The majority of spread bettors fall into the common pitfalls that plague inexperienced traders. As a result, more often than not new spread bettors will find themselves exhausting their capital before they feel they’ve had a real attempt at playing the markets, which often leads to heavier trades as the gambling instincts kick in. In order to become a successful spread trader, it’s pivotal that you learn these all-too-common traps that tend to catch traders out, so you can plan your spread betting career more effectively and give yourself the best possible chance of long-term trading success.
Let’s look at the 3 most common mistakes spread betting traders make.
Over-Exposure and Over-Leverage
Over exposure, more often borne as a result of a lack of true appreciation of leverage, can be a devastating trap for most spread traders, paving the way for significant losses and even the dreaded total wipe-out. Over exposure generally takes shape in the form of stakes that are too high for the capital pot to bear, with traders equating a small margin requirement to a small risk. Remember at all times that you are liable for losses infinitely beyond your trading pot, and as such you should only bet with small per point stakes until you have sufficient capital to invest more heavily.
No Strategy
A lack of focus brought about by poor strategic thinking is another common pitfall, and one that all too often catches out the lazy or inexperienced trader. Strategy is not just a long-term spread bettors’ ambition – it’s a short-term necessity, and a consideration that every serious trader should take into account before executing a single trade. While on a trade by trade basis you might be successful, over time you will find it hard to develop rhythm and consistency in your trading, which is essential to long term profitability. Remember, even expert traders get it wrong from time to time, and trading the markets is fiendishly difficult at the best of times – only those that have a strategy to deliver more frequent winning trades than losing trades will stand the test of time. Here’s a list of simple strategies for spread betting.
Ignoring Stop Losses
Positioning stop losses at the appropriate levels is something that many traders learn to do the hard way, and in neglecting the stop loss you will find yourself quickly running up significant losses. Some traders are put off the concept of stop losses because they automatically cut positions that might otherwise recover, but the benefits of having the rigid safeguard of a stop loss in place far outweigh the downsides of the odd prematurely closed trade. Learn how to use stop losses and set them for every trade you position, especially in the short-term as you learn the ropes. Stop losses not only prevent trader oversight, but they also help keep defined parameters on your potential losses, to ensure the preservation of your capital and your long-term success. Think long-term – it’s better to have some capital remaining than none at all if your much-cherished position collapses. Start by learning about order types in spread betting.
Spread betting can be a lucrative and exciting pursuit, but it’s not much fun if it starts costing you serious money. The above mistakes are just three of the more common errors (find out why most spread bettors lose) encountered by traders, but by taking care and exercising caution at every turn in your trading career, you should be able to limit these negatives as you learn the markets and improve your trading skills.
Spread Betting – Learn From your Mistakes
Becoming a successful spread bettor presents a significant earnings opportunity, and many traders who have invested the time and energy in learning to trade the spread betting markets correctly have ended up enjoying the financial fruits of their labours. But as any successful spread trader will tell you, they didn’t get to where they are today without the help of a few essential resources which no serious trader should do without.
Good Trading Platform
Central to any successful spread bettor’s armoury is a good, reliable and inexpensive broker with a good spread betting platform. For various reasons, continuing to switch between different brokers with their own different trading portals is undesirable, so it pays dividends to make sure you take the right decision at the first time of asking to avoid the pitfalls of swapping later on. By far the best way to do this is through trialling spread betting practice accounts at those brokers that seem to be the most reputable, according to other traders and independent sources. Look for broker reviews and comparisons in order to find out the best portals through which you can trade – this will help you sort out the wheat from the chaff in order to eventually settle on a reputable broker with a trading platform you can live with.
Spread Betting Information and Media
Another critical arrow in the quiver of prolific spread betting traders is the quality of their information, both in terms of the foundations of the market and how things work through to strategy ideas and technique. Quality information is hard to come by, but when you find it you should plunder it for every gem of knowledge you can. The Internet, for example, is packed with the exact types of information you need to know to become a successful spread trader, across every single conceivable trading discipline, but that doesn’t mean it’s easy to find. Locating good, quality resources with the kinds of information that will help inform your knowledge and shape your opinion is vital to the ongoing learning process.
Data Analysis Tools
Data analysis applications are another thing that most traders could not live without, and their value shouldn’t be underestimated. Data analysis tools allow you to look at and interpret past market data, in order to give you a better idea of how the markets should behave in future. While data tools can’t predict the future, they are the next best thing, allowing you to decipher the natural fluctuations and maximum/minimum price points of an asset before you venture in to take your spread positions. This helps you better guarantee more frequent, consistent trading, by enabling you to make sensible decisions based on the performance of the market.
The successful spread bettor’s toolkit need not be an expensive collection of premium applications and resources, nor does it need to be most in-depth in its category, to deliver results. These various tools are highly advisable to make your trading life easier, and to help streamline your decision making process so that you are more able to respond to the dynamic, ever-changing face of the markets when dealing in spread betting positions.