s; though sometimes it is a struggle to find number 10 which is usually the craziest.
So, in the hopeful spirit of nabbing an even more expensive lunch next time, here they are:
- DON’T MAKE LOADS OF TRADES EVERY DAY YOU IDIOT!
I can tell you this for a fact: if the trades you are making on your spreadbet account start to mount up every day, you are chasing the market. It will eat you up and toss you down the rubbish chute. The more trades made, the more losses pile up. Only trade when you think the odds are really in your favour. Stop pressing so many buttons.
- HAVE A BREAK!
And not just a Kit Kat sized one. Things not going your way in the market? Stop huffing and puffing and saying bad words at your screen. Especially that one. Sell up. Come back next week or the week after. You don’t have to trade in a difficult environment. Keep hold of your capital and you can fight another day.
- WAIT FOR THINGS TO SETTLE
Don’t just jump in because you heard Greece is saved on the news. Remember, everyone else knows it too. If there is big news about, don’t go straight in — especially right now because Greece can be saved and then lost in ten minutes in this environment. And if Greece is fixed, they come up with another country to worry about. Wait till the whipsawing ceases and you can figure out a longer-term trend is really developing.
- WE’RE NOT ALL IN THIS TOGETHER
The professionals know just how to extract your hard-earned trading cash from you. In current conditions, the moment you are in profit the market will turn on you. And just when you take your losses it will shoot back up. Don’t let them have it.
- BUY WHEN YOU ARE REALLY SCARED AND ABOUT TO SELL THE LOT
The professionals are buying just as the private investors are piling out. Remember if shares are tanking down on fear that prices are actually cheap! It’s amazing how private investors buy at the top and sell at the bottom.
- SELL WHEN THE NEWS IS GOOD
If you bought on the bad, you want to sell on the good. The Euro saved? All in the garden is rosy? Commentators saying the FTSE is going to boom up to 6,500 by the end of the year? Time to bank profits.
- STOP BEING JUST A BUYER
Spreadbet firms will tell you even in bad market conditions that more people are still buyers than shorters. Seems that psychologically it’s hard to be a shorter. But if a share is in a continual downtrend, you must consider making some money on it as it goes down. Don’t just think long; think short too. If you get a decent short in and a downtrend continues, it can pay off handsomely as fellow contributor Evil Knievil will relay with gusto.
- WATCH OUT IT’S A CASINO RIGHT NOW
Especially if you are playing indices. It’s tough to play those. The FTSE opens up 60; suddenly it’s down 30; hang on it’s up 30 again; now it’s down again… During all this mucking about unless you are one of the super special 5% of the day traders that win, the casino is, in effect, just raking in all your chips.
Don’t let this happen. Only put your chips down if you are playing the FTSE when a proper trend one way obviously develops. Steer clear of the really choppy days because all your stops will get taken out.
- DON’T STAKE IT ALL
In volatile conditions keep your leverage low. Play with a smaller amount. If you lost a lot, don’t try and get it all back in a couple of days. Don’t seek revenge on the market; you could lose more. Take your time to get it back then hit a profit.
- DO THE OPPOSITE OF WHAT YOU WERE GOING TO DO!
A bit of a crazy idea… or is it? If you’ve been losing a lot recently, don’t you realise how much money you would have made if you’d done the opposite? Imagine if you’d pressed sell instead of buy and buy instead of sell! So each time you trade, just as you are about to press buy or sell… press the other button instead! If you think that’s crazy, better go and read Evil Knievil. Now that guy really knows what he’s talking about.
