The Beginners Spread Betting Guide

 

Beginners Spread Betting Guide

Believe it or not, there really are some seriously wealthy traders that have hit the mint by spread betting the financial markets. Normal, everyday people, just like you and me. Hopefully this beginners spread betting guide will help you get started too.

No one knows the exact figure of successful traders, but it is estimated that it is around 10 % of the total traders who actually make a long term regular profits from financial spread betting.

Obviously there are always more losers in the stock market than there are winners, that’s what makes it work; and that is exactly the same with financial spread betting. It’s that 10% that hoover up all the foolish and unfortunately ill informed traders money.

The Beginners Spread Betting Guide

When it comes to anything in life there is rarely a holy grail that solves the problem that you are trying to. What works for one person does not mean it will do so for another.

When it comes to spread betting the markets the same can be said. What works well for one trader may not suit another. So there is no one particular Holy Grail system that is going to show you the way to millions in profit in a month from now.

There is neither any system that wins 100% of the time, not even close. It’s far from anything like that.

If you only won 20% of your trades you could and can still make astounding profits. That statistic is more like reality.

The best winning system I have ever seen in action is the actual trader that handles the emotions of trading and can wait without making irrational trading decisions. This is often regardless of what system is being used. It is these traders that you may read about that have become wealthy not from being smarter than you but just from doing the basics well… over and over again.

This guide is intended to highlight those basics of spread betting so you can confidently move on and approach spread betting the financial markets with realistic expectations.

What is Spread Betting?

Spread is different to traditional betting. When you place a normal bet of any type, the majority of the time you are saying that there will be a winning outcome [or draw]. If using betting exchanges like betfair or betdaq you can also bet that you think the outcome will be negative… bet to lose or laying this is called.

When placing a spread bet though things differ because you are essentially saying that something is going to win or lose by its price rising or falling over a duration of time.

Unlike fixed odds betting, your profits are made from spread betting by exactly how correct your prediction was/is. In essence the more right you are the more your profits rise. The more wrong you are the more your profits fall.

This image will make things clearer

Guide to spread betting

So if we are right and our spread bet goes in the right direction we are able to keep making profits the longer we are correct.

Another way to explain spread betting is going long, means that you will make money for every point the market you are trading moves up/rises. Or going short, meaning you will make money for every point the market goes down.

This is what trading the spread looks like on binary.com

Spread bet binary

What can I spread bet on?

Depending on what financial spread betting firm you use, more or less anything that moves. Indices, commodities, individual stocks, currency, bonds, sectors and now ETF’s

Having such an array of trading opportunities at the click of a button can cause confusion to be honest. I think it’s better to find one area and stay with it. This way you’ll learn to trade the chosen market effectively without getting distracted and diluting your attention.

How much do I need to start trading?

Nowadays and also fortunately not very much. You can open an account at finspreads and be trading with a couple of hundred quid. You can also get a demo account to practice with first.

The most important thing to consider when opening a real money trading account is this, are your expectations realistic? Don’t get carried away with the possibilities of becoming rich overnight. Like anything in life, you need experience to get better. The first step is to try and not lose money and go from there.

Here’s a list of the most trusted spread betting companies in the UK.

City Index

IG

Fin Spreads

ETX Capital

CMC Markets

Spread ex

There are more and more companies popping up all the time but the first 3 on the list have been around for a long time and are the market leaders.

How do I start trading?

Trading is very emotional when you start out; it takes a long time to become an unflinching seasoned professional.

It’s far more important to practice first and determine what type of trader you are before deciding on your trading system or strategy.

This is one of the biggest hurdles in trading that gets overlooked. You might like the idea of becoming a trader and have already bought your system or books from Amazon and be raring to go, but go where? You have no idea if you’re going to be cut out for this yet.

The best advice I can give you is find out what is going to agree with your personality. Are you likely to get bored trading long term trends over months and even years? Is the idea of fast paced action like swing trading and day trading already giving you a headache?

There’s no point in trying to be a day trader if you’re far more suited to the longer term, 5 minutes a day to check your position approach. And vice versa, don’t try long term trading if you are someone that needs to be active in the markets.

Margin requirements

Margin on your spread betting account is just the deposit or minimum account balance to keep your trade open. Most spread betting firms have a margin level indicator and also a calculator so that you can test out the margins before you place a trade.

If you open a trade and you find it goes against you and you do don’t have enough funds in your account to cover the margin, you’ll often find that the spread bet company will close your position without warning.

Obviously this is to cover their own liability and not a personally swipe at you. Be sure to check this and make sure you understand it fully if in any doubt. You can read more here at city index.

Spread betting strategy

What is the best strategy to use spread betting?

