Financial Spreads Blog Trading Tips
Another selection of spread betting tips for you.
Tip 43. One way of ensuring you’re getting better value is, as always, to shop around. If you open an account with 2 or more spread betting companies (see Best Spread Betting Companies) then you should be able to take advantage of the variations in their spread sizes and quotes. Having a two or three accounts simply makes it quicker and easier to shop around for the best price.
44. The Great Spread Bet. However tempting it is, it can be dangerous to risk large sums on a single “great spread bet”. There’s nothing with big stakes (provided you know what you’re doing, have the necessary funds, are confident in your research etc) but if you have one of two big trades and they go wrong then that could easily undo all of your good work.
When you get tempted to place a disproportionately large spread bet, then have a quick look in your Trading Spreadsheet. Remind yourself of all your ‘great-trades-that-lost-because-of-unforeseen-market-conditions’ and other ‘unknowns’. That can help sober you up.
45. If you think a share or market looks like it could be a good bet in the (near) future then keep a regular eye on it. Don’t just check it randomly when you’ve got a few spare moments.
46. There is some good free chart software out there (eg Financial Spreads offer some free charts) but even with that kind of help it still easier to spot an existing trend than ‘spot the top and bottom’ of a trend.
Therefore it’s easier, and theoretically less risky, to spread trade WITH the trends. Of course if you do that you will miss the top and bottom of the curves. However doing this can help you reduce your losses.
47. A common expression in spread betting is ‘cut your losses and let your profits run’. The theory is simple but it’s difficult in practice to turn a paper loss into a real loss by closing the losing your bet. For many of us it’s difficult to say I made a mistake! On top of that it’s not much fun writing off all the research you’ve done. The greater your losses the more emotional and attached you become. It may also affect your other trades. If your trade has been running away from you for 2-3 days just ask yourself if you want to lose more?
A stop loss can help you close a bet. When setting a stop loss it sometimes helps to work out the actual financial loss not just the point movement. eg work out that you’re prepared to lose a maximum of £500 per trade and set your stop loss there (not that not all stops are guaranteed).
Thinking in cash will help you understand how much you could potentially win and lose rather than thinking in terms of a 20 point movement in this market or 5% change in that market.