In financial spread betting, it is important that we remain calm, focused and detached from each individual trade. When emotions get the better of us we can make rash decisions that prove to be potentially very costly. Staying cool, calm and collected helps you trade the plan that you have created. Let’s take a look at a few practical ways you can you can approach your spread betting in order to keep those emotions under control.
Firstly, you should only trade with money you can afford to lose. If you are spread betting using the money for next month’s rent then it is going to be impossible for you to stay detached from your trades. Make sure that the amount of money that you put at risk reflects your own financial position. In financial spread betting there is a small, but very real chance that you could wipe out your whole account and end up owing the spread betting company more on top.
You should be prepared for draw downs. Every trader, no matter how good they are, will experience a run of a consecutive number of failed trades. You should acknowledge this eventuality and when it happens, trade your way through it. This is not the time to start making ad hoc changes to your strategy or to start trading with larger size. If your trading strategy works then you will trade yourself out of that draw down in due course.
Trade with small stakes to ensure that each trade only risks a small portion of your capital. This approach is a vital part of your money management strategy and will help to ensure that you are still trading years down the line. Keeping the stake sizes small means that it would take a statistically very unlikely run of failed trades in a row to wipe you out. Putting only a small amount at risk on each trade helps to keep you detached from the outcome of that particular trade.
Use tight stops in your trades and put these in the market if you can. If you are attached to the initial opinion you had about an instrument’s future price movement, it is easy to delay closing the trade when you should. You can talk yourself into allowing the trade just a couple more days so that you can be “proved right”. Spread betting is not a place for ego massage so put your stops in the market to take that decision out of your hands.
As you start to get comfortable with spread betting with a small stake size and you see your account slowly growing, then begin to scale up your stake size. Keep following your money management program whereby you only ever risk a small percentage of your account on each trade, but as your account size grows, so too should your stake size.
Successful spread traders are not robots, but they are able to detach themselves emotionally from each trade that they place. They lose many trades and accept those losers as being part of the game. In fact, those losers prove more valuable than the winners. It is often the case that how you handle your losers defines your trading success far more than how you handle your winners.