That’s a bit like asking what the best dog is. There is no one strategy that suits all. As you know I have had great success trading Vince Stanziones system. It’s longer term and suits me. Although there are quite a few of Vince’s trades that last only a few weeks, but that may still be to long for some of you.

If you’re looking for something that fits both styles you should try my free system… you can get it here. It’s trend trading in nature but also offers the chance to trade much shorter term movements as well.

If you’re looking for rocket quick cash and profits then you’re going to have to search hard to find what will work. I get lots of these so called get rich quick systems emailed to me… I’ve yet to recommend one.

In saying that, if this guy can make money day trading then I’m sure you can too.

I’m currently looking into developing a short term trading system that you will be able to use on Binary.com and also the other main spread betting companies. So watch this space.

Different types of trading strategies

 

Swing Trading

Swing trading is a shorter term trading style that relies on trading the retractions off of the support and resistance levels. Swing trading can last from around 15 minutes to a week.

These figures are somewhat vague as everyone will have their own ideas and time frames of swing trading but as a rule you rarely enter swing trades for monthly time frames. It is normaly day to a week.

Swing Trading strategy

 

Trend trading

As mentioned, trend trading is trading the longer term trends that the market is indicating. Moving averages are a regular tool [amongst others] for long term trend traders. These trades can last, weeks, months and years.

Long term trend trading is generally open and leave, you normally check your positions once a day [if that]

You can see in this image of British American Tobacco that there has been a steady and continuous up trend that has lasted for the last 16 years. You could have taken profits out along the way if you wanted to.

In this example you could even buy the stock instead of spread betting at around 3.22 in 2000. So let’s say you bought 1000 shares = £3220 that means at todays date [May 2016] they’d be worth £42000.

This is outstanding returns. Also this is a typical type of trade using Vince Stanziones system. You can of course spread bet this position too.

Long trade

 

Scalping

This method of trading requires you to be in and out the market very quickly and to result in making small profits from a trade consistently. These trades are often open for only seconds at a time.

 

End of Day trading EOD

I like this idea as it can fit in around people that work in the day. The signals for this style of trading are given in the morning and are left open until the close at the end of the day.

It saves the stress of having to trade all day and it also can reward you with good profits. The general idea again is trend trading, letting your profits run and cutting your losses quick.

This idea suits many because even though there is only one trade a day, if you are spread betting that does not mean 1 point a day. You can win many ticks and this can easily outperform other day trading strategies.

 

How to place a spread bet.

It is not at all difficult to place a financial spread bet. Once you have speculated on which way the market is going to go you simply choose your desired time window and hit the long or short button.

As you can see from the image beneath, the long and short prices are different. It is this difference in prices that is referred to the spread. The spread is how the spread betting company makes their profit on your trades.

You can see from the image that the long price is 44202.71 and the short price is 44182.71 this is obviously a 20 point/tick difference or a 10 point spread in each direction.

Place a spread bet

So when you first open a trade you will probably notice that you are in a negative position. This negative position is just the spread that the spread betting company are charging you. Once your position starts moving into profit you know that the spread [bookmaker’s fee] has been paid and that anything you make from here on in is profit.

Closing a trade

To close a trade you are simply buying or selling the same position in the opposite direction.

Stop loss orders

Stop Loss OrdersStop losses can be a great tool for protecting your trading bank should the market go against you. You can use a standard stop loss when opening a trade or a guaranteed stop loss.

The standard stop loss is activated at the best available price depending on market movements.

So if you bought the FTSE at 6000 and your stop loss was set at 5800 the order will come into effect as close to this price as possible.

However sometimes the market makes erratic movements and your stop loss may not get triggered until 5795. So you have paid an additional 5 points. This additional 5 points is known as slippage.

 

Guaranteed stop loss

A guaranteed stop loss is just that… Your stop loss will be activated at the price you set. There is a premium charge for using a guaranteed stop loss and this is added to your spread.

 

Trailing stops

A trailing stop can be added to your position so that when your trade moves into profit you can lock in profits as it moves along. This can be a great strategy in clear trending markets.

Rollover Spreads

When you open a spread bet it is always for a certain time and date in the future. This is called the expiry date.

You need to check when your expiry date is of the contract/position you are opening. If you do not know this information you will find that your trade has been sold and ended on the expiry date. This will be regardless as to whether your trade is in profit or not.

To counteract this you can add automatic rollovers to your positions. Doing so will keep your trades open until you decide to close them or you are stopped out.

Also you’ll find it is cheaper to use the automatic rollover feature at your spread betting firm than it is to manually keep reopening your position. This is because rollover spreads receive a discount on the spread that you’d normally pay.

Spread betting analysis

Whatever you decide to place your first spread bet on, at some stage you’d have done some homework on why you think your bet is going to go up or down.

