I've created this forum so we can all share the spread betting tips and tricks that we have learned. When I say tips and tricks I'm talking about lessons that you have learned on your own spread betting path like "Don't trade the FTSE for at least a year", not Buy BP @ 350p. I don't mind if people want to post their potential trades with reasons behind them but I don't want people to start claiming that they have hot tips on share prices going up etc.
Here are some of my lessons that I've learned along the way.
Don't Trade the FTSE (Or any other indices or currency pairs) for at least a YEAR!
This is a rule which I myself have broken many times and have paid the price for it. If like me you are trying to learn the ropes of spread betting with a small amount of funds then I would highly recommend you do not trade the FTSE for at least the first year. The FTSE can easily move 100+ points in a day. So even trading at the low price of £1 per point this could still mean £100+ move against you in one day. If you are only trading with around £1000 it will only take 10 bad trades like this to wipe your account out and probably put you off spread betting forever. This is not what you want is it.
I try to stick to a rule of only risking 1% of my trading capital on any one trade. This is another rule which I will cover in another post. Again I have broken this rule which is how I have ended up with a current £500+ loss. If you stick to this rule then you can make 100 trades with your £1000. Law of averages says that you should win at least 50% of the time so if you stick to 1% risk then you should alway live to trade another day.
I have tried to trade the FTSE with only 1% risk but this is a very difficult thing to do. The FTSE can move 10 points in a matter of seconds so you can be very quickly stopped out of a trade. When I have tried to trade the FTSE I have tried to identify support or resistance lines(which I will cover in another post soon) and place my trade based on these. Identifying support and resistance is a bit of a skill which I have yet to master. Hence the reason for mostly losing money on FTSE trades.
Therefore I have decided that the FTSE can wait until I have more confidence in my ability to trade. I am (for the time being) an position trader. I am buying and holding. As the great Warren Buffet said "Our favourite holding period is forever". This is going to be me from now on. I am going to buy and hold and move up my stop order as the position moves in my favour.
Don't Boredom trade
I have lost a lot of money this way. When I have been bored looking at my trading platform I have traded the FTSE and other indices and equities purely out of boredom. It's a hard thing to resist but this, as I found out the hard way, is no different to gambling. If you feel the urge to trade out of boredom with no strategy behind the trade, run away from your computer as fast as you can. Go find a mirror slap yourself in the face and ask yourself "What am I doing". Turn your computer off. Go outside, sit in the garden, smell the flowers, cut the lawn, make yourself a snack, phone a friend who you haven't spoken to in a while do ANYTHING ELSE to stop yourself from boredom trading. I've been there done that and each time I've done it and lost money I ask myself "why did I do that?" Don't make the same mistake. DON'T BOREDOM TRADE
May the markets be with you!
The Spread betting beginner