I started by ring fencing £1k to learn from. I halved it without too much difficulty then trebled from there to leave me at about £1.5k. I then paused the rollercoaster while I analysed my spread betting trades to learn where I was failing/succeeding. I have since withdrawn my initial £1k learning fund plus some…and currently trade from generated profits.
For me the most important things to remember:
- Avoid index betting…very exciting but frequently fruitless.
- Avoid excess leverage. Although this is often quoted as one of the advantages I tend to avoid it e.g. My positions tend to be of a size equivalent to an equity investment. e.g. If I would otherwise feel comfortable investing £2k of a £1 share I would ‘bet’ £20 a point. I would not exceed this because deposit requirements allow a tenfold (larger co.’s) or fourfold exposure.
- My shorts tend to be fewer and even more tentative than my longs. I am not sure why this is.
- I tend towards futures not day contracts. Personal choice.
- I use limits but not stops. This works for me because I like to avoid being spiked out and am able to close at a loss without too much hesitation. If you are a see if it is better tomorrow type I would use stops.
- When a profit presents itself I tend to grab it unless news flow confirms a fundamental position either way.
- Maintain a database/spreadsheet of your spread betting. Although you don’t need it for tax purposes you can analyse your trades and learn. This is how I learnt to avoid index betting.
Spreads is very different from other trading and takes some getting used to. So easy to overtrade and have too many positions as I have found out. Greed and fear get magnified. But it sure is fun!
Overtrading is a mistake we all make, (and I know I still do). Sometimes we trade because we think we ‘have to trade’ to earn money. In this game…less is usually more and patience pays you the best bounty. I usually do best when trading OSAAT… (one stock at a time – lol)