How does one spread bet successfully? That is a question that a trader may ask, especially if they have not been involved in spread betting before.
Every successful spread better knows what spread betting is, and that is very important for a trader to know. Spread betting is profiting from the difference between the buy and sell price of a particular asset.
So, as it goes, you should always put yourself in a position to buy at a low price or at a discount and sell it at a high price or at a premium to be a profitable trader, the vice versa goes for selling or shorting as it is called.
The successfully spread better has several things he or she focuses on to ensure that they have the profitable plan in place.
How to Spread Bet Successfully?
The following is a list of things that a trader can use to spread bet successfully, they are:
- Know your markets or tradable assets
- Efficient position sizing
- The costs attached to trading
- Risk management
- Education
These are the most important things to consider if you want to be a successful spread better.
Many traders who have found success in spread betting; they have incorporated each of the stated aspects and have found a confluence, and they utilize it on their trading.
Education
Many people who get into trading think that they will just get into trading and read some articles here and there, attend a weekend webinar and by the start of the coming week you are ready.
Trading is quite the opposite; the more you get into it, the tougher you realize it is. Getting a good education from a trusted and experienced institution or trader is the best investment you will make for yourself as a trader.
Many traders starting out want to take the short way to profitability, but all those short ways fall short with time. The time you spend learning and practicing being a good and disciplined trader will determine your profitability and success.
There are many institutions that offer quality education at an affordable price. The most important thing is for you to get educated and that will be your most important tool as a trader.
Know your Markets or Tradable Assets
After getting your education focus on the assets you want to trade, it may be forex, stocks, indices or commodities. After realizing which asset you want to focus on, you study it and specialize on it consistently.
The most important thing is to know how your markets work; when are they volatile, when do they open, when is the best time to enter and exit.
Learning how your market behaves gives you an edge that will make you more cautious and skillful when taking trades. It is better to be a master of one than a jerk of all markets and a master of none.
The more you learn about a particular market, the most confident you become while trading it. Once you master one market, you can focus on another market that you feel comfortable trading so as to spread your risk and diversify your portfolio.
Efficient Position Sizing
As a trader, you will always have that urge to make more on each trade you make, and this might be detrimental to your career as a spread betting trader.
With each trade, you take you are opening yourself to risk, and it is important to know your risk threshold before taking the trade.
If you have an opportunity to take a trade that is low risk, you can increase your position size and take advantage of that opportunity, but if you have a high-risk trade, it is important to lower your position size to avoid putting your trading capital at risk.
Every trade should be considered individually and having a set of rules that govern your position size in relation to risk will greatly help you become a successful spread betting trader.
Costs of Trading
Traders mostly focus on their profits and forget that there are costs related to trading. Although spread betting doesn’t have commissions on it trades there are the bid and offer prices that will slowly accumulate over time as you continue trading.
With each trade you take, you should be aware that you have the difference between the bid and offer that you are covering your cost, this is called the spread.
Trading during volatile conditions will surely make the spreads widen and thus cost you more to trade during those periods if you have a fixed spread account that might help to have a consistent cost for each trade you are taking.
Also, your frequency will determine how much you are paying in costs. Day traders who are more active than swing and position traders obviously pay more in costs. As a trader, you should not have your costs exceed your profits because this will eventually make you a net loser.
Risk Management
Many traders get too attached to their trades, and this makes them think that they are bulletproof, and the price will always respect their analysis.
This type of misconception leads them to become sloppy, and they forget to place their stop loss orders. The importance of a stop loss is to protect your capital from being wholly wiped out.
The stop-loss order should be placed as a protective measure; many traders may look at it and feel like it is an obstacle but it is your only line of defense if the trade reverses and goes against you.
Trading is not about how much more you are going to make for every trade you take, but it is about how much more am I willing to take a risk for this trade to be considered worthwhile.
Protecting your capital is your first and most important thing to consider when trading. If you protect your capital and follow your plan to the letter, your chances of becoming profitable will always increase, but if you focus on how much you want to make and forget the risk aspect, you will definitely become a loser with time.
These are just a few pointers of how to spread bet successfully; these are the core concepts that can be developed further into more precise and focused information.
