Trading Tips

Trading itself in a technical sense is really quite easy.  Your success (or not) will definitely depend a lot on the psychological aspect – sticking sensibly to money management and trading rules can be hard and it may take you years before you develop the self-discipline to stick to your rules.  In any case it is likely to be a continual journey which can take a substantial toil on your life and not only in a financial sense.  If strategies are the most important aspect of investing or trading, then I feel it’s important to stick to some basic “rules” which can help assist in the process in making money from the markets.

If you’re looking for spread betting tips, this is definitely a good place to start. To be a successful spread trader you will need discipline, good planning and careful reflection to perfect your trading skills.

1. Remember that each time you deal you are paying COMMISSION so try to deal in markets with tight spreads to minimise trading fees!    Once trading begins, you must pay a commission each time you enter or exit a trade and these fees do add up substantially over time.
2. ‘I will always care about price’ – never chase the trade, whilst the market is not perfect, I aim to action a trade within a 1.5% target range of my desired price.  Trading requires patience and picking your battle. Our goal should not be to buy low and sell high, but to buy high and sell higher! We can never know what price is really ‘cheap’.
3. The more profitable trades consist of trends where a spread trade is entered long or short and is left to run with the trend for weeks on end. Remember the market moves in underlying trends, technical analysis can help to maximise profits from a trend you’ve identified. Always be willing to swap sides when a trend has reversed director; remember our goal is to always be on the winning side.
4. The best times to buy a market is often when the herd is terrified and you can smell blood in the air. When I used to post my trades live on a blog there was much to learn as to how others react to what you are doing if it is different to them, especially when they feel the need to criticize….so that was a nice lesson on how to personally manage such criticisms, but also of course there is the obvious lesson of public bias and how news/data has such an impact on traders as a herd…it is very difficult to go against the herd, not because they are criticizing you, it’s because emotionally there are a few factors that are playing against you…one of which is, I don’t want to be seen to be wrong in front of others, especially if they are criticizing, OR, I WANT to be seen as right, and this is ego…going against the herd has little to do with the herd itself and much more to do with your ability to segregate your subjective reasoning from your objective reasoning… The financial markets crash because of insufficient buyers. For a bull market to continue rising you need to continue pumping in new money. If all investors are bullish on a market, then it has no other way to go but down as investors that wanted to buy have already done so.
5. Avoid exiting trades too early. It can be tempting to close your trade as soon as it has turned to profit but closing bets too early is wrong. You REALLY have to try letting profits run as much as possible. Stick to your trading strategy and only exit your position once it has reached your target level. This can even be done automatically if you set a limit order so you don’t have to be continually in front of the screen.
6. Don’t stay in a trade for too long. On the other hand it can be easy to fall in love with a stock and get greedy. Markets go down as well as up and trades will not go your way forever so you may see the market reversing direction at some point. Stick with your trading plan and exit when pre-defined levels are reached. If the market is going against you and the trade is loss-making, don’t hesitate to exit. Avoid ending up in a position where you are watching as your money dwindles away while you you hope for your trade to recover, as it may already be too late.
7. Overtrading is a killer Do not do it. This is one of the most common mistakes that beginners tend to make. Leveraging your spread betting account too high by taking on big positions relative to your initial deposit outlay puts you in a very vulnerable position. A tip is to limit your leverage to 15 to 20% as this gives your trades a bit of leeway for normal everyday market noise and reduces the chance that you will be forced to exit positions due to insufficient margins.
8. Develop your Trading Plan Plan your trades out before plunging in. This is one of the most important principles in trading – you need to have a regimented plan and trading system to have any chances of success in the long run. Many day traders do not realize that trading is more complex than it may initially appear. Don’t be greedy and set realistic profit targets. Admit your mistakes and try to learn from them. Be confident in what you’re doing. Keep all these in mind, and you will not go wrong.
9. When trading on leverage discipline is paramount so as to avoid your cash balance suffering a boom or bust. Overconfidence, or so called ‘conviction’, leads spread traders to disregard evidence that contradicts their view. Golden rule for me is to get out if a trade goes opposite to what I expected – end of day or intraday.
10. Control your Emotions Emotions are a no-go in trading. Always be objective with your trading decisions. Don’t panic every time one of your shares starts falling in price, but … The old saying applies here as well: ‘never marry your trades’. If you are in a trade and the market keeps moving against your position, admit that you have got it wrong. Hoping is futile and will only lead to more pain.
11. “I know my exit” – Have an exit strategy – how much are you willing to lose on a share before dumping it?  At what level will you sell a rising share to take your profits?  Evaluating potential downside vs anticipated upside is one of the key risk management aspects of investing or trading. Once you know your chosen exit level, ask yourself how much risk you’re taking for the reward you seek.
12. Cut losses at an early stage. How many times have we heard that?   Don’t ever be tempted to add to losing positions! An underperforming position not only costs you monies, but time and potential opportunities elsewhere.  The key is to make sure that your winners offset any damage caused by your losers and you have some risk management measures in place. Stop losses can help limit any hits from individual share holdings. ‘… mate I’ve been holding since 21p. And when I see shares lose 80%+ in no time and without apparent reason, then I simply cannot push the button. 50% loss ok, but % 80+… it was all over for me.’ In these situations more often than not you end up selling at the bottom.
13. And last but not least get your rest the night before and try not to skip breakfast – you will definitely need your energy!

