Many moons ago I was introduced to a guy who’s method for trading really excited me, however for all my willingness and desire, I could not get it to work. I knew it worked because I was shown the track record and it proved without a doubt it worked.
I toiled away for about 6 months with this system, trying to work out where I was going wrong. I didn’t want to give up on it because it was the first time I actually got excited about a particular approach to the markets, where as all the systems I had looked at before bored me to tears.
A system is a set of trading rules that enable a trader to look objectively at the market and determine, free from distraction, the highest probability trading opportunities.
There are many facets to long-term successful trading, and the skills and competencies that are necessary to make a career of trading are far more than simply opening an account and getting busy. It is vital that a person know what the true key qualities and characteristics of BEING a successful trader are, if indeed that is what they wish to become.
If you’ve started spread betting, and the results are sporadic, you’ve probably come to the conclusion that you need a successful financial spread betting system* in order to succeed. In this spread betting is no different from any other type of trading. There are very few people who can trade “by the seat of their pants” and expect to be consistent in making a profit, and if you know one you will probably find out that they paid for their knowledge with significant losses when they started out.
Looking For A Spread Betting System? Well I hate to disappoint you but if there were really some magical formula out there I’m sure nobody would share it online with you, especially not for free. That being said there is an approach, a systematic and disciplined approach you can take to spread betting.
The question is, what should you look for when trying to find or devise a successful system? There are several elements that make up a trading system, and unless you have all of them you may find yourself losing your account. It is not enough to just have a technical system, as there are other aspects that need to be in place in order for you to prosper as a whole.
Just remember that if you don’t have a winning trading strategy, it is pointless to focus on your mindset as no amount of psychology will transform your losing system into a winning one. Conversely, a trader who hasn’t worked on the psychology is also likely to fail. Most experts agree that for a trading system to be effective it should be unambiguous and tested. It must be unambiguous because anytime you have to make a decision while you are under emotional stress, it is likely that you will act irrationally. And you will be under emotional stress when you are spread betting, even though you may think that you are cool under pressure.
There are many different ways of anticipating market moves, and none of them foolproof. That doesn’t matter, as trading is a game of averages, when you win some and you lose some but you work to come out ahead. A popular principle is to trade with the trend, that is to find a financial security where the price is steadily going up or down, and to take a position that assumes it will continue to do so. This is usually a better than even chance.
There are many ways to analyse the movement of a price, and they’re generally known as technical analysis. Books have been written about various aspects of technical analysis and it can’t be explained in these few sentences, but if you are going to be involved in financial markets it is a good idea to learn about it. Technical analysis will help you decide when you should open a position, taking out a spread bet, and when you should close it.
“If you’re new to investing, then you’ve seen that thousands of ‘successful’ traders out there are offering to sell or give their system away…but we can’t emphasize enough the failure rate when other people try to use these same systems.”
Your spread betting system must include two ways of exiting the bet. One is if you’re winning, when you want to close the bet for the maximum gain, and the other is if the bet did not succeed, and you want to minimize your losses. A successful financial spread betting system must tell you when to get out if the bet is losing, and to be successful you must always obey such a signal. One of the hardest parts of successful trading is to let go of the losing trade and close the position, and if you can master this you are well on the way to becoming a successful spread better.
In any case, the variables you set depend on the timeframe involved and the kind of trading system you’re using.
In general, the shorter the timeframe you’re using the shorter the stop loss. Also, if you’re just looking to make 20 pips, do not place a 100 pip stop loss. Never risk a Porsche to win a bike.
If you entered a position based on rules you’ve set, then if such rules are broken or are invalidated you should exit. You are stopping yourself out for technical reasons and can do this when taking profits too.
However, a method I use when going long during an uptrend is to set a stop loss just below a previous higher low, and the reverse if shorting a downtrend. Anyone not using a stop loss is bonkers.
Note also that can still have more losers than winners and remain profitable but you need to keep the losers small, the exposure even and find the confidence to let the winners run.
A lot of operators work on the 80/20 rule i.e. you make most of your money from 20% of your trades the rule is known as the Pareto Principle,the problem i have with it is if you had 7 duff trades in succession would you go into the ninth one with the same conviction for me probably not that’s why you need a strategy that suits your personality.
I’ve also been noticing that if a trade doesn’t go in my direction in the first few minutes it usually results in stop out for a loss. Rather than snatch a profit, try stop to breakeven and go make a cup of tea. This has produced a couple of nice runners for me. Risk to capital is 0 so you can’t lose. If you get stopped don’t worry wait for the next one. They are like buses.
Whatever you do make sure that you familiarise yourself with your trading method. Test your trading method/system using back testing and sensible money management!
* In reality you don’t even need a spread betting system with a 50/50 chance to succeed. In fact, you can use the most crude trading method around, such as throwing a dart at a dart board and still create a profitable trading business! Actually, it doesn’t matter (that much) what trading method, style or set of indicators you use –
I believe that if you have:
• A desire to succeed
• A good work ethic
• A trading strategy or system, even if quite basic
I know a number of professional traders who have less than a 50% win ratio. Their skill is in making much more money on their winning trades than what they lose on their unprofitable trades. So for instance, making $30 for every $10 that is lost…managing your loses is the key…getting out of a losing trade before it gets to big. Most traders and investors can’t do this (psychologically) – they just keep hoping that the market direction will reverse and that the trade will turn round…disregarding price action and acting on a belief (or hope) is what kills them. Discipline and a good understanding of yourself (psychology) are the keys to being successful in this game.
There are lots of trading systems, each to find their own. Most of us have different investment/trading styles and investment objectives and naturally all want to make money. My own spread betting system is one that I can run for days, weeks and even months whilst I wait for the profit to materialise. Never could make day trading work.
We have come a long way since 2000 when we first started trading. In that time, we have come across many systems, technology, and ideas. But no amount of experience speaks louder than to realize that not all of trades are successful. There are winners and losers. From the outset, I do not claim to be right 100% of the time. In fact, I typically have x number of winning trades, and y number of losing trades. This is simply the reality of this business. But what a great business it is, if you have the knowhow…
My recommendation is to place low amounts ppp and if the stock price goes down it leaves you some ammunition to buy more at better value (note: this is not averaging down). For example, Barclays at 170p. Instead of buying my whole intended position at 170p, I would buy a small chunk and see where the price goes. I’d probably buy repeatedly if it went down, even as far as 150p, I’d just keep buying. Doing low amounts allows you to do that. And I have many times. Building a position slowly soon mounts up. It can really be profitable if done correctly.
My suggestion is to avoid chasing the big kill in one go. It will bite you. Be very careful of indexes and commodities. Playing with fire. Used carefully, and chasing small profits, it is amazing how quickly a pot can grow. Less than 2 months ago I started a another pot just for a bit of fun (yet another with CMC Markets) £500 and have traded it with miniscule amounts. currently £1300.
If you do spreadbetting, go careful, and don’t be afraid to take £5 or £10 profit on low stakes. However, if you have a few million to spare, then forget all this, it’s bollox 😉
The key is to be right MOST of the time, and let our profits ride. We are never in a trade which begins to move against us for long. This is why losing trades are contained, and winning trades are allowed to fly.