Hello folks! Hope all is going well. Today I bring you a post on spread betting which will be followed by a post on forex trading in a couple days. This series of posts are intended to introduce a couple more complicated investing (or “betting”) strategies that are out there. These concepts are relatively new to me and while I don’t necessarily endorse them or fully understand all the risks myself, I have always been of the mindset of learning new things to expand my horizons. Take the post for what it is worth, but hopefully you learn something new today!
After this short series I’ll resume my normal posting agenda on Monday 8/14 with an update on my investment philosophy!
Top Reasons Why People Lose Money In Spread Betting
One of the most prominent type of trading in which most people indulge in is “Spread Betting”. If you are wondering what is spread betting, and what can you do with it, then, it’s a UK based betting system in which the traders speculate the movement of a specific asset in the financial market. The trader gains money for the right speculation and loses it if wrong.
It does not matter whether the value of the asset is increasing or decreasing, if you have guessed it right you will make money. It is a type of derivative strategy, where the participants don’t need to own the underlying assets on which they place the bet. Furthermore, one can place bets on anything ranging from commodities, stocks or forex. If you do it right, you can make huge money with spread betting, provided, you are using a reliable spread betting platform like ETX Capital. But, there are high chances that you might lose money as well, if you don’t follow the best trading practices.
Why Do People Lose Money in Spread Betting?
There can be various reasons leading to loss of money in this form of financial betting. Here are te most prominent ones:
Sometimes, when we keep on gaining the profits or losing money, we aren’t able to understand where to stop. This indecisiveness can lead to huge losses. So, whether you are garnering profits or losing money, you must know your limits and should be able to control the emotions.
Lack Of Proper Plan
Timing plays a significant role in spread betting. Placing the bets at the right time can greatly influence your profits and losses. The market timings is one of the aspects that you need to develop expertise in, to become a successful trader. Buying or selling too early or too late, both can lead to losses. So, it’s vital that you prepare a robust plan and adhere to it during trading to avoid making wrong decisions pertaining to the market timings. Also, indulge in thorough research to understand the protuberant market trends.
The financial markets are very unpredictable and dynamic. Anything can change anytime, and thus, entering the market with preconceived notions is full of risks. Its important that you make every decision after carefully analyzing the situations instead of, on the basis of some preconceived ideas.
Not Sticking to One System
Many people, after incurring losses in one trading system, quickly move to another one in the hope that they will make profits there. However, the truth is that by changing the systems, you would never be able to get long term gains. It’s always a good idea to stick to one system, understand how it functions, develop your bespoke trading strategies, test them and then use them to make profits.
You would always need some time to fully understand a system and develop your own trading strategies. So, patience is the key that you need to hold on.
Not Understanding the Difference Between Short Term and Long Term Trading
One of the common mistakes which most of the traders make is not understanding the difference between long term and short term trading. The long term trading is about predictions while short term trading is all about probabilities. So, ones’ long term and short term strategies should be based on these.
If you are planning to invest short term trade, you have to work with all the probabilities and then make a decision. If you only consider predictions, you may not be able to make the profits.
Now, as you know what can lead to a loss of money in spread betting, try to avoid making these mistakes! And be sure to stop back on Monday 8/14 for an update on my investment philosophy!
Thanks for taking a look!
The Green Swan