Have A Trading Plan Before You Start Spread Betting
When setting out to trade the markets, whether you're a first time spread bettor or an experienced multi-disciplinary investor, a critical pre-requisite of success is the trading plan. Much more than just a trading strategy, a trading plan delineates an overall strategy, outlining what you want to achieve from how much capital, and exactly how you're going to go about achieving it. Its importance is as central as that of the business plan to a start up, and without having the plan in place holding yourself accountable to targets and keeping an eye on the bigger picture is near impossible.
Why Have a Trading Plan?
A trading plan is a blueprint on which you can base your trading activities. If your plan shows you need to make a 10% return on your investment and you're sitting at 11%, you know you're performing above target. If you're down at 5%, you might want to adopt a new trading strategy, or explore opportunities in other markets. These prompts to action take a while to imbed if you've nothing to cross-reference against, and in the process of drawing up your trading plan and monitoring your progress accordingly, you can help to more efficiently identify whether you're trading along the right lines.
But a trading plan is much more than just a counterpoint on which you base your trading. It's a guide, a roadmap, guiding you towards your end goal. For some, that's making a full-time income (and then some) from spread betting alone. For others, it's part of a wider trading and investment strategy. Or you might even just be looking towards a few points a day for a bit of extra pocket money. Whatever your trading goals and objectives, a trading plan helps keep you on the right track, and divert you along the often-bumpy road of spread betting in order to meet those aims. Without it, you can expect limited success, particularly long-term, because the lack of the focus it provides can easily blow you off course.
How to Draw up Your Trading Plan?
Drawing up your own trading plan requires a bit of preparatory research. First of all, you need to think about your trading objectives. Why are you trading? What are you going to trade, and why? Is spread betting an exclusive trading medium, or are you also interested in trading CFDs or other instruments? These decisions are essential in shaping your plan, and in providing some form of structure to your trading.
Secondly, and equally as crucially, you should have a think about the types of strategies you're going to use. Are you trading ultra-short term, or comparatively long-term? Check out our section on spread betting trading strategies for more information on the most common approaches to spread betting.
Spread betting without a trading plan is a lot like driving without directions, and while you might eventually stumble upon your destination, your route will be inefficient and potentially very expensive. While most traders are urged on by the excitement of jumping in two feet first, and getting started on the markets for real, taking the time to draw up a trading plan, and to decide on the strategy and techniques you're going to use to get there is not only a good exercise, but also a highly useful companion as you launch your trading career.