Why do so many day traders lose spread betting the FTSE?

It is a brutal reality that very few day traders succeed, not least because the market is stacked against you which is the reason why there is so much competition from trading brokers to win you as a client! It is not hard to learn technical analysis and tilt the odds in your favour, however the real challenge is controlling your emotions which is the part that will ultimately let you down, unless you learn to be a disciplined trader.

Failing to control your emotions (i.e. yourself) means that you are destined for failure, if not immediately – it is likely to happen at some point, because emotion will take over and control your decision-making – money management goes out of the window and then you get the hammering blow. The hard fact is that it only takes one bad trade to lose control and then you’ve lost a bit percentage of your trading capital in the blink of an eye. It then becomes very difficult to recover and get back to breakeven, if this is even possible.

Why do so many Day Traders Lose Spread Betting the FTSE

If you have never traded or learned the discipline of trading psychology and money management, here is a scenario that most traders fear and likely to end up causing you serious damage to your trading capital -:

You buy the FTSE 100 Index at 5200 at £10 per point and a 20 point stop-loss.

Your aim is to exit at 5210 to make £100, but you decide to keep the spread trade going because the FTSE is still rallying.

10 minutes later it has gone to 5250 and you are patting yourself on the back thinking ‘great, I’m 500 quid up’.

After some time the FTSE drops back to support at 5220 and your exhilaration is substituted by sheer disappointment.

You remain in the trade because after all you are still £200 up and the market is likely to move back up.

You’re so much expecting the market to go up that you don’t move your stop up so as to breakeven.

Suddenly the FTSE spikes down to 5195 and you are now in negative territory…yet the FTSE is still going down.

You don’t want to gulp the loss so you move your stop down further just to avoid getting stopped out.

The market hits your original stop loss level at 4880 but you still think the market will reverse so you average down with another £10 per point to capitalise on the recovery uptick that seems underway.

But wait – it is just a blip and the market falls another 25 points.

You are in it BIG now, can’t afford to be wrong, so you keep on moving your stop down below the next support and double down to £40 per point.

I will stop here, but you can see where I’m heading with this. You end up taking a massive hit, perhaps even losing your entire capital because you got blinded by the hope of that big win, then let your profit slip into a loss and lastly did the cardinals sin of doubling to a losing position….in brief you lost control of your trading plan and your emotions got the better of you. Money management was substituted by the old emotions of greed and fear.

While you lose a night’s sleep disturbed by your trading demons and the heavy losses incurred you slightly hope that all this is a bad dream – it sounds so unreal. Yet, the next day the hard reality sinks in and emotionally impaired, the next day you seek revenge over the market or try to get even by betting big if you haven’t already been wiped out. A good trader on the other hand doesn’t have these problems because experienced traders know that discipline is key in spread betting, he would have taken the 10 points again or in the worst scenario he would have exited the spread trade at breakeven knowing that there will always be other opportunities.

Those who lose their pots are probably trading poor risk management or no risk management and poor stop loss positioning.