This is simply referred to analysis and is separated into either technical analysis or fundamental analysis.

Technical analysis

Technical analysis is done by using all information available that the price of the market you are looking at is offering. All information is gathered from the price charts. An example of technical analysis is using simple moving averages, MACD, Bollinger bands, candles, Elliot wave, Fibonacci and EMA.

Fundamental analysis

Fundamental analysis does not involve using technical indicators [although they can be combined]. Fundamental analysis is done by factoring in rather more external events like, earnings reports, elections, company splits and so on.

You then make an informed decision on what way you think the market is going to go after reacting to the anticipated news.

There are so many areas of trading and countless volumes of agreeable and conflicting information that it is impossible for anyone to cover everything in a blog post.

Summary

Hopefully you will gain a clear insight into beginning spread betting from this guide and from here you can move onto more in-depth study if required.

  • Remember spread betting does not have to be complicated to be profitable. Learn to trade by doing the simple things right over and over.
  • Decide on what type of trading will suit you? Do you want to be busy every day [day trading] or be a far more long term trader?
  • Start small; you’ve got the rest of your life to make it big.
  • Start with one strategy and stay with it until mastered or you realise that the style truly does not suit you.
  • Cut your losses
  • Let profits run

My personal Best Films about the Stock Market

Best films about the stock market

Considering how much goes on, in and around the stock market its surprising that there are not far more films about it. Fortunately the best films about the stock market tend to become cults that are enjoyed for years after their release.
Here’s my personal list of the…

Best films about the Stock Market

 

Trading Places: 

Probably the best film Eddie Murphy ever made. Truly an original masterpiece… It’s actually a reminder that Americans used to be able to write comedy… what happened?

Anyway, that was a film that you could say was the right time right place. I remember seeing it when it first came out on video and not really understanding it. After I saw it again in my 20s I actually got it. Hard to believe it came out 33 years ago.

Wall Street:

Another perfectly timed stock market mega piece. Michael Douglas is awesome in this. Right when the word Yuppie was on everyone’s lips in the UK Wall Street was released. Greed is good, what a line… but the film goes much deeper than one liners.

A film about morales, possessions, and a world of excess were anything can be bought. and profit is everything at any cost. reminds me of how true the saying is that pigs get slaughtered on Wall Street. Great film.

 

Rogue Trader:

The only brit flick on the list… Ewen McGregor plays Nick Leesson , the budding private banker and investment manager that manages to bring down Barings Bank.

It’s told from Nick Lessons angle and lacks a little bit of the reality of which my other favourites have, but being as it was the UK’s true scandal it had to go on the list.

If ever you needed proof that doubling up [martingale] is a bad idea if you haven’t got an exit strategy, watch this film. Just proves the point that if you hire monkeys you’ll get peanuts.

 

The Wolf of Wall Street:

Wow… what a shock to the system this was. My favourite film of 2013 and with good reason.

If Wall Street had rock stars it was this lot. Nothing but charlatans really, but again proving the point that it’s just dog eat dog when it comes to turning a profit as a stockbroker.

Leonardo Di Caprio plays the part of Jordan Belfort fantastically… this is a true story but it’s the funniest film to come out of america since… Oh yes, trading places.  absolutely a must see.

 

Boiler Room:

In a way this film is like a hybrid of Wall Street and The Wolf of Wall Street. Incredibly realistic and really gives a vivid picture of what it must have been like as a broker on Wall Street in the day.

If you haven’t seen it you’ll understand when you do. Ferraris, booze, drugs, infidelity and of course money… loads of it. The film gives you a clear indication that brokers are really just glorified sales men, sales men that feed of the rich or at the very least those with savings that they can’t afford to lose.

Great film, fantastically realistic.

 

Inside Job:

Ok this is a documentary not a movie but it truly is a brilliant depiction of how the global crash in 2008 started and snowballed. It has to be the best documentary I’ve ever seen on the financial markets and how they are fulled.

It is very sad though that so many get affected so terribly and negatively by the actions of so few, but that was the reality. The film is narrated by Mtt Damon [Jason Bourne] and it suits the mood perfectly.

You really should know what happened in the crash of 2008 so you can be wiser in the future and hopefully protect yourself. A must see on all levels.

 

The Big Short:

If you liked my suggestion of Inside Job then The Big Short is like the movie version of the same financial crisis… well almost. it’s the true story of four investors that saw the crisis coming and bet against the US economy.

A clear view of the big winners but also the real losers… the working class with investment properties that they eventually lose along with everything else they had.

In saying that, it’s a brilliant film that is funny in places, informative and engrossing.

