Financial Spread Betting Tips: Part 1 of Spread Betting Tips, Tipping and Strategies

Financial Spread Betting Tips

Test your knowledge and ability to trade

1. Paper Trade. Always start with paper trading ie real markets but fictional funds. Write down all the trades you would normally place ie note down the date, buy and sell prices, stakes and why.
   
   Rather than use a notebook, set up a spreadsheet on your PC. Slowly develop it with columns for your needs, and at very least, set it to work out your profits and losses. You don't need to be an excel wizard but you should get to grips with the basic formulas. After it's set up you can then update your Trading Spreadsheet to help you quickly workout different profit/loss permutations.

2. Set up a Test Account and trade. With a test account a spread betting company will give you £1000s of virtual credits to test your skills (you'll also get more used to their software / layout). Continue to add these trades to your Trading Spreadsheet. Make sure your Trading Spreadsheet P&L correlates with your Test Account History.
   You can currently get free Demo accounts with:
   
   • Capital Spreads
   • Financial Spreads
   • Paddy Power Trader
   
   
3. Whilst paper trading / using Test Accounts make sure you get used to 'Buying' and 'Selling', closing bets and the advanced features that some firms offer such as One Cancels the Other (OCO) and Two Factor Sell Stop Trades. It's also worth looking at Pairs Trading (these are all covered later). Once you understand spread betting these techniques are straightforward but I wouldn't necessarily suggest them for the new punter.
   
   The point of paper trading these features is to get you to think about how the markets can move in complex ways and how one market influences another. This is something that can catch you out or you can exploit. Investors often slip up because they mentally isolate a share and therefore ignore market / sector influences of other shares.

4. Upgrade your Trading Spreadsheet with: what you did, market bought / sold, price, price you aim to close the bet at, any stop loss, what you plan to do if the market moves against you and why you liked the bet, why you closed a bet, why you didn't close a bet when you were on a loser. This will help you develop a plan and also help you stick to it.
   
   You should also use a calendar element with notes for yourself eg 'look at the price of PQR on date X'.
   
   

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   'Betting and Gambling' or 'Trading and Investing'?

5. I'm not referring to how spread betting works, stop loss orders, limit orders etc. I'm referring to the fact that this business, depending upon how you treat it, is either "Gambling" or "Trading". Treat spread betting seriously. If you treat it like betting / gambling you are likely to get hurt.

6. If you can't say in your Trading Spreadsheet why you placed the bet - you're now gambling not trading. Don't trade.

7. Remember you are not A-Cop-Who-Gets-Things-Done. Don't rely on Hunches. Don't bet with your heart. Use your head.

8. If you're the sort of person who plays poker, likes a regular sports bet, dreams about bingo and scratch cards, does the lottery and is partial to a few casino outings then financial spread betting may not be right for you.
   
   Trading can get exciting and, as a result, can encourage the gambling element in you. Financial spread betting will also relieve you of your money a lot quicker than Betfair, Ladbrokes or Sporting Index ever did.
   
   
   What Not to Trade

9. Make bets on the markets / companies you know something about. If you don't really know anything about the 100 companies in the Nasdaq 100 don't trade on them or the Nasdaq 100 Index. If you know little about Foreign Exchange markets - stay away from them. If you are most familiar with the gaming industry, start there.

10. Newcomers should stay away from Indices like the FTSE 100 and S&P 500. It's tough enough researching, trading and predicting which way one company's share price will go. Predicting 100 companies at a time is no mean feat.

11. Many people find day trading takes up too much time and too much emotion. That results in you responding poorly to market conditions.
    
    Also the spreads on some markets are too wide for day trading and therefore it may be more sensible to try trading markets between a period of 1 day to 4 weeks.
    
    
    

    paddypowertrader >> "With paddy power trader you get all the normal advantages of Spread Betting plus..." >> read paddypowertrader review.

    
    
    
    Research and Preparation
    
    
12. Keep a realistic scenario when paper trade. There's no point in trading 20-30 markets at a time / having 20-30 open positions. You won't have the time to research and trade these in real life. Stick with 0 - 10 open positions.

13. If you keep having large losses then look at where you're going wrong. Maintain paper trading until your research and strategy is sound and until you're trading without incurring large random losses.

14. Karate Kid or Star Wars? It doesn't matter which you prefer but both share the lesson of learning and that expertise take time. Assuming a hazy blue Alec Guinness isn't standing next to you and that Mr. Miyagi doesn't live across the road a lot of the training is down to you. It's great to have mentors, trading colleagues, chat room 'buddies?' but ultimately your trading is down to you.
    
    Lots of research, testing, research, testing and more research and testing, I think you get the idea. This will help you stop trading on hunches. It will reduce your losses and hopefully increase your profits. Likewise keep noting everything in your Trading Spreadsheet even though you can't be bothered. Your spreadsheet will help you analyse what you're doing well and what you're doing badly.

15. Winning and Losing Trades. If a trade goes against you, note it down and why. If a trade goes with you note it down and why. Do this even if the market went up / down because of the reason you originally thought it would.
    
