Financial Markets – Spread Betting Tips
Financial Markets – Spread Betting Tips Explained
1) It’s possible to profit in all market situations
Today thanks to spreading betting you too can benefit from markets, shares, currencies, and commodities to go down (Short Sell), to go up (Long Buy) and to even move sideways (Barrier Range), where you would wager for a market to stay within a range of 3,300 to 3,900 for the next 25 days.
Just take note, shares and markets fall faster than they rise so you can make much more money in a falling market than a rising one. Additionally, the financial markets are like a seesaw, if money flows out of one market, say equities, then it will flow into another market, such as commodities or bonds. When the US dollar is weak, then the Euro, Swiss or Australian Dollar will be strong. Trading is a zero-sum game, there is always a winner and a loser.
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2) Start small and build-up
No successful trader commences his business in a big way. For my own spread trading, I started out with £2,000 of risk capital. Small bet sizes and virtual accounts provided by some financial bookmakers can help you trade via a real system with no risk. You can eventually move on to trading with small stakes and build up.
The benefit of trading with a financial bookmaker is that it allows you to trade numerous products such as currencies, commodities, stocks, and bonds all from a single account, yet the majority of customers stick to FTSE or DOW. By spreading out your bets you reduce risk especially in non-correlated markets, i.e. S&P500, Dow, FTSE, Dax are all major stock indices, you can honestly say if the S&P goes down, the others follow. On the other hand, if you traded one of the above and also Gold, Oil, 10 year T bonds or $/Swiss Franc, you would have a far better-balanced account. So let’s say £2 a point short on S&P500 and £5 a point long on Gold.
4) Know your personality and trading style
If you think “day trading” and short-term bets sound exciting the truth is that capital will not derive from short terms bets but by trading trends over weeks, months and years. While brokers and bookmakers enjoy generating more business from active customers, the winners, in the long run, are the least enterprising traders.
5) Money management is the key to survival
A good trader will not be required to make money that often. Indeed, you could get 80% of your trades wrong and still make money. However confident you are that the market will crash or XYZ is going to soar, make your first trade a small one, and then, if you are correct, add more to that trade. Pyramiding a flourishing trade is the key to making large returns. Never add to a losing trade!
6) Cut losses and let winners run
Trading boils down to psychology and everyone wants to win and no one likes to be wrong or be classed as a loser. What I advise is that you have a mechanical approach to exits and entries. That is, you put a cutout point in place on opening a trade. Financial Bookmakers provide a guaranteed stop loss on most products. This denotes that you can place a bet knowing that the most you can lose is known, yet your profit could be unlimited. Another good idea is to trail stops, which means you lock in some profits yet keep the trade running. When a trade shifts into profit, you could move the stop loss to your entry point; this denotes that the worst-case scenario is a break-even trade.
7) Treat Financial Spread Trading as a business
If you fancy making real money, then you need to treat this as a business and work to a professional standard. Chronicle details of your trades, invest time and money to learn to trade and continue to update your skills. It is a never-ending learning process.
8) Don’t get carried away by technology
It is easy to get excited by all the great software, on-line trading, real-time data, etc. The truth is, less is more, and too much knowledge makes you a worse trader. The more complex your system, the less chance it will work or that you will follow it. The most important factor when trading any market is the price. The price conveys the truth and should always be obeyed.
9) The crowd and media is normally wrong
One of the best times to buy is when the pack is terrified and there is blood on the streets. Markets go down because of a lack of buyers, not because of sellers. For a bull market to proceed you need new money to keep the party going. If everybody is bullish on the market, then it has no other way to go but down as everyone that wanted to buy has already done so. A classic example of this was the NASDAQ in March 2000.
10) Don’t feel you have to trade all the time
Only gamblers place wagers on markets every single day. In some cases, the best trades are the ones you do not make. Getting involved in Trading can get addictive for losing traders who want to get even and winning traders that now are on a roll. Markets have been here for years and they will be here for many more to come.