Losing Money Spread Betting

With all the advantages of spread betting, it is easy to think that it is simple to make a profit. Here are six ways that you can trade if you are intent on losing money spread betting.

  1. Make sure that you change the market you’re trading every time you lose. With so many different markets available from most spread betting providers, surely you must be able to make money in one of them, so don’t bother to stick with a market where you find your bets are losing. After all, they are all the same, at least they look the same on the trading platform.
  2. Stand by your decision, and don’t quit. It happens sometimes. You take as much care as you can, picking a spread bet, and as soon as you make it the numbers start to run against you. If you’re into losing money spread betting, the best answer is to hang in there, and see how far it can go before it turns around. This is a great topic of dinner party conversation, complaining how the market did not treat you fairly. After all, you took time to research your bet and you deserve the market’s respect.
  3. Close your spreadbet as soon as your position is in profit. You haven’t made a profit unless it’s in the bag. Particularly after some losing bets, you will want to feel the satisfaction of having a win, and you deserve it. Just as soon as your last bet goes into profit, you should snatch that profit by closing the trade. Just don’t continue to watch where the price goes; as if it keeps on going you might feel some regret.
  4. If you have a run of losses, double down. It’s statistically unlikely that your bad luck will continue all day, and the only way you can make up what you have lost is by betting more each time. The more you risk, the more the potential profit if the bet should work out this time.
  5. When you win, cut your stake next time. This is the opposite of number 4, and is founded in established statistical mythology. If you have a run of winners, then you know that you cannot continue to succeed, so the sensible thing is to cut how much you are risking each time. This is sometimes called the “plateau rule”, as the end result is that your winnings, if continued, tend towards, but do not quite reach a plateau value.
  6. The best way of losing money spread betting – do not have a plan. After all, it is called betting and that means you should apply your best guess. Some people have a gut that tells them what bets to make, and others use a magic 8-ball or similar device. Above all, your bets should not be consistent, because if they are you might be able to work out how you could improve them, and that would not help with losing money spread betting.

In case you are wondering, none of the above are recommended practices when you are spread betting.

Here are some thoughts from an experienced trader in the field -:

Many people come in to the market with a small (say £10k) pot and are disillusioned by talk of people making millions and/or a living from trading. Yes, of course people make millions, and a living, some gamble and are very lucky, some came in to the market during in the dot com boom or a bull run and made a lot of cash from very small pots, some are wealthy people with large enough pots to be able to make a living using sensible risk and money management, they are much lower risk and far more likely to succeed than the small high risk average IG kamikaze trader.

IG say that the average account is only £1k, and that 90% of account holders lose. I think the “dumb money” smaller account holders without risk management in place get sucked in by the 10% “smart money” bigger players who are big enough to be able to implement a good risk and money management strategy. The problem is people are disillusioned and therefore are far too high risk for their capital and lose it to the larger account holders.

A trader with a £1m account may make a living by taking only £4k positions using a 10% stop, his risk is then £400 or only 0.04% of his pot. By comparison a trader with say a £10k pot may blindly follow the professional and be oblivious to risk management, he may copy the same £4k position using leverage, his risk is a whopping 4% of account balance, if he were to use the same 0.04% risk, his position size on a £10k account would need to be £40 and his stop would be £4. We all know this is not possible and imo why the money gets passed up thro the ranks from small accounts to big accounts. If the professional trader was to risk the same amount of his £1m pot his position size would swell from £4k to £400k! I hope there are lots of smaller traders below me in the food chain that don’t use risk management, at the same time I’m mindful of the bigger sharks above me.

Here are the figs (subject to alcohol related mistakes) on a trading pot of £10k averaging 20% pa over a 15 year period, so people who think they can make a living from a £10k pot can see the reality of a trader consistently averaging 20% pa over a 15 year period.

£10k + 20% = £12k at end of year 1 pot is £12k profit is £2000
£12K + 20% = £14.4k at end of year 2 pot is £14.4k profit is £2400
£14.4k + 20% = £17.28k at end of year 3 pot is £17.28k profit is £2880
£17.28k + 20% = £20.73k at end of year 4 pot is £20.73k profit is £3450
£20.73k + 20% = £24.87k at end of year 5 pot is £24.87k profit is £4140
£24.87k + 20% = £29.84k at end of year 6 pot is £29.84k profit is £4870
£29.84k + 20% = £35.80k at end of year 7 pot is £35.80k profit is £5960
£35.80k + 20% = £42.96k at end of year 8 pot is £42.96k profit is £7160
£42.96k + 20% = £51.55k at end of year 9 pot is £51.55k profit is £8590
£51.55k + 20% = £61.86k at end of year 10 pot is £61.86k profit is £10310
£61.86k + 20% = £74.23k at end of year 11 pot is £74.23k profit is £12370
£74.23k + 20% = £89.07k at end of year 12 pot is £89.07k profit is £14840
£89.07k + 20% = £106.88k at end of year 13 pot is £106.88k profit is £17810
£106.88k + 20% = £128.25k at end of year 14 pot is £128.25k profit is £21370
£128.25k + 20% = £153.90k at end of year 15 pot is £153.90k profit is £25650

…..And by the year 2027 £25k pa will be worth sweet fa, the people on the social will be getting more than that.