How to make money by spread betting forex – the golden rules

Spread betting is a fantastically tax efficient way to trade on the currency markets. But be warned, there’s no advantage to tax breaks if you don’t make any money in the first place. What’s more, if you lose money (which most people do), you won’t be able to offset it against any gains, as you can do with share trading for example.

Despite the fact that many fail, there are still plenty of people making a lot of money trading forex. But most of them have travelled a rocky path on the way to gaining the knowledge they need to be successful.

The idea of this page is to give you a few words of warning, and hopefully help you avoid some of the major mistakes that most people make when they start.

1) KEEP YOUR TRADES SMALL. If you play with money that you’re scared to lose, then your judgement will be affected. You’ll take profits too early only to find you could have made more if you waited, and you’ll cut your losses before your stops kick in, only to find it could have been a winning trade all along. Better to make a small profit than a big loss.

2) DON’T CHASE LOSSES. There’s no surer way to blow your account than doubling up your bets trying to make up for lost trades. This is another reason to keep your trades small (max 2% of your account), so that when you do take a loss, you’re less affected by it and less tempted to win the money back.

3) BEWARE GREED. Similar to the above, if you’re having a good run and you start raising your stake size, you’re opening the door to wild gyrations in your account size. This can then lead to loss chasing and general lack of control.

4) TREAT TRADING AS A BUSINESS. Meaning, don’t lose perspective on money. Keep your trading money in a separate account. Transfer in an amount that you’re willing to lose, and plan your trades carefully so that you don’t blow it all at once.

5) TAKE YOUR TIME. No-one gets rich quick overnight trading forex, indices, or anything else unless they’re over-leveraging their account and have been lucky, in which case they’ll probably just lose it all again the next day. Those that make a lot of money already have a lot of money to play with. They’ve done the time and slowly worked their account up. There are no short cuts. Try to rush it and you’ll lose everything. Be warned. View your trading career as a building project. It won’t happen overnight, but if you work on one brick a day, you’ll be amazed how your account can build with a bit of patience.

6) STOP AND TAKE A BREATH. The markets will always be there. Resist the urge to always be in the market. Better to bide your time and trade only when the outlook looks most positive. Also, if you feel yourself ever losing control, take some time out. It’s amazing how even just a few days can help you get your perspective back.

7) LEARN TO WATCH YOUR EMOTIONS. Most traders have rules, and most traders break them. When you’re dealing with money, there seems to be a part of our human psyche that allows the irrational to lead the way and ignore what our ‘sensible voice’ is saying. This happens to everyone. Just learn to watch yourself, learn what your own triggers are for any irrational behaviour (99% of the time greed, fear brought about by over sized trades), and learn to change any bad behaviour bit by bit.

3 Responses to “How to make money by spread betting forex – the golden rules”

  1. wow says:

    That is the most sensible pieces of information that ive come to learn are vital to being successful. Ive have just started and heard what you are mentioning before I started. However hearing something and doing something are two completely different things. I am quite poor, or not rich, and have lost £900 in the last two weeks. I hope I do learn to overcome these weaknesses to gain quick money without the effort, as i genuinely enjoy trading. Those words are like goldust for the man who hears.

  2. Engela says:

    I have traded before and recently started again and this has been very insightful. Thank you for the advice, I nearly jumped in head first again.

  3. homepage says:

    Way cool! Some very valid points! I appreciate you writing this post and also the rest of the site is very good.

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