Learning how to succeed at spread betting is a process that can deliver significant rewards over time, particularly as you begin to build both your confidence and your capital. For those that make the grade, massive pay-days await, along with the roller-coaster ride of ups and downs that comes with the territory of being a serious trader.
Unfortunately, the vast majority of traders will never find themselves in a position to benefit from these rewards, and in fact will probably lose money overall in their pursuit of spread betting nirvana. In order to make sure you don’t join the ever-expanding graveyard of failed spread bettors, we’ve compiled several of the most crucial things you can do to shape your trading future, with a view to becoming a more accomplished and ultimately more successful spread trader.
Succeeding in spread betting isn’t a given, even for those that work hard at learning their craft. The markets are highly unpredictable beasts, and with the added pressure of highly leveraged returns and losses, it can often seem like an uphill struggle to make any real progress. While blueprints to success are impossible to definitively draw up, there is nevertheless a proper path of projection you must follow in order to give yourself the best chance of building a successful trading portfolio. With significant rewards waiting for those that managed to crack the spread betting code, following these 5 steps to spread betting success can be your best chance of making it as a spread betting trader.
Choose a Solid Broker
Step one – get yourself a good spread betting company with tight spreads. If you want to become a successful trader, you need as much time (and as much capital) as possible to focus on honing your trading skills. One thing you do not want to encounter is difficulties with your broker, or indeed choosing a broker that’s simply not value for money. Brokers essentially provide a very generic service – the only tangible things that differ are pricing and platform. It is recommended that before you settle on any one broker, you try your luck with a few different demo accounts before settling on the one that appears to offer the slimmest spreads, the most intuitive interface and the best odds. While it’s not always easy to choose between different spread betting companies, the wrong choice can cost you significant sums of money over your trading career, so it pays to choose wisely and to periodically check you’re still getting the best deal.
Compare the experiences of other traders who have gone before you, and look for reviews, ratings and comparisons between different brokers in order to settle on the right one for you. Remember to look at both pricing and usability – after all, a low cost trading platform with limited functionality is a less attractive option than a more rounded platform with a slightly more expensive broker.
Know your Onions
This point really can’t be stressed enough. If you want to become a successful spread bettor, you have to know both spread betting (as a format) and the markets you trade inside out and back to front. It is essential to know what you’re talking about, and that goes beyond reading a few short news articles and tuning into Bloomberg every once in a while. For example, if you like spread betting on shares, make sure you thoroughly research those companies first.
Aim to understand how the markets work, what factors impact on pricing, how volatile markets tend to be, how markets have swung directionally in the past – like any professional, you can only be good at trading when you know exactly what you’re doing, to the point where you can shed reasoned, intellectual insight into the way the markets behave. Trading is a ruthless, dog-eat-dog environment, and only true experts can positions themselves ahead of the field to profit on a consistent basis.
Discipline is a crucial skill to master as a successful trader. Discipline means ensuring not only that you are absolutely 100% behind a position before you enter it, but also ensuring you enter and exit at the appropriate times. Many a trader has been caught off guard by a lazy or half-hearted trade – flying by the seat of your pants makes for very risky trading, particularly with spread betting, so it’s not an advisable strategy to relent and enter a position simply for the sake of doing so.
Likewise, it’s so common for traders to cut off a winning streak prematurely after being carried away by the rising stock ticker. Make sure you are absolutely certain you’ve extracted the most value you can from you trade – have the discipline to ride the curve and take your profits when you feel the market is starting to reverse on itself.
Know When to Cut Your Losses
In a similar vein, one of the hardest and consistently soul destroying things to do as a spread bettor is to reject positions that are losing you money. Even the most logical, most rational positions can lose, and there’s absolutely nothing to be gained in watching the value of your account slide in the vain hope that the market will ultimately wake up and see your point of view.
No matter how much time you’ve spent thinking your position through, no matter how much energy you’ve invested in reaching your trading decision, there comes a time when it makes more sense to cut your losses and move on – a skill that most if not all serious, major spread bettors will have mastered. You can either adopt this approach from the outset or learn the hard way – either/or, you don’t become a great trader without appreciating that you can’t win them all.
Read, Research and Learn
This is an out-spoken path to succeeding as a spread trader, but it’s one that shouldn’t be underestimated in its importance, helping to craft you into a successful, accomplished and knowledgeable trader. Read absolutely everything to do with spread betting as you possible can – from the theory and sheer background information through to strategy guides, tips and analyst thinking. The more you read, the more information you will be able to draw on during your trading endeavours, and the more likely it is that you will be able to trade successfully over time. The same goes for research – by immersing yourself in the markets and in spread betting know-how, it’s far more likely that some of it will stick, and help to shape your perceptions as to how to go about successfully trading.
Develop a Trading Strategy
Having read tomes of spread betting literature from a variety of mediums and choosing a reliable, reputable broker you’re sure you can work with, it’s time to develop and implement a spread betting strategy of your own. While trading strategies can be flexible and ultimately change entirely over time, learning and practising one particular strategy can be a great way to build up a consistent trading profile. By far the best testing ground for strategies is through a demo account with your broker. This will enable you to access their trading platform, but for virtual trading stakes, enabling you to try out your strategy on real-time markets without the real-time risk. When you’re satisfied you know how to implement a given strategy, then you can take the time to get out there and start making profitable trades for real.
Build up your Capital and Expertise over Time
Becoming a successful spread betting trader is a marathon, rather than a sprint, and to begin with you should veer away from any form of significant risk. As a general rule of thumb, you should absolutely limit your exposure to any one position to no more than 10% of your trading capital. Anything beyond this represents too significant a risk burden, which can hamper your ability to progress as a spread betting trader.
Making small but sensible trades is the way to play it if you’re looking to achieve success. Of course this doesn’t vitiate the risks, but by taking it easy and building up your capital pot first of all, you will both strengthen your ability to invest more freely in the markets while helping to gain the lessons from experience that will stand you in good stead throughout your trading career.
Take Cautious Risks
Trading is a business of risk, and there comes a time when it’s important to push the boat out a little further and take the risk on larger transactions. By the time you’ve experienced both winning and losing at lower levels, you should find yourself becoming a much more informed, much more knowledgeable trader, and this is most certainly a good thing. When you’ve got the trading capital and the knowledge of your past trading activities behind you, taking measure risks is the next order of business, enabling you to start making money as a spread betting trader. Ensuring you never lose sight of the basics, you should know when you’re ready to embrace the heightened risks of larger stake sizes and more frequent transactions, and assuming you maintain your focus, you should be able to land more frequently profitable transactions than your losing positions.
Becoming successful at spread betting is, like most things, a difficult process that pays due dividends for those that put in the hard work and effort to get themselves to that stage. While there is sadly no direct route to riches through spread betting, by taking control of your trading career, avoiding the most common pitfalls that trip-up even experience spread bettors and making sure you treat your trading in a serious, professional manner, you should find yourself in the best possible position to derive a good source of income from spread betting over time.