Common Spread Betting Mistakes
The majority of spread bettors fall into the common pitfalls that plague inexperienced traders. As a result, more often than not new traders will find themselves exhausting their capital before they feel they've had a real attempt at playing the markets, which often leads to heavier trades as the gambling instincts kick in. In order to become a successful spread trader, it's pivotal that you learn these all-too-common traps that tend to catch traders out, so you can plan your spread betting career more effectively and give yourself the best possible chance of long-term trading success.
Over exposure, more often borne as a result of a lack of true appreciation of leverage, can be a devastating trap for most spread traders, paving the way for significant losses and even the dreaded total wipeout. Over exposure generally takes shape in the form of stakes that are too high for the capital pot to bear, with traders equating a small margin requirement to a small risk. Remember at all times that you are liable for losses infinitely beyond your trading pot, and as such you should only bet with small per point stakes until you have sufficient capital to invest more heavily.
A lack of focus brought about by poor strategic thinking is another common pitfall, and one that all too often catches out the lazy or inexperienced trader. Strategy is not just a long-term spread bettors' ambition - it's a short-term necessity, and a consideration that every serious trader should take into account before executing a single trade. While on a trade by trade basis you might be successful, over time you will find it hard to develop rhythm and consistency in your trading, which is essential to long term profitability. Remember, even expert traders get it wrong from time to time, and trading the markets is fiendishly difficult at the best of times - only those that have a strategy to deliver more frequent winning trades than losing trades will stand the test of time.
Positioning stop losses at the appropriate levels is something that many traders learn to do the hard way, and in neglecting the stop loss you will find yourself quickly running up significant losses. Some traders are put off the concept of stop losses because they automatically cut positions that might otherwise recover, but the benefits of having the rigid safeguard of a stop loss in place far outweigh the downsides of the odd prematurely closed trade. Learn how to use stop losses and set them for every trade you position, especially in the short-term as you learn the ropes. Stop losses not only prevent trader oversight, but they also help keep defined parameters on your potential losses, to ensure the preservation of your capital and your long-term success. Think long-term - it's better to have some capital remaining than none at all if your much-cherished position collapses.
Spread betting can be a lucrative and exciting pursuit, but it's not much fun if it starts costing you serious money. The above mistakes are just three of the more common errors encountered by traders, but by taking care and exercising caution at every turn in your trading career, you should be able to limit these negatives as you learn the markets and improve your trading skills.