Spread Betting Tips For Beginners
Below are some useful spread betting tips to consider if you are in your first year of trying to master the spread betting system:
- Do not risk more than you can afford to lose.
- Always use stop losses – some markets can move very quickly and there is a saying that shares “go up by the stairs but come down by the lift”. You need to calculate before you make a trade the maximum you are prepared to lose if the trade goes against you.
- Do not keep changing your stop loss position if the market starts to go against you.
- Do not risk more than 4% of your trading bank on any one trade.
- Do not trade the same amount per point on every trade. Calculate the amount to trade per point according to how far away your stop loss has to be placed.
- Do use a charting package if possible as this will give you the DMA’s (daily moving averages) to establish trends and to decide on appropriate entry and exit points.
- Do check for company news or Directors Dealings. If several directors of a company are selling a substantial number of shares then perhaps they know something that the market doesn’t and now would not be the correct time to put in a buy order. This does not apply to small amounts but is certainly worth watching either on Sharescope or in the Financial Times at the weekend. Conversely if the directors are buying large amounts of stock then the reverse could be true. It is also necessary to be aware of any possible takeover bids which are in the offing.
- Do not despair if you have losing trades. If you are following your agreed trading plan and the market still goes against you then accept it gracefully. Even the most experienced traders only hope to win 60-70% of the time. The main object is to win more than you lose by the appropriate use of stop losses.
- Do check the financial spread for each share or index. This is the difference between what you buy it for and what you will get paid when you sell it. Some financial spreads are very close like the rolling spread on the FTSE100 which is normally only 2 points during the day but higher at night. There is also a difference between the different spread betting firms and it is sometimes worth shopping around. Some shares have a very wide spread, (especially if they do not have a lot of volume being traded) and if the spread is in double digits it can take a little while to reach break even point even if the market is moving in the right direction for your trade.
- Do not over trade – 12 open positions is enough for even the most experienced trader.
- Do keep very detailed accounts of all trades. This should include date of order, date of activation, price order activated, stop loss position, net profit or loss, price at stopout or close etc. Money management is essential.
- Do not trade during the first 30 minutes of the day unless you have very wide stop losses as the market can be very volatile at these times.
- Do be prepared for the fact that you will probably be terrified when you make your first trade!
- Do join a spread betting forum, consider what others are saying and share your experiences.
- Do realize that both fear and greed can sometimes make us do irrational things. Try to remain calm and treat all trades objectively and do not trade on “gut” instinct but stick to your agreed methodology and remember that the market is never wrong.
Hopefully some of the above financial spread betting tips will prove helpful to any beginners out there.
Original content from Gr8 Free Articles.
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- Beginners Spread Betting Strategies
- Spread Betting Strategies
- Learn From Others In A Spread Betting Forum
- My Personal Spread Betting Guide
- CFD vs Spread Betting: The Debate
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