Research Tips - Know What You're Looking For
If you read anything worth its salt on spread betting, you won't have to look far to find numerous references to research. Research is so often stated as being central to trading success that it's becoming a cliché. But clichés are only clichés because they are based in truth, and with the importance of research, that's most definitely the case. The markets are a hostile, dog-eat-dog environment, and one in which you must keep one-step ahead of the collective competition in order to make your money, thus researching and keeping on top of goings on in and around your markets is vital to successful, sustainable trading.
However, very little of the literature on financial spread betting is dedicated to the 'how' - how do you actually go about researching the markets, and the positions that you will eventually support? While there's no definitive right or wrong approach to research, there are a number of tips that you should bear in mind in order to give yourself a fighting chance.
Narrow The Field
This is one of the most obvious to experienced traders, but for new spread bettors understanding that too much choice is a bad thing can seem counterintuitive. We're taught from an early age not to put all our eggs into one basket, and the importance of diversification, and to an extent that does have merit, even in the trading sphere. However, there is a balance to be struck - a balance between diversifying your options and specialising in your chosen area of research.
Don't research 20 markets at once - focus on one market or even on just a handful of stocks or assets. That way, you have a realistic chance of becoming something of an expert, and getting close to the behaviours and factors that drive those prices, which will ultimately pave the way for profitable investment opportunities.
Know What You're Looking For
Knowing where to look is one thing, but knowing exactly what it is you're looking for is quite another. When you've narrowed down your field, you've still got to decide what information you need to point towards a viable trading proposition. For most traders, this depends by and large on the nature of the trading strategy you're using, and the goals you're working towards. For some strategies, you might be looking for markets that show signs of promise or weakness, or you might even be looking for correlations between different assets in order to work out a hedging or pairs strategy.
Whatever your chosen strategy, it is critical that you know what you're looking for before you start your research, in order to ensure you can approach your decision making with discipline and objectivity.
Stalk Your Stocks
In the early stages of your spread betting career, you should avoid making research decisions on the spot, which can lead to bad trading and the losses that can bring. Instead, 'stalking' particular markets can prove to be a great way of building up an understanding of how that market behaves. If you notice a trend in one of your research areas, make a note of it and watch its performance. Do not be tempted to jump in - not all markets behave in a unified or even broadly similar way, so by foregoing the first potential (and highly risky) opportunity to jump on a trend, you can learn a valuable lesson that will enable you to take advantage of a similar profitable trend in the future, albeit with less uncertainty as to how the market will behave.