How I lost £35000 Spread Betting
Guest contribution by Michael Platt as he embarks on his spread betting journey to become a millionaire!
What? You lost £35000 spread betting? You must be a moron. Hmmm… well I can’t really disagree with you there. However I’m sure there are plenty of others out there who have similar stories (hopefully for lesser amounts).
So how did I lose so much? Easy. I was gambling. All down to poor thinking. I was blind to the downside. Undisciplined also. I would take a large position, hoping the price would move a certain way for me. Then I would watch it like a hawk, panic and close the position. Either at a very small gain or a very large loss. So say I was getting things right half of the time, I was still making big losses as I was overexposed and the times I made a gain, I cut them short (nervous to take the profit before it disappeared) and on the times when I made a loss, they went a bit long – therefore the average with overexposing myself was a consistant loss. The other way I’ve lost my money is through day trading. Prices move around a lot and have unexpected jumps and falls. Unless you are able to spend the whole day in front of the pc and have instant access to news/events that the big traders have then don’t day trade. You’ll get caught out time and time again.
A fool and his money are easily parted. That’s me.
Two particularly bad trades cost me 10000 each in short succession.
The first, I was sitting at 33000. I placed a 4000 per point sell bet on Lloyds Banking Group. Way, way too much exposure. I thought the price might be heading in a downwards direction as results had just come out a couple of days before and were not great. If it went down 2.5 pence, then that’s a 10000 profit. No, it went up 2.5 pence. I panicked and closed the bet at a 10k loss. Ouch. Worst thing was a couple of days later it was 5 pence down again. So if I had held then I would have been in profit (although it might have also gone the other way also). The key point here was I had too much at stake and panicked.
The second time I lost 10k was again with Lloyds and shortly after the first. The price had moved up to 60p and over a few days had moved down to 56. I thought this trend was going to continue so completely ignoring the lessons from the previous bet, I put 2000 a point to sell on LBG. This will be good as it will make up some of the loss (don’t chase losses!!!!) . Next morning, I’m watching my mobile phone (I have spread betting on my phone). Market opens at 8:00 and I’m watching the banks. Lloyds starts swelling, in an upwards direction. I want to sell but I can’t. The market is blue (meaning my spread betting company is not taking trades on it). Nooooooo I watch it go up to 2 pence, then up to 4, then up to 5. Eventually the market goes green and I can trade (a few minutes after market opening – be aware of this, sometimes you can’t open/close trades during market hours). I don’t want to lose any more and close at another 10k loss. Turns out there had been an announcement. The results weren’t entirely accurate, it turns out they are likely to make a profit this year, which was the reason for the massive rise in price (and loss for me).
So the markets rallied and lloyds kept going up. They got to a point where people were saying they were quite high and due for a correction. So I put some more shorts on Lloyds. Then I started messing about and day trading and closed the shorts and made them longs. Then the maket did fall. I missed a massive opportunity and managed to make a loss when I should have made a gain. So angry at myself.
The good thing was this led me to rock bottom. I can’t lose any more. I have to pay this money back. I have to get serious. I have to stop gambling and start making sensible trades at sensible volumes. No more day trades.
I want to first get back to 45000. This isn’t going to happen in one trade. This is going to happen in hundreds of trades. Some winning, some losing. Always with appropriate exposure, stop losses and fall back strategies. Become a trader and not a gambler.
So watch this site, and watch me become a spread betting millionaire.
Posted on November 4th, 2017 at 1:00 am
I started spreadbetting about 16 years ago after finding the gains slow with stock trading and fancied the opportunity of making money by trading on margin. My first trades were small and I soon decided to use mainly indices. I liked to open positions on Australia 200, since there was a time when that market went up and down like a yo-yo on a roughly daily basis.
I soon increased my account size and traded £100 per point on ASX200 most nights. Sometimes I made £10000 and closed or reversed losing deals before the loss was over £4000. This way I was taking thousands of pounds out of my trading account each week. However, I found this way of betting made me stressed and too much worrying makes for poor decisions, so I reduced trade sizes to £1-£10 per point on indices.
Eventually, I was making losses, not large ones, but less gains and this persisted for several years. Some years I traded only occasionally, but felt unable to stop completely. I felt there was a way to make money consistently and searched the Web for useful strategies and information. The trading systems on offer seemed to me expensive and the claims often exaggerated.
Over the past 4 years, I have tried to ensure I close out losing trades and take profits when the market has returned a reasonable gain, rather than waiting for further gains that often do not materialise. I never use stop losses because I often hedge trades against similar instruments and need to avoid unexpected position closures.
For the past 2 years I have been making £1000-£2000 each month from trading world indices and certain FX pairs. I used to watch Bloomberg and CNBC and read considerable information on the Web each day. I gave that up and look for market trends, trading anticipated price movements. I like to open and close positions within a couple of days where possible.
I do not try to recoup losses and do not stop trading if I make a loss. Better to continue and learn from experience. I was reading about the Swiss Franc earlier and realise many people had large losses. I had just closed a position on the Dow when the US ‘flash crash’ happened – after a few minutes I increased margin and bought the Dow again. I think I have been lucky – I was trading the Nikkei when the tsunami hit, but by chance had closed a long position. I did not trade on the Nikkei for a few days.
The above makes me think about the possibilities of price gapping and the position sizes I have open. I trade mainly the Dow, NASDAQ, ASX200, CAC, SMI, AUD/USD, USD/JPY & AUD/JPY. However, if a chart looks inviting, I will consider trading the instrument, but not with overly large risk.
Anyone who says to use stop losses on index trades should be advocating stop losses on holdings of physical shares – I bought shares in Jessops that later fell to zero, although I got out of it without any loss by setting a limit order. I do not open positions that I cannot cover immediately if the market goes against me and have not had many margin calls and then not for perhaps 10 years.
Although I have sometimes decided my original reasons for placing a trade became invalid, closing or reversing those positions have often resulted in losses or increased losses. Once I have decided on a trade, I try not to second guess and make changes, unless there is a very good reason, such as the development of a market correction.
One spreadbetting company representative could see I am always making withdrawals from my account and asked me why I do not use larger trade sizes for increased profit. However, that would not fit with my strategy of trying for £1000-£2000 per month profit and not to take undue risks. Scaling things up would increase stress and encourage rash decisions.
I pay my credit card and household bills with spreadbetting profits – very useful, since I am somewhat addicted to online purchasing from Amazon, eBay and CCL. I find I concentrate better on the markets if I know I need money for something well defined. Once I decided to have my cataracts removed – I developed them early – I soon made an extra £5000. I am left with unaided vision in the top 1% and am glad that I decided to pay and choose the surgeon.
Spreadbetting nowadays gives me what I want – I am not glued to the screen all day and night anymore and have been doing some house and garden maintenance that is long overdue and mostly paid for via my spreadbetting account. My income is doubled or tripled by the spreadbetting and I have reduced my debts to a level I felt unattainable a few years ago.