Spread Betting: Make Riches Quick Or Fast Lane to the Poor House?
October 16, 2010 10:03 am
It is true, spread betting allows you to make riches quick if you can get the market direction right; of course the opposite is also a sad reality and spreadtrading can be a quick lane to the poor house if not handled sensibly. For this reason it is important to appreciate that spread betting is not for the faint-hearted and can be high risk especially in the hands of a ‘gambler’. The leverage inherently makes trading more risky and this is why many spread betting companies provide users with risk management tools like stop loss orders to use while trading. A stop loss order functions by limiting losses should the market move against your position, and in so doing lowers the potential risk of spread trading. This is especially important given that your account balance could be seriously periled by one bad spread trade.
What Spread Betting Winners Do
So don’t be like 80% of the herd of day traders who are mostly looking to make money, fast, with no real knowledge and no risk. As in everything in life, there is no free lunch in trading. My belief is that there is no easy road to riches via the stock markets. For the majority, it is all hard work and a full time job.
If you behave like the 80% of traders, you will end up making no money and abandon your millionaire dream much soon than you originally planned (wipe-out!). Only 20% or so of spread traders are successful in the long run. What do these traders have in common which makes them successful? They have a trading plan and system with clear entry/exit targets and are willing to cut losses early. Winners consider each and every trade carefully and learn from their mistakes.
And lastly don’t be greedy. Don’t expect it to be easy or consistent – if it was easy, everyone would be rich.
It is true, spread betting allows you to make riches quick if you can get the market direction right; of course the opposite is also a sad reality and spreadtrading can be a quick lane to the poor house if not handled sensibly. For this reason it is important to appreciate that spread betting is not for the faint-hearted and can be high risk especially in the hands of a ‘gambler’. The leverage inherently makes trading more risky and this is why many spread betting companies provide users with risk management tools like stop loss orders to use while trading. A stop loss order functions by limiting losses should the market move against your position, and in so doing lowers the potential risk of spread trading. This is especially important given that your account balance could be seriously periled by one bad spread trade.
What Spread Betting Winners Do
So don’t be like 80% of the herd of day traders who are mostly looking to make money, fast, with no real knowledge and no risk. As in everything in life, there is no free lunch in trading. My belief is that there is no easy road to riches via the stock markets. For the majority, it is all hard work and a full time job.
If you behave like the 80% of traders, you will end up making no money and abandon your millionaire dream much soon than you originally planned (wipe-out!). Only 20% or so of spread traders are successful in the long run. What do these traders have in common which makes them successful? They have a trading plan and system with clear entry/exit targets and are willing to cut losses early. Winners consider each and every trade carefully and learn from their mistakes.
And lastly don’t be greedy. Don’t expect it to be easy or consistent – if it was easy, everyone would be rich.
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