Spreads Tips Running Your Profits
It’s been a while since we added any spread betting tips in this blog so here is the next set:
Tip 48. So this running your profits malarkey…how do you actually do that? That tough one of being confident with being too greedy.
You might start thinking ‘this trade is going well, perhaps I’m being greedy, perhaps I should be disciplined and take the profit. After all, I don’t know where or when the market will move’.
However you need to remember that you’ll probably lose more trades than you’ll win. Perhaps only 40% of your spread trades will be successful. That’s not too bad if the good trades cover the losses of your bad trades.
The nature of the market suggests that to be profitable you’ll have a high number of small losing spread bets and a low number of large winning spread bets. Don’t forget you can always use a Stop Limit in order to protect your profits. Just remember that by closing the bet you are basically placing a new bet in the opposite direction that the trend is going in.
So ask yourself the question, “do want to place a bet in the opposite direction?” And work that trade out separately.
Also don’t forget that you are paying the width of the spread and knocking a couple of points off your hard fought profit.
Look at your plan and question whether you really want to place a new bet against the market. If it looks like a good thing then do so.
Another protective option though is to part close the bet. eg close half of the bet and leave the other part running. Make sure you note down in your Trading Spreadsheet why you’re doing that so you can analyse the affects later
49. Sell, sell, sell. Most traders like to Buy (go long) for the large majority of their trades. However many successful traders also Sell (go short). It’s a natural human emotion to think positively and think about the markets going up. Look out for markets that appear weak, markets that look overpriced and that could go down. If you’re only buying then you’re closing yourself off to 50% of the opportunities.
50. You have an Open Position. Fine. You decide to do nothing with it? Why? Doing nothing with an option position is the same as trading. Make sure you know why are you staying with the bet.
51. Try to Avoid Churn. With wide spreads, spread betting can be expensive if you’re constantly in and out of the markets. Of course there are a number of companies like Financial Spreads or Capital Spreads that offer tight spreads to help negate this effect.
If you find you’re constantly in and out of positions, you may need to do more research to stop this. Alternatively try reducing your stake size and staying in your positions a little longer. You won’t learn much from constantly opening and closing bets
52. In important but short tip. Just because a price has gone down a lot that doesn’t mean it the market won’t fall further. Similarly if a market has gone up a lot. Don’t expect it to stop just because it’s gone up a lot.