Spread betting is like every other form of gambling, there are do's and don'ts. Here are some pitfalls to avoid....
1. Over confidence. Get over confident in a bet and you may lose the ability to think rationally. This may cause you to bet more than you should and do yourself some financial harm.
2. Emotional betting. Bet with logic, not your heart. Resist the urge to have bets on teams or markets you like, instead bet on what the prices and stats say. Also, do not enter trades based purely on fantastic news!! Basically, again you get emotional, spot an opportunity to make some 'easy' money and jump in without any plan. No idea of where to exit to take profits or where to place your stop.
3. Betting against the trend. Many novice traders will look at some charts, decide this is as low as it can go, and place a trade going long. This is a common mistake, the chart can always go lower and you are placing a bet against the trend. Always have a reson other than acting on impulse. Intuition is just a hunch; it has no bearing on trading the world markets. Ok, it might work once or twice, but in the end it could cost you far more.
4. Failure to stick to a staking system. A staking system tells you how much you should bet on each event and gives you a maximum loss for each set period of time. Failure to stick to this could result in you "chasing" and losing money.
5. Impatience. Great bets do not come up every day or week. Sometimes you will have to bide your time and wait for an opportunity to present itself. Better to have one great spread bet than 5 bad ones. I've seen many people say things like 'I've just bought £10k in BARC's, it may go lower, but I just couldn't wait any longer'. Things like that is just not the way to do it. If Barclays share price fell another 10%, then you are 10% away from making a profit compared to what you would have been if you had waited.
6. Over-leverage - The first thing any trader learns along the painful journey of trading is not to get too highly leveraged in the first place. £100 a point is just a ridiculous amount of leverage if you only have £10,000 or so in your bank. It's this 'greed for cash' that is more akin to gambling than trading and how many gamblers win long term...not many. The thing is if you have £10,000 in your bank and you buy the FTSE 100 at £100 a point, and by some chance you guess correctly and it goes up 50 points you sell having made £5,000. The next day you do the same at 200 a point and so on...it only takes one black day when you guess the market wrong and you're wiped out. Some time ago I was at a 'free seminar' sponsored by CMC, and their guy told an amusing anecdote about some muppet who'd blown up in a big way, and he added parenthetically that they were still pursuing him through the courts to reclaim the full extent of the losses he incurred (i.e. above and beyond his deposit/margin with them).
Courtesy: http://www.financial-spread-betting.com/Spread-Betting-Risks.html
1. Over confidence. Get over confident in a bet and you may lose the ability to think rationally. This may cause you to bet more than you should and do yourself some financial harm.
2. Emotional betting. Bet with logic, not your heart. Resist the urge to have bets on teams or markets you like, instead bet on what the prices and stats say. Also, do not enter trades based purely on fantastic news!! Basically, again you get emotional, spot an opportunity to make some 'easy' money and jump in without any plan. No idea of where to exit to take profits or where to place your stop.
3. Betting against the trend. Many novice traders will look at some charts, decide this is as low as it can go, and place a trade going long. This is a common mistake, the chart can always go lower and you are placing a bet against the trend. Always have a reson other than acting on impulse. Intuition is just a hunch; it has no bearing on trading the world markets. Ok, it might work once or twice, but in the end it could cost you far more.
4. Failure to stick to a staking system. A staking system tells you how much you should bet on each event and gives you a maximum loss for each set period of time. Failure to stick to this could result in you "chasing" and losing money.
5. Impatience. Great bets do not come up every day or week. Sometimes you will have to bide your time and wait for an opportunity to present itself. Better to have one great spread bet than 5 bad ones. I've seen many people say things like 'I've just bought £10k in BARC's, it may go lower, but I just couldn't wait any longer'. Things like that is just not the way to do it. If Barclays share price fell another 10%, then you are 10% away from making a profit compared to what you would have been if you had waited.
6. Over-leverage - The first thing any trader learns along the painful journey of trading is not to get too highly leveraged in the first place. £100 a point is just a ridiculous amount of leverage if you only have £10,000 or so in your bank. It's this 'greed for cash' that is more akin to gambling than trading and how many gamblers win long term...not many. The thing is if you have £10,000 in your bank and you buy the FTSE 100 at £100 a point, and by some chance you guess correctly and it goes up 50 points you sell having made £5,000. The next day you do the same at 200 a point and so on...it only takes one black day when you guess the market wrong and you're wiped out. Some time ago I was at a 'free seminar' sponsored by CMC, and their guy told an amusing anecdote about some muppet who'd blown up in a big way, and he added parenthetically that they were still pursuing him through the courts to reclaim the full extent of the losses he incurred (i.e. above and beyond his deposit/margin with them).
Courtesy: http://www.financial-spread-betting.com/Spread-Betting-Risks.html
No comments:
Post a Comment