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 The
popularity of financial spread betting is growing exponentially. I
once heard a trader state that trading was simple, but it wasn’t
easy. I agree with that, so with this statement in mind I have
compiled a handful of tips to get you started on your trading
journey.
1. Have a trading plan.
In the best selling book Market
Wizards, by Jack D. Schwager, some of the most successful
traders in the world describe their thoughts on trading and how
they generate consistent returns year after year. Although the
systems, methods and markets they trade are all different, they do
have one thing in common. They all have a trading plan that they
strictly follow.
It is easy for a seasoned professional to state that you must
have a trading plan, but how do you actually go about acquiring a
trading plan?
There are quite a few questions which need to be answered when
it comes to a trading plan. Let’s look at a couple of them:
- What kind of trader do I want to be?
- What markets do I want to focus on?
What kind of trader do you want to be?
There are some traders who focus on the market intra-day. They
will take frequent positions during the day, and focus on the very
short-term. They are not necessarily interested in the big picture
of the market. They solely focus on the market on a
minute-by-minute basis. This is a labour intensive way of trading.
The advantage is that they often don’t experience the ups and downs
that traders who trader longer-term have. The disadvantage is that
they often don’t participate in the really big moves.
You may want to focus on a less labour intensive way of trading
and try to catch the bigger moves lasting 2-3 days or more. If so,
you may want to focus your study on trend analysis, and generate
buy and sell signals from longer-term indicators.
Here at Finspreads we hold frequent seminars on trading
strategies. You can email me on tom@cityindex.com or visit our
website
for a complete schedule of our workshops.
2. Exercise good money management.
Money management is another way of describing the art of winning
big but losing small. Unfortunately I have to prepare you for
losses. It is inevitable that you will have losing trades as well
as winning trades. The trick is to keep your winning trades big and
keep your losing trades small. This is much easier said than done
and it is an area that requires constant vigilance.
3. Cut your losses and let your profits run.
This is one of the biggest clichés of the trading world.
Everyone knows this one, but few are able to follow it. Here at the
Finspreads workshops I focus a great deal on the psychology behind
trading. It turns out that this well meant advice is not so easy to
follow because of the way we humans operate. However, it is
possible to change your behaviour and operate in a way that serves
your interest. At the seminars I will teach you the four primary
trading fears which prevent you from acting in your best
interests.
4. Be patient.
There is a simple prescription to guard against overtrading in
the markets: Patience. By having the discipline and patience to
wait for the right opportunity, you can increase your chances of
success greatly by simply waiting for the right trade.
Take your time and choose the best of the crop. Make sure the
elements of your chosen strategy are satisfied before putting your
trade on. If you are starting out on the path of your trading
journey, you may not have a wealth of trading experience yet.
However, once you do acquire some experience, you will soon realise
that often the hardest trades to execute are the most profitable
ones.
5. Manage your emotions.
Trading must be treated as a business. In doing so you must not
get emotional about your positions. Remember rule no. 1. Plan your
trade and trade your plan. This in itself should help keep your
emotions in place.
Many traders get emotionally attached to their position, which
means they now have an opinion on the market. Opinions are
dangerous. Trade what you see and not what you think.
Over the coming series of articles we will be looking at the
above areas in more detail. But for now, remember that successful
trading amounts to doing the right thing all of the time and not
just some of the time.
All the best in your trading
Tom Hougaard
Please remember spread betting is leveraged
and can result in losses quickly exceeding an initial outlay. It’s
not suitable for everyone and you should make sure you fully
understand the risks involved. If you have any doubt, please seek
independent advice.
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