When it comes to spread betting, there are many attributes which will determine whether someone will be successful or not, it could be the method that they use, their knowledge of the underlying market but in the eye’s of successful spread bettor’s everywhere, one of the most important factors which will ensure success would have to be the mindset.
There is a saying within any form of financial trading that you should cut your losses and run with the profits yet as so many new spread bettors discover to their cost, unless you have the correct mindset in place this is one of the hardest things to do.
Nobody like losing but no bettor is going to win every bet they make. Losses come with the territory but when you are first starting out, when a bet does not go the way that you expected it is easy to panic and get out. The same scenario applies to a bet that goes the opposite way, it may be showing a few points profit but that old demon rears it’s ugly head again and tells you that you should take those few points, after all, a win is win, isn’t it?
Unfortunately, trading in this way will not lead to a happy ending but there is a way to overcome the problem and as with anything else in life, the more often you do it, the easier it gets. Experienced traders will be smiling to themselves at this point because when they can probably look back and say that their spread betting fortunes took a step for the better when they started implementing some simple steps.
Those steps are to simply know exactly what your exit points are before you make the bet, know exactly what profit you will be happy to take and the level at which you will take a loss. Just by acting in this way will remove all emotion from the bet, the whole thing will become more of a mechanical procedure and take away the need to think on your feet, so to speak.
As you become more experienced it will become second nature and you could also implement a moving stop loss where by you lock in a profit as the price rises, don’t run before you can work though because there is no getting away from the fact that trading in this way will take some getting used to, especially if you are used to diving in without a plan of action.
The adrenalin rush will still be there, don’t think for one moment that having the correct mindset will stop that, whether that is a good or bad thing, but the panic when things don’t go as planned will disappear and it should not be under estimated what a better trader this will make you. For more information on this subject there is a superb book on the market which should be regarded as a ‘must have’ for any trader’s bookshelf and that is Come Into My Trading Room Dr Alexander Elder. Highly recommended and the author does a superb job of explaining what a massive impact simply thinking and trading in a different way can make to the success of a trader who is prepared to think a little bit out of the box.
So next time you are placing a financial spread bet, stop for one minute to ensure that you know exactly what you are doing, do this with every trade that you make and you will soon see a big difference in you bank account!
Greed Is Not Good!
Contrary to those famous words uttered by Gordon Gekko, greed is most definitely not good and has been the curse of many a spread bettor over the years. We are all prone to it but it is one of those things that has to be mastered for anyone who wishes to progress in this exciting industry.
It really is common problem so picture the scene for one minute, you are trading the daily Dow and have a stop loss in place with a target at which you intend to take your profit. The trade is going your way and after hovering just below the target for a while, the required figure is finally reached and you are just about to take the profit when the voice inside your head tells you that you should wait just a little bit longer.
The charts are telling you not to hang around, the system that you are using shows that you should be happy with the profit that you have achieved so far but no, you decide just to wait a little bit longer because after all, you could very well be looking at a few hundred pounds more if you are lucky.
Ten minutes later the price begins to fall and the profit goes down as just a distant memory and it takes all of your effort not to remove the stop loss that is in place. This is just another example of the constant battle that goes on in the mind of the spread bettor and just goes to enforce the fact that it is not just a good system that is required but also the will power to stick to it.
When you do suffer a loss like this, when a decent profit could have been made, it really is a horrible feeling and what makes it worse is that there is no one else to blame but it is all well and good me telling you that but what can be done to make someone stick to their guns and not let greed get the better of them.
For me, the most effective way of dealing with this problem is to write everything down, when you enter a trade have your targets and stop losses written down, I use those yellow ‘post it’ notes that I can stick to my computer monitor, I would also advise the use of guaranteed stop losses especially for anyone who is new to the game.
I know everyone is different with regards the the trading methods that they use but I always try to make everything as mechanical as possible, that way for me it is a complete numbers game, no emotion whatsoever, when my trade raeches its target, whether that being a profit or a loss I am out of it.
I will be missing out on profits on some occasions but I can live with that and I feel that if you are having something of a problem with discipline or greed then you do exactly the same. I won’t say it is not difficult, especially for the first few trades but trading in this way will soon become second nature and I can guarantee that you will feel far more relaxed in your trading.
I have definitely noticed that my trading has become far more enjoyable and many people who I know who have started trading in this way have also experienced the same. It could be argued that trading in this way is not as exciting as hanging on in there, especially when you do and the market breaks out leaving you with a much larger profit but I would rather have my way any day of the week!
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