Spread Betting Tips: Using Your Losses to Make You a Better Trader
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Spread betting carries a high level of risk and so, regardless of your ability to place stop loss orders and interpret the markets, spread betting with any kind of frequency means that you’ll lose from time to time.
In the long term, however, the loss itself is less important than the way you hone your spread betting ability to react to it.
Before a Losing Spread Bet
It can be difficult for a financial spread bettor of any level to admit that they have made a mistake. When a spread betting position starts to move against you, it is easy to convince yourself that the situation is temporary and will soon turn around to put you in a spread betting profit. After all, you entered that spread bet for a reason.
And the more the market goes against your spread betting position, the greater chance it has of coming back eventually, surely? Besides, your spread bet has already reached an unrealised loss, what difference would a little more make?
This pattern of thinking can turn relatively small losses into much larger ones. It is obviously not impossible to profit from a position of unrealised loss, as the market could indeed turn around.
This, however, will quite possibly happen only after the market has reached a point where your spread betting account can no longer afford to keep the trade open.
Instead, you should have a considered, rational system in place before you start spread betting and stick to it.
Make sure your spread bet entry point, objective and exit are all covered. If you plan to cut your losses at a certain point, make sure you cut them there. If you decide to place your stop losses at certain levels, do not move them any further away from the market price.
Ultimately, do not let emotion dictate the way you run your trading. This approach will not stop you from making losses, but it will help to minimise them.
After a Losing Spread Bet
Quite often, a loss can actually be more valuable to your financial spread betting education than a profit. Do not simply put it down to bad luck and move on; think about what happened.
Did you move your stop loss to accommodate a potential turnaround? Did you research the spread bet fully? Did you try to let a profit run for too long? Were the signs there that you should have cut your losses earlier?
By working out how not make the same mistake twice, you can tailor your own individual spread betting system and make it more effective.
Losses are a part of spread betting, and making money is as much about minimising losses as it is maximising profits.
So learn to accept your losses and, if you can, make them part of your trading education. However, whatever you do, never ignore your losses.
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Spread Betting Tips
Risk Warning: Spread betting, CFDs and Forex trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.
'Spread Betting Tips: Using Your Losses to Make You a Better Trader' edited by DB, updated 04-Nov-10
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