Everybody likes to think that their money is safe in the bank, but that is not always the case, as the Credit Crunch of a decade ago highlighted. One of the main criticisms of the banking and finance sectors in this period was their perceived ‘reckless’ attitude towards other people’s money.
The term ‘casino banking’ came into common parlance with every major news outlet in the world likening major banks to Las Vegas casinos. Whilst this was shocking for the general public, the biggest shock was that it was even a shock in the first place...
Trading on the stock market is gambling, just in a slightly smarter guise. Investors have been gambling on the stock market since 1593, when Tulip Mania swept through the Netherlands and laid the foundations for our modern financial markets.
One facet of finance that is most certainly a form of gambling is financial spread betting. As the name suggests it is a practice that involves betting money on an unknown outcome, although instead of that outcome being the roll of dice it is the future health of the stock market.
It might sound complex to the outsider, but spread betting isn’t actually too hard to understand.
As financial spread betting is a form of gambling, the best people to ask for tips are gamblers. The golden rule of gambling is to set a budget, it is one of the most essential money management tips.
The reason that gambling, investing and financial spread betting are so popular is the end result, lots of profit. People hear about others success and want a slice of the pie for themselves, often neglecting to plan and prepare. As with gambling, there is an inherent element of risk when it comes to financial spread betting. You are not guaranteed to make a profit, in fact there is a considerable chance that you will end up losing money.
Big companies, industries and banks set aside a realistic budget for financial spread betting which they can reasonably afford to lose. This figure will be based on a range of different factors, which you will need to individually work out for yourself. If you are looking to negate tax losses then you will want to invest the minimum amount of money that will allow you to do that. If your financial spread bet turns out to be unsuccessful, that is the time to step away from the markets and focus your efforts elsewhere. There are too many tales of people throwing good money after bad in the markets and ending up in difficulties, don’t become another sad story, and define your budget early.
Elvis Presley once sang, “Wise men say only fools rush in” and he was right. Before you embark on your financial spread betting journey make sure you know your markets inside out. It might seem like a stupid question to ask yourself, but do you know what trading hours your financial market operates?
Are you aware of the biggest companies in your financial market? Impending regulations or market shifts that might affect your investments? You need to become an expert on the market you’re betting on before wagering a single penny.
Once you know everything there is possible to know, you will be able to make an informed and hopefully profitable decision. Both the gambling and finance sectors have been built on people that failed to heed the advice of the unintentionally profound Elvis Presley.
Unlike Elvis Presley, the most famous of the Founding Fathers of the United States was trying to be profound when he uttered this quote, and he succeeded. Preparation is the absolute basis of any successful financial spread bet.
We have already talked about knowing your budget and knowing the markets, and those factors will now come into your overall plan. Your investment needs to be plotted out from start to finish along with profit goals per day, chapter, month and year etc.
Entry and Exit points are key to a successful spread betting exercise. Beginners often focus heavily on their entry point without taking the time to consider their exit point, which is a fundamental part of your success.
Make sure you consider a whole range of factors and prepare for them with various exit points to minimise your risk and maximise your profits. A useful way to set up an exit point is when your investment reaches a certain ratio, whether that be measured via profit or loss.
Finally, don’t second guess your plan. If you have invested the right amount of time, effort and research into it you should stick by it throughout your investment even if you’re having second thoughts. It’s far too easy to get carried away or downbeat as you react to small events, have trust in your plan and see it out to the end.
The key to a good financial spread bet is preparation, without it you will end up losing money in the long run. Of course, as it is inherently a gamble there is no guarantee that you will end up in the black even after the most steadfast of plans. That’s why it’s important to stick to your pre-prepared budget and not waiver from it, you don’t want to get hooked on financial spread betting. Use it as a way to maximise your profits and minimise your tax obligations, not as a fun pastime, that's what traditional gambling is for...
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