Tips for budding Spread Betters

Pages : Current Page - Systems & Tips : Page 1 - Spreadbetting Tips : Page 2 - Disasters to Avoid: Page 3 - Tips from Vince ($) :
Page 4 - Common Pitfalls : Page 5 - Advice from the Pros : Page 6 - Entry Points & OCO/If Done Orders : Page 7 - Mistiming Exits :
Page 8 - Dangers of Shorting Stocks : Page 9 - Tragic Tales from the Frontline : Page 10 - Survival Tips for a Stormy Market

Quick Spread Betting Tips for 2008 -:

1. Spread betting is more accessible for new investors than CFDS, but less cost-effective due to the wider spreads (which is usually more than compensated by its tax-advantaged status.
2. Open up a DEMO ACCOUNT with a spread betting firm such as Capital Spreads (£10,000 to practice with) or TradIndex ('Player account'/simulator, using £20k 'virtual money', plus free 'beginners guide' book)
3. You will get £10,000 to play with. Trade with that virtual £10,000 as if it was your hard earned cash, and do so for a least 2-2 months with your theoretically 'winning' strategy.
4. Start with slow paced UK FTSE 100 stocks, preferably expensive blue chip stocks that are very liquid. Indices are too random for newbies to guess, US stocks (most) are too volatile and will wipe you out in no time, and also Forex is too volatile for a newbie.
5. When ready to start spread trading for real money do keep in mind that companies can let you open an account with £200, but I would suggest a minimum of £1000. This will then enable you absorb more losses than with £200 or £500, if you keep your bet size to a small fraction, 2% max risk is ideal but with a small account I would use 5%.
6. Place your bet only when you think that the underlying financial instrument will move up or down sharply.
7. Never average down - i.e. do not increase your position when the market moves against you. It can be a good idea, though, to increase your position once you are already in profit. For example: You open a position for £1 a point on the FTSE at 5000, stop loss at 4900. The market moves to 5100. You are £100 in profit. You could now think about perhaps buying another 50p and moving your stop to 5000. Should the market move against you, you will break even on the £1 per point trade and lose £50 on the 50p per point trade.
8. Place daily bets only if you can constantly watch your screen. Prior to opening or closing any daily bets it’s advisable to check Level 2 data as this will let you know at a glance whether the price is going to move up or down.
9. Do try to buy on short term weakness within a trend of long term strength (doing the reverse when selling). It is sensible to try to buy as cheaply as possible but if it all comes to saving a few pence on entry - then you really should be getting into the position in the first place.
10. Use a financial bookmaker that quotes firm prices on a screen.
11. If you close the deal by telephone, state your requirements accurately and don't expect advice. Check your contract note carefully.
12. In placing your bet, use a stop loss (maybe even a guaranteed stop loss!) and perhaps a limit order.
13. Do not move your stop loss once set.
14. You could place a stop loss and a limit order simultaneously, so defining the parameters within which you will make a profit or loss.
15. Ideally you would be able to move the stop loss up as the prices moves up but that's not usually possible as spread betting providers only let you place a stop within a certain percentage of the current price (but their systems don’t always work, and you can sometimes get it higher than they would like!).
16. Do not set you stop losses too close to the current market price. Do this and you will get stopped too often (death by a thousand stops...). Set the stop loss below the trend line you are basing your decision to spread bet upon... Stocks unfortunately do not go up in a straight line (I wish!!) and some of the biggest wins come after a stock has fallen short term, quiteoften to near its 200 day MAT.
17. Don't take excess initial risks - I manage my wife’s share portfolio as well as my own and couldn't understand at first why hers consistently outperformed mine when I often held the same stocks on both accounts. Suddenly I realised it was because I took bigger risks with mine and only bought for my partner when things were going well. In this way she missed out on some of the initial gains but more crucially, missed out on the big losses: that way her portfolio looked always better than mine. I’ve now adopted that stratagem on my own as well!!!
18. Don't expect to make a profit in six months, however, if you are a quick learner and already understand Technical Analysis pretty well, then you might break even. More importantly, you can have the best method in the world and understand Technical Analysis inside out, but if you can't pull the trigger due to psychological aspects of greed of banking every small profit and fear of losing, then you will not succeed. This aspect to trading is the hardest to master. You must constantly evaluate yourself and the trades you make, i.e. complete a trade journal with reasons why you entered and exited trade.
19. If you have a trading strategy written up, no, not in your head, but written down, then start with a demo account. However, paper trading is futile. It will not test the demons in your head like trading with real money, so try out your strategy, get some confidence with it and move on. I would suggest 4 weeks as a minimum to paper trade.
20. Check the credentials of trainers in spread betting. Do not overpay for any training course.
21. If there is anything that you don't understand about the way your bookmaker operates, ASK.
22. Spread-betting profits are free of capital gains tax, but this will not effect the majority of punters. The tax advantage may disappear if the trader derives his or her whole income from spread betting.
23. Spreadbetting is IMHO not something to get involved in when you are feeling fed-up with the markets. The right state of mind is essential to spreadbet. You have to be a cold, clinical, detached, riverboat gambler to win at spreadbetting. If you are feeling in the least fragile (or euphoric) stay away from the table! A lot of firms allow you to practice, without risking any money, on simulators...open one and do it for a few months but be aware that it will be very different once real dosh is involved though. The greatest problem, will be, believe me, restraining yourself.
24. One thing I would say to anyone who sees spreadbetting as being a quicker way to play on a bigger scale than by tying up cash. It is. But you do need to be already good at choosing what to trade and when. Spreadbetting will magnify your existing performance. If that performance is poor your losses will be faster and bigger(!).
25. Arbitrage is sometimes possible, but you will need accounts with several spread betting firms, and to be quick off the mark.

>> Page 1 - More Practical Spread Betting Tips