By Louis H-P on February 26, 2023Reading Time: 4 minutes
Do you want to find out spread betting tips to help you making money? Despite the risk, it is possible for retail traders to generate large profits through spread betting. The leverage in spread betting increases your profits, but also you losses. Yet if you can be disciplined and follow some common sense rules, there is no reason why you cannot create a secondary income!
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It is a form of betting where the person placing the trade gains or looses depending on the change in value on what they are betting in. In the context of this article, the underlying value is that of the financial asset you are betting on.
Outside regular market hours many spread betting companies (bookmakers) will offer their own values. This can lead to big swings when markets open and close, and is something that any novice should be aware of. It is best to focus on trading during regular market hours.
Due to the leverage in each position and the volatile nature of markets and spread betting, you can loose all your money quickly. You should therefore be focused on risk management first and profit second. This will mean giving yourself a margin of safety, knowing your maximum risk and be aware of downside risk.
If there is one thing you should do, is to develop your own risk model. This means understanding what level of risk you can afford to take. This is not subjective. It will give you a number by which you need to cut and run. That means you need to be ready to cut your losses. This will likely mean selling a position at a considerable loss.
Remember the first cut is the cheapest
This means being prepared to take a loss early, which will often allow you to lose less over the long-term. One way of doing so is deciding of an arbitrary number by which to work of. An example would be, if your position is 5% or 10% off being profitable then that is a signal to move on. It will be a lot less painful than selling at a 30% loss!
Good spread betting tips also includes talking about operational matters such as the brokers you use. Although attractive spreads are important there are other things to consider. One tip regarding spreads: typically the broker with the largest amount of spread betters will have the tighter (better) spreads.
When choosing your broker you should also consider how many outages they have had. There is nothing worse than wanting to trade in a volatile time but being unable to because the broker’s platform has crashed.
You should also consider the safety of your money. Where is the spread betting broker based? Be careful that the contract you sign when you open your account is within a jurisdiction where you money is over-seen by a respected regulator such as the FCA. Many broker’s passport in from other jurisdictions, often based in Mediterranean Islands, where the regulator is not as strong and the consumer protections limited.
You have to be clear that this is a trading game, it is not an investing one. You are not looking to hold these positions for long periods of time. Partly because they are expensive. As a result you need to be prepared to become a technical analysts.
As professional traders use technical trading, why not you? This means developing your knowledge of technical patterns such as head and shoulders, shooting star, inverted hammer and hanging man among others.
Yes it can be, but it depends on how disciplined you are. If you trade based on what you think will happen, you will likely lose your money. To ensure profitability, focus on risk at all costs, nothing else matters, not even profit. If a trade feels too risky or is going wrong, GET OUT. Do not wait.
Only consider yourself a successful trader once you have remained profitable over a 12 month period. By then you will have seen trades go wrong, and if you can survive such losses and still make a profit, you can consider yourself a real trader. But just because you are successful is not a reason to stop learning.
You should never stop learning. This means analysing yourself and investigating where you make profits and losses. Armed with this knowledge, you should incorporate this in your trade-placing-decision-making process.
Making a money from a spread betting trade is not hard. Doing so consistently is. That is because you are your own worst enemy. If you start successfully you are likely to increase your risk and lose money. If you do not start positively you will either give up or take bigger risks trying to recover your money.
If there is one lesson to take away from this article, is it that limiting the amount of risk you take will ensure your success. The market will give you many opportunities to make money, so if you can avoid the dummy trades, you will able to compound the successful ones!