Trading Simply: The Ramblings of a Newbie Spreadbet Trader

Spread betting | The Simple Way to Trade the UK Stock Market

Are You Cut Out For Spread Betting?

by 2,441 Comments

I sometimes wish that spread betting was called something else because even though it is betting, as is any kind of share trading, it can often attract the kind of people who are just looking to have a punt. There is certainly nothing wrong with having a punt as no one likes a bet more than me, but I can’t help but thinking that some people financial spread bet in the same way that they would have £20 each way on the next race at Kempton Park.

I think that some of the spread betting firms have to take some kind of responsibility for giving this kind of impression as you often see their advertisements in similar places to the likes of Ladbrokes and William Hill. When you also take into consideration that some of the high street bookies also offer a financial betting service, William Hill and Ladbrokes to name two, it is easy to understand why some of their clients may just treat betting on the FTSE in the same way they would bet on a horse.

So are you cut out for financial spread betting if you are used to normal betting? The answer to that question is usually that you will have no problem but there are certain things that should definitely be taken on board. For instance, if your idea of a bet goes hand in hand with having a few beers then it is time to change your way of thinking. To be honest, and I know I sound like something of a prude here so please forgive me, but it is not a good idea drinking alcohol when you have any kind of bet, not if you want to win anyway. Have you noticed that bookies on the high street always try and position themselves between as many pubs as possible. The reason being that they will make far more money out of punters who have had a few pints, so take the hint. The leverage that spread betting takes advantage of can be a cruel mistress if things go wrong and if under the influence there is a good chance that you may forget adding the precautionary stop loss to a trade.

It is also common for someone who likes to place a bet at the bookies to use whatever is in their wallet at the time to bet with. Financial spread betting is a different ballgame completely so any bets should not be placed on impulse but planned and a specified betting bank should be used.

I suppose what I am really trying to say is that you probably are cut out for financial spread betting but it should be treated more as a business as opposed to some recreational fun. I have found that when someone realises how lucrative this form of betting can be they soon change any habits that they may have had before and start betting in an extremely professional manner.

Another thing that often stops individuals getting involved with financial spread betting is that they assume that they need to invest thousands of pounds to get started. This is not the case, in fact far from it as it is now possible to get started with less than a couple of hundred pounds and the small stakes that some of the brokers allow means that a small percentage of that initial deposit is ever at risk.

Spread Betting – Treat It As A Business!

If you step back for one moment to consider how much money it is possible to earn from financial spread betting it is a wonder why some people don’t treat it more seriously. I often see spread bettors dip in and out when they feel like it, which is fair enough but they really are missing out on increasing their profits ten fold.

Let me try and explain, so many times I have seen newcomers to trading open an account with a broker, using money that they cannot only ill afford to lose but which is also earmarked for other uses, ie, to pay the rent or to take the family on holiday! Now everyone to their own, I suppose, but apart from the obvious problems with funding your spread betting account in this way, what about the psychological side of the trading. If you have placed a bet with this kind of money and the market goes against you by only a few points, panic will more than likely set in and you will sell at a loss, whereas if you were using a bank which has been set aside for spread betting purposes, you would be trading in a completely different way.

Winning over the long term is hard enough as it is without having any added pressure. I saw another example recently whilst having a quiet drink in my local pub. A young chap was boasting how much money he was making through spread betting and proceeded to show his friends how easy it all was by placing a spread bet on the Dow, using his blackberry smart phone. I couldn’t help but take note of the price he had made the trade at on my phone, after all he was telling everyone how he was just about to make a few hundred quid, he wasn’t shouting as loud though when the non farm payroll results came in and his bet went against him.

Spread betting is a lucrative business, it can earn the astute bettor the kind of money that they many people could only dream about so it deserves to be treated as such, by that I mean a sum should be invested in your spread betting business which is used for spread betting only. By all means, use a smart phone to place your trade but not with the intention of showing off to mates down the pub.

Accurate records should be kept, this is an easy task due to systems that have been put in place by the online spread betting brokers but print them out if you don’t receive them by post and put them in a specified folder. It would do no harm to also take notes of the reasons for each trade that you make, if you are following a certain system, make a note of which one, if you are using charts or fundamentals, detail exactly what.

As time progresses, these notes and records will become invaluable. I always know at any given time exactly where I am with my spread betting activities and that includes the financial side of things, I would suggest that you do to. It is often the case that if you are making mistakes with your trades it is far easier to recognise if you are able to look at what you have done in writing as opposed to trying to remember why a trade was made. It does not take a lot of effort and please believe me when I tell you that it will make all of the difference to your trading activities.

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Comments

  2. Oops, I was meant to be cutting through the financial jargon and making it plain and simple. A spread bet on a share is almost identical to buying shares in the traditional way. The differences between the two are ‘technical’. Hope this helps.

    By the way, the email address you gave me when you commented on this post bounces back any emails that I send to you, would you mind sending me an email address that works.

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  4. In reply to Canttradefortoffee.

    Unfortunately for some, yes it is. Which is why I always discourage people from spread betting or traditional share trading if they have a pre-existing condition such as gambling. Successful stock market trading requires a certain type of mindset. Gambling is not one of them. I am curious, why do you think it gambling?

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