Five spread betting tips

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1 Use play-money to test your strategy

Many platforms that offer spread betting online will allow you to set up a demo account where you can make (pretend) trades using play-money. Not only is this a great way of getting to know the platform and learn how it works, but you can also use the demo account to try out your trading strategy and watch how various tweaks impact your success rate and bankroll. There are many spread betting strategies that seem perfect in theory, but when you actually put them to the test, their flaws and weaknesses are revealed. When that happens, you’ll be glad that you’re only losing play money and not your own hard-earned cash.

2 Keep a detailed trading journal spreadsheet

Keeping and analyzing a detailed trading journal spreadsheet will help you spot short-term and long-term trends in your trading success. It is shocking how our memory can betray us. Consulting a trading journal spreadsheet is a very good habit that should be ingraned early.

Examples of data that should be included in the trading journal spreadsheet are date/time, position size, underlying, entry point, exit point, price, profit/loss size, and reason for making the trade.

3 Diversify

The farmers in the days of yore knew that putting all the eggs in one single basket was to tempt faith, and this old adage is just as true in the days of modern spread betting.

Even if you think you have a SURE THING, please resist the temptation of risking a big chunk of your bankroll on a single bet. You might be right a few times and win big – but eventually this type of risk(mis)management will catch up with you.

Diversify your bets and make many small different ones in order to spread risk. Also, don’t have all your capital stuck in spread bets simultaneously. One sudden black swan event shouldn’t be allowed to wipe out your bankroll.

A good rule of thumb is to not risk more than 2% of the bankroll on a single trade.

4 Be curious

There are many great resources out there for those who specifically wish to learn more about spread betting, but I also recomend that you widen your perspective and keep your mind open even for information about things that you don’t think would be able to help your trading.

“The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.” – Paul Tudor Jones, founder of the hedge fund Tudor Investment Corporation

If you only read Financial Times and Bloomberg, you’ll never get an information edge over all the other traders doing exactly the same.

5 Don’t be ambushed by tax law

Check up on applicable tax law before you start trading to avoid unpleasant surprises down the road. Depending on your jurisdiction, there might be plenty of things that you can do to avoid paying exorbient taxes or getting into trouble with the tax agency for filing your documentation the wrong way.