    
    Financial Spread Betting Tips - an average sports anecdote you can ignore:
    
    Apparently you should practice what you preach. I thought about whether my 'teachings' were of any use. So I decided to apply a similar methodology for my sports betting. I wouldn't actually improve my research much but I would note everything down for a year ie each bet, trade size, why I did the bet, profit etc.
    
    My sports betting accounts were in good condition, I had some good wins, some poor bets, the usual, but I rarely deposited funds and my stakes sizes were growing so I must have been OK. Then I started a record of every bet. After a year it read something like this: UK Football bets profit +- 2%, rugby +30%, tennis -10%, racing -10%, novelty bets +5%, golf -100% eh?
    
    Yes I never realized what a terrible golf punter I was. 26 Bets placed, 26 bets lost. Poor hunches and relying on "mates tips". It's a pain to note every bet but the analysis and subsequent answer was simple: increase rugby stakes and...no more golf for me.
    So where were we?
    
    
    Have a Plan

16. Be The-Man-(or Woman)-With-The-Plan. There are a number of strategies and steps you can take to becoming successful at trading but all have well thought out and consistent plans. None were perfect first time out. You'll need to improve your plan along the way. Trading - Planning = Gambling.

17. Changing your plans. You should only allow small changes to any trading plan. Large changes must have a very good reason.

18. Have a long term plan eg a 1 or 2 year plan and say what sort of profit level you're looking for, eg 20% return after Y1. This will help you analyse how you're getting on. If your target is realistic it can help reduce your greed on individual trades.
    
    
    Essential Tools for Trading

19. A good quality, reliable PC with a fast reliable internet connection and printer.

20. Access to lots of quick live market information.

21. A phone for calling up traders.

22. Print hard copies of your notes and open positions in case your computer crashes. I normally print off my Trading Spreadsheet after every new trade. Clearly you should be backing the data up as well.

23. Capital that you are prepared to lose.
    
    

    paddypowertrader >> "With paddy power trader you get all the normal advantages of Spread Betting plus..." >> read paddypowertrader review.

    
    
    
    
    Optional Tools for Trading

24. Have a look at a trading course. There are a number of introductory courses available. Take your trading seriously and understand that you probably need some education in order to do well.

25. To give you greater access when you're travelling, or even just out-and-about, it makes sense to use a spread betting service with a mobile phone trading platform and/or XDA / PDA...or BlackBerry or iphone etc.
    Note that IG Index offer an iphone dealing platform.

26. Whether you are inexperienced or an old hand, most commentators would suggest that you use Charts to help you improve your analysis and maintain your discipline.

27. Most of the Operators will provide some analysis software / charting packages. They will offer it for free, however, it's also worth a look at some of the more bespoke software packages. Note that these can cost you £200-300+.

28. There are some handy computer trading programs that you can use as a guide or to assist your trades. However ,to solely rely on these programs will get you into trouble.
    
    
    Training Courses / Seminars

29. Many Spreads firms will want to 'help' you learn how to spread bet. One way of doing this is via their Free Seminars. Naturally this helps them open new accounts but in return they can give you handy advice and help you with your strategy. It's give and take.

30. If you're looking at Trading Courses where you are paying for the privilege then make sure you check the credentials of company running the course and the trainer themselves. It may be worth going to a free Seminar or two before any paid courses. At least that way you can ask more appropriate questions when looking into the Paid-For-Training-Courses.
    
    
    Online Forums / Discussion Boards
    
    
31. Beware of the Tip. Many users will try to alter the price up/down of certain markets by creating a buzz in a forum(s) about that stock. ie the same thing that the City Slickers did in The Mirror. This is done so that readers will act on that information and move the market so the originator of the rumour or tip can close out for a profit.

32. Beware of poor information. Some 'tips' that are posted aren't intended to mislead like the City Slickers. They are just posted by excited and often poorly researched investors.

33. Beware of the stake size and portfolio. Many members will post large stakes sizes, don't let this affect you. Stick to your plan. Likewise let's say someone has a similar position to you in a particular market and they post a message saying they've closed it. Stick to your plan. Their funding, their portfolio, their information will be different. By all means research something that someone else has said but only do trades that you understand and that you have researched.

34. If you've got something worthy to write eg suggesting this website to newcomers! then do so. However, don't get drawn into arguments and pointless discussions. Spend your time with your family and friends, working and/or researching. The bulletin boards can be an amusing soap opera but you'll gain nothing by joining in these 'discussions' apart from high blood pressure and lost time.

35. Forum benefits. As with the above it's worth taking things with a pinch of salt but you can learn some practices from the forums. Members will often write about their own mistakes of being too greedy, not using a stop loss, having too many positions open, listening to tips, poor research etc. ie many of the ideas discussed on this website. Real life examples can help drum these important lessons home.
    
    
    Financial Tips, Rumours and Forums
    
    
36. Rumours are not a sound source of information. Note down when you trade on a tip or rumour and the source. Then analyse your results (it's generally not good news).

37. The market makers will often take the newspapers and investor magazines tips into account. They will move their prices up / down before you get there. Any value in good tips may already be gone.

38. Try to verify all such information. If it's accurate you can always join the trend a little later.

Financial Spread Betting Tips

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