Spread betting is easy once you've mastered the basic mechanics (see Learn to trade with spread betting for more on this). But making money at it isn't. So before you dive in, ask yourself whether you have what it takes to spread bet successfully. Here are three things spread betters need in spades.
Some people assume that every spread better is waiting for the big pay-day bet. The one that will see them retire at a stroke. For inspiration, perhaps they look to the likes of George Soros who become a billionaire largely from betting against sterling in 1992. However, most people who try to copy his lead will fail. Most successful spread betters grab the pennies they place regular small bets that make decent but not spectacular profits and let the pounds take care of themselves. And be warned if you expect spread betting to replace your day job, then expect it to become your day job!
Once you understand how spread betting works, you need to get an edge over your competition. The best way to do that is to become an expert in one share, currency pair, commodity or index. Don't spread yourself too thin and apply a grapeshot approach or you will always lose out to other betters who know more than you do. Be prepared to spend time learning about your chosen market, and then just as much time practising on your broker's trading simulator.
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You will lose money spread betting from time to time. And if you don't use stop losses you may lose quite a lot if a trade backfires. So to make any decent money over the long term, you need the confidence to stick to a trading strategy (seeour spread betting trading blogfor examples) through thick and thin. If you are the kind of person who cannot stomach frequent sudden losses from trading, then spread betting isn't for you. You might only win 60% of the time, but that's enough provided you can cope with the 40% of your bets that don't pay out.
Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.
He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.
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