While there is money to be made in spread betting not many are able to actually successful build wealth in this business. Hence it is important to learn the tricks of the trade and only then get into the market in right earnest. There is no doubt that history is a good teacher and therefore taking tips and suggestions from those who have gone through the process would be a great idea. We will try and have a look at some real life lessons which could help in understanding the concept of spread betting better and also make money in the process.
Importance Of Planned Trading
There have been many instances where traders have lost big money because of their failure to have a plan in mind. They enter into the market without having any specific plan in mind as far as risk evaluation and profit booking targets are concerned. There are many who attempt some rough planning but drop it like a hot potato mid way. They then start guesswork and in the process end up losing big money. Luck, guesswork and other such things will never work in spread betting and it has been proven over and over again. Such unplanned approaches will lead to squeeze-like situation and they will end up liquidating their position much earlier than what they had planned for.
Many Hot News Have Been Factored By The Market
Quite often we come across traders who often believe that news which is making the rounds will have a sudden and unpredictable impact on the market. In most of the cases these news items and ground situations would have been factored by the market. For example there could be many who could be carried away by news about robust growth in banking and finance markets. When the market opens this fact would most certainly have been factored and therefore basing your betting decisions on such so called latest news would not be the right thing to do.
Resting On Past Laurels and Successes
Many traders after having executed quite a few successful deals tend to go overboard and throw all caution to the wind. Many become reckless in their betting habits and believe that past laurels and past experiences will take them home and dry. This is a wrong approach because each day in the speculative commodity and forex market is a new beginning. What has happened yesterday is history and today is a new sheet of white paper. Hence, it is important to find out ways and means by which they can take each day as it comes. While past experiences are important it would be not right to consider them as bible and ultimate truth. Getting in touch with reputed and professional service providers like CMC markets would most certainly be a great way forward.
Small Capital Big Positions
Many traders have slipped and fallen badly because they have gone overboard as far as their positions are concerned. They have over-traded and far overshot the capital which they had in the first place. They also would have traded too frequently with a capital which is very small to say the least. This is a dangerous practice and should be avoided at all costs. You should know where to draw the line between risk and capital which they have in hand.
Emotional Decisions Are Bound To Boomerang
Another real life lesson, which certainly is a lesson learnt the hard way is about bringing in emotions while indulging in spread betting. This is bound to be a big disaster and this is actually because of lack of experience and expertise on the part of the traders. They often become too obsessed with avoiding losses and in the process become irrational in their decision making. Losses are a part of the profit making process which they must understand well.
Apart from the above there are a number of other instances which also could have led to loss in spread betting. These include throwing in the towel with a few losses or being rigid as far as their directional bias is concerned. These things must be avoided and being rational and logical is perhaps a great lessons which we could take from traders who have burnt their fingers badly.