It is well-known fact that money doesn’t make you happy. But at the same time, we tend to feel better if we have a little bit more of it than someone else.
Some people come to spread betting it because they think they can make money easily trading the financial markets. Of course there are always some people who will boast of their endeavours and winnings, and make it sound like there is easy money to be made. But if you want to improve your chances at making money, you need to spend considerable time to work out your tactics and strategies.
The way you make money in this spread betting game is by knowing and when you know you pile it on. Risked 20% of one of my spread betting accounts today (2.2k) and made 100% in one day! Mind you I thought I knew on Wednesday and lost 10%.
This can obviously work. You identify certain high probability setups that you know work very well. Have strict entry criteria. Only trade the ones you know are high probability, coupled with good risk management.
Problem is you could be waiting for a long time for such a setup. And then if it doesn’t work you don’t know when the next one will present itself. That’s when the virtue of patience comes in. Most people won’t be patient enough and will trade other not so high probability setups. Or takes trades when the entry criteria for a high probability trade has only been partially met. Or they’ll enter the position before a clear signal has been given.
Trading is about supply and demand for financial securities. If the supply is greater than the demand, then the price will tend down; if demand is greater than supply, then the price will tend up; and if supply and demand are balanced, the price will stay around the same point. So at all times there are traders taking opposite positions, each convinced that they know which direction the price will go.
The result of all this is that many people who get involved in trading or spread betting lose money and give up after a few months. As the idea is to make money spread betting, you need to take the necessary steps to make sure that you are on the right side of the bets you place. One of the skills that you must learn is to read a price chart. Working out what the chart is telling you is called technical analysis, and it repays study many times over.
Technical analysis is not to be confused with fundamental analysis, which most long term investors use. Fundamental analysis is more concerned about long-term profitability, corporate profits and expenses, product positioning, and other aspects of company management that are not necessarily reflected from day-to-day, but affect the value in the long run.
When you make money spread betting, it is on a much shorter timeframe. Some betters may day trade, and a popular way to spread bet is to review your trades every night, looking for opportunities and the action to take on the following day. As the market can turn against you, and you are not expecting to be in a spread trade for the long-term, as a spread better you will be checking prices fairly frequently.
This is where technical analysis excels. The daily price fluctuations owe much more to the general sentiment of the trading market than they do to the company fundamentals, and technical analysis allows you to form a good opinion on how each financial security is being viewed by other traders.
Identifying the best probability spread bets is only one part of your work to make money spread betting. To make money you have to have money, and that means that you must not lose too much on any bets that go wrong. When you study trading, you will learn about money management and position sizing, techniques that are designed to keep you “in the game” even if you have a run of bad luck, as you will inevitably if you spread bet for long enough.
Regarding wipe outs and spread betting:
That’s why it is very important to set a “target” i.e. say 25 points … at x per point …. once that is hit .. you “win” feel good .. cease trading …
the other side… 3 x losing trades ** STOP ** you are wrong, don’t try and fix it, it will get worse….. Day trading is incredibly difficult to scale into positions let alone double up on losers. LOOK AND ANALYSE why it went wrong… you will probably find that you are either:
- chasing ups and downs in a sideways market ….
- overtrading late to make up for loses…
I would rather win 25 points 4 days out of 5… you feel good and reinforces good trading strategy…
Don’t mean to make anyone suck eggs …. but plan a trade and trade the plan. Only trade the signals that agree with your plan. If market moves against your plan, stop, reassess i.e. why did you take that view etc…
So, is it possible to make money spread betting? Certainly, but you must approach the topic seriously and be prepared to study it so that you can increase your chances of becoming a successful trader; but even then there are no guarantees!
Are spread betters contrarian by nature?
But are spread betters necessarily contrarian? Spread betters form a quite diverse group of people spanning many different employment types and with different investment perspectives. One of the positives of this trading product is that it accommodates all types as it is as easy to go short as it is to go long, so contrarian types along with people with other outlooks do spread bet.
Spread betting providers like to see volatility in the markets as it gives their clients an opportunity to trade and make money. Financial spread betting is one of the few ways that investors can make money in falling markets so if anything spread betting providers are generally more busy in bear markets.
The thing I believe most spread traders tend to forget is that the market will be there tomorrow….don’t chase…it will always be there; its a 50/50 call I try and stay with one side .. that way my margin for error is halved…so too is my margin for profit…but you never feel bad about making money.