‘On the last note people were screaming “bargain” at AYM because it had fallen from 95p to 70p, and a “bargain” again at 60p and again at 50p …its 20p now! Some bloody bargain they had lol! Same story over at CEY “bargain” at 100p, 90p, 80p ect. They are now 60p! Maybe it will it go to 30p if gold falls? Over at MONI yesterday, it was a “bargain” and “top up time.” Today they are worth 5.5% less that yesterday, perhaps in 3 months they will be worth 30% less than yesterday? If a price falls 40% and we don’t get out we’ll need it to rise 66% just to get back to breakeven.’

Some traders keep hoping that their loss-making trades will ultimately do well if they wait for long enough. More often than not, the market keeps moving against your positions and continues losing you hundreds of points – making it very difficult to ever recover. Don’t think that each and every single trade has to be profitable for you to be successful. If half the number of your trades are doing well, you should consider yourself as being on the right track. The key here is to ensure you still get enough even if only half of your trades are winners is to allow your winners to run and to reduce your losses.

More Spread Betting Tips -:

14. It is essential to have a high tolerance for risk and a gambling mentality. On the other hand you have to be risk aware and constantly try to make your trades more efficient by getting the odds on your side.
15. Spreadbetting on FTSE 100 companies requires a greater awareness of the macro economic picture. For instance, stock prices can move rapidly when economic news are about to be released, it is immensely important to be able to trade  when this happens.  Likewise, London prices react to movements on Wall Street so an eye has to be kept on the Dow Jones Index.  Watch out for news that might affect the companies you are trading.  But more importantly avoid dealing in more shares than you can easily keep track of.
16. Diversification – Do not put all your eggs in one basket or trade. Diversification can help to smooth out performance over an extended period of time; it can help limit losses without sacrificing returns. It’s always important to consider the bigger picture when trading the markets. It’s reasonable to suggest that if I buy a basket of stocks in a market that rises by 10%, I too should make money, the question is have I outperformed the market?
17. Avoid the temptation to take positions outside your chosen sphere of knowledge. I usually make sure to dedicate sufficient time to research  ‘my shares’ well but once or twice was tempted to take a position on a share I did not know which had experienced a sudden price movement.   Most of the times it didn’t go well…
18. One key to trading is being consistent. All great spread bettors have lost money, but as long as they maintain a positive edge, they may still come out a winner overall. Educate yourself, stick to your trading plan, manage your risk and practice discipline and patience.
19. Don’t be afraid to explore a new path. Although consistency is important, don’t be afraid to re-evaluate your trading plan if it’s not working for you. As your spread betting experience grows, your needs may change. Your plan should be a reflection of your goals, so if your goals or financial situation changes, so should your plan.
20. Have a trading diary. Many successful traders deem it necessary to keep a trading diary. Writing in diary form can allow one to describe the daily events and also express your trading emotions. A trading diary let’s you learn from both your technical and psychological mistakes and become a better investor.
21. Beware of your Emotions. Develop a clear strategy for emotional risk management. I can’t stress the emphasis on controlling emotions sufficiently. Especially how hesitation and doubt can play a critical factor when your on the clock. Don’t trade when stressed from work, family or finances. If you cannot separate emotions from your life when trading you are more likely to make rash decisions that may cost you dearly.
22. ‘Markets can remain irrational for longer than I can remain solvent’ – whilst it’s my belief that markets are efficient, I also understand that the market isn’t perfect and can trade through irrational periods, so although you may see logic in a buying an asset, the market may not, therefore having conviction on every trade before you enter is imperative.  Markets are under no obligation to reward your correct opinions...
23. Try to take advantage of gap days.  Gaps are usually a precursor of sharp new price movements.  They are particularly important when trading shares.
24. It is gambling. But it is about making high probability bets and limiting the odds of failure. I have read enough books on it to know the facts. The vast majority of people will keep losing money for the same reasons. Downturns in any trade is where doubt sets in and the old psychological mind games set in, so with my getting to breakeven and half banked as soon as possible it allows me to have psychological control over the trade. I admit that sometimes I miss bigger moves, but my results say, the way I’m trading suits my personality, again in that new wizards book a lot of the traders interviewed stressed how important it was to match up your trading plan with your strategy in fact a few had given nut and bolt access to their strategies and found others had not been unable to convert it into long-term gains.

Whilst the above points are not necessarily the be all and end all of trading, it is without question that some if not all of the above “rules” can help make you become a better investor or trader, if you can implement them into your own strategy.   Like most other things in life – finding the path to successful trading will depend on how badly you want it – if you don’t want it really badly, just don’t bother with it.