Working from home is the dream of many who want to be in control of both their time and earnings; allowing a better quality of life without having to turn up to an office every day. Increasingly, more and more people are turning this into a reality by learning how to profit from spread trading in order to earn supplementary incomes. Spread betting, as with all speculation, comes with risk but these can be lowered with practice and discipline to permit dedicated individuals to improve their chances of ultimately being profitable at spread betting.
Over the past few years, spread trading has grown in popularity and the barriers to entry have been lowered so that anyone can try to make money trading without risking large amounts of money. Numerous online brokers proved web-platforms with low initial deposits of only $50 to open an account and begin spread betting. These platforms offer tools for experienced and new traders alike to minimise their risk whilst maximising their profit from spread trading by using stop-losses, indicators and interactive charting software in order to aid their clients in making successful spread bets. These tools are designed to allow traders to use technical analysis to identify high-probability spread trading, the charts contain historic data so that strategies can be tested for their profitability over time.
“Most people understand that trading successfully is difficult, and most quit soon after they start. When it comes to trading leveraged products, it’s even worse. But, as with most things in life, there is the right way to do it, and it is not a single way that works, there are numerous ways to approach the stock market and try to beat the best brains in the world attempting to do the same thing as you, make money each and every day.”
Spread trading profits are currently tax free in the UK making spread trading the most popular means of making money from the market without having to declare these as earnings. Due to the fact that it is known as ‘spread betting’; profits from spread trading are outside of the UK tax system as they are classed as profits from gambling. This is subject to future changes in the law but currently many spread betters enjoy trading successfully for a living absolutely tax-free.
The options available to make profits and to trade high-probability setups are vast with spread betting. Almost all online brokers offer multiple currency pairs, commodities, stocks and bonds to look for potentially profitable trades. The competitiveness between leading online brokers means that spreads are also kept to a minimum and will let you enter the trade as close to the market price as possible, reducing the initial drawdown and providing a good opportunity for a position to become a profitable spread trade faster. An example of this are the markets for certain currency pairs such as the EUR/USD which almost all brokers quote with only a 1 point spread. Some providers, such as IG Index, offer this market with a minimum quote of only 0.8 points which brings the trader close to profitability as soon as they enter the trade.
Not Easy but Possible
A common mistake that newcomers make is tied to greed and unrealistic expectations; some beginners tend to believe that all they need to do is to place a few £10 spreadbets and then retire to some island in the Caribbean and continue trading from there. The reality is that if it was too easy, many of us would be doing it but trading successfully is hard to master.
Profitable spread trading starts with risk management and the ability of the trader to limit their exposure. Some of the greatest traders have said that the focus should be on minimising losses rather than maximising profits. Many of these traders try not to risk more than 2-3% of their deposit on any one trade, allowing them to continue to profit from spread trading in the long term. Obviously, starting with a new account and a small deposit makes it difficult for spread traders to only risk this small portion of their account but with discipline and the right broker this is absolutely possible. Several leading brokers, such as IG Index offer an 6-week introductory and educational package to new account holders which allow spread trading from as little as 0.10p per point. With a £100 initial deposit this allows a stop loss of 20-30 points on each trade, maintaining the golden rule of 2-3%. This is a good way to begin to look to develop a profitable trading strategy.
If starting out you would also do well to avoid day trading and the more unpredictable markets. You would also do well to stick to trading markets that suit your trading style; some traders tend to be attracted to markets that are too volatile or ones which they don’t really understand. Despite the pessimists judging spread betting as a blind gamble on irrational markets, it is possible to profit from spread trading. With the combination of a solid strategy, good discipline and a risk management approach your trading account has much better chances of expanding as your profits grow.
In fact I know traders who have taken years before they started to become profitable. One particular trader I know started by falling prey to the common mistakes that beginners tend to encounter and then proceeded to spend considerable sums of money on courses and seminars before continuing to lose even more money until finally after years of experimenting he found a technique that worked. Keeping emotions in check is crucial and once you’ve mastered this, most other things seem to become easier because decisions are taken more lucidly.
A profitable trader isn’t one that runs losses. It is a proven fact that 80% of private individuals who trade on margin lose money (80/20 rule) and running losses is probably one of the most common errors that traders make. Even experienced traders tend to allow losses to accumulate sometimes because it is human nature not to want to suffer a loss.
“A profitable trader isn’t one that runs losses. It is a proven fact that 80% of private individuals who trade on margin lose money (80/20 rule) and running losses is probably one of the most common errors that traders make. Even experienced traders tend to allow losses to accumulate sometimes because it is human nature not to want to suffer a loss.”
Taking advantage of gambling tax allowances is certainly a positive even if spread trading professionally is very much a skill requiring very few of the requirements of pure gambling. In consistently making profits from spread trading the poof is in the outcome that it is very much more than a blind gamble on the movement of market prices.