Sell in May and go away

US elections

It always feels like a few days after Christmas for me when May is here and the sell in May signal is given. You know those days just after boxing day when it seems like all the build-up and excitement that led up to Christmas day is now over… anticlimactic is the word.

Ok that’s a slight over exaggeration but it does always feel like the end of something.

Sell In May

According to the trader’s almanac the average gains trading the DJ from November through until April yield 7.5% that’s a pretty good return for not doing that much apart from opening the position. This year’s profits were way over the average being closer to 12% following Vince’s lead.

Vince gave the sell signal just over a week ago and I was out of my seasonal trend trades for this year.

I personally only traded the Dow this season although the S&P and NASDAQ were both up even if only slightly. If you had taken the seasonal DJ signal, you’d be around 750 points better off after the spread.

Sell in May

Because I’m a subscriber to Vince’s service he publishes the buy and sell signals but you can easily do this on your own using the already mentioned Stock Trader’s Almanac.

I think that if I hadn’t started trading with Vince that I’d have probably taken my trading style from the almanac eventually. It isn’t a science but long term you’ll be in the money.

Talking of Vince Stanzione, he is out in New York at the moment getting a feel for the markets. Considering that the UK follows the US, where else is he going to go to check out the situation?

Anyway, he made an interesting point that Jim Rogers had said to him that a good way to get a feel for a country’s economic mood is to talk to Taxi drivers and prostitutes! The logic being that you get to assess the situation from a working class perspective. And I suppose you don’t get much more working class than… U’m, taxi drivers I suppose.

So what lies ahead in the off season? Well apparently chop in the US but whatever happens I’m out [Dow] until October.

This year I’m probably not going to be as active in the markets as I have been during the summer in previous years. No particular reason for this other than it’s going to be nice to take a step back for a change and look at some other possibilities on how to make money.

I’ll trade the odd few new trades of which I like that Vince recommends, but in general I’ll just be hanging on to my longer term trades that I have open and watch the markets go buy… pun intended.

A time for new traders

This is a good time for new traders and toe dippers to really get on with some studying and to make the most of the markets quiet time. Start swatting up today and by October you could be getting ready for the new seasonal trades.

Even if you only ever read a single chapter every day of your chosen strategy you’d soon be finished and hopefully a lot wiser. {If it’s a good book of course} it’s back to the slow and steady approach again. Bit by bit you’ll learn, not everything in one day, just keep it steady.

History repeats itself…

If you do get a chance to do some stock market research, look into the market gains and losses on presidential election years. It’s interesting reading if nothing else.

That being said… If I was going to look at any trades from now until October I’d most certainly be looking to go short.

7 Reasons to Trade Binary Options

Trade Binary options

I have some more interesting ideas at the bottom of this post regarding how you can trade binary options for daily profits. But here are some valid reasons for trying it out.

It Only Takes a Small Bank to Trade Binary Options

You won’t really get any other decent chance at entering the stock markets with this type of minimal budget. £50 is plenty, plus bonus incentives and you can place fixed odds financial bets like a pro. OK maybe not quite like a professional but you’ll certainly be taking a step forward. What’s more is that the minimum stake to trade binary options is around £2 in the UK and winnings can be Tax Free.

 

It’s really easy to do

Binary trading is so easy to do. Login to your account, choose your market and hit up or down for example. This is the simplest of the options you can trade. So you just decide on which way the market is going to go. The trading screen is self-explanatory and very easy to navigate

Your account is also very easy to set up and open. There is not such a stringent check prior to opening; it is in fact not much different to opening an account at the likes of Paddy Power.

 

Knowing your limits

Another very useful feature of trading on binary is that you always know what you stand to win or lose before placing any bets. You can see the return value and your bet amount clearly. This means that you will not get into any financial disaster when you trade binary options. If the markets or your take goes against you all you can lose is your chosen stake.

 

It’s super fast

Trading on binary is like supersonic speed on many of the markets compared to other trading alternatives. You can set the time to as little as 2 minutes and be out with your profit as soon as the trade finishes. So if the idea of long term trend trading like i do is not for you; binary options may offer you a good alternative.

Not all trades on binary are set in minutes though. You can still open trades that that are longer term that expire in a week or even months.

 

Lots of markets to choose from

When binary options first came on the scene there were mainly only indices and currency that you could bet on. Now things are changing and more markets are being added all the time. You can trade on stocks, commodities and even the volatility index which is available 24/7

 

Use binary for hedging

You can also make use of binary for hedging. If you have a current spread bet position open that you feel may be about to turn against you then you can open a fixed odds bet on binary in the opposite direction so that you reduce your liability on any spread bet losses.

 

 Mobile trading

It’s a totally reality to be able to trade on the move with binary options. Due to the nature of the platform that binary uses, you can simply login to your account anywhere that you have 3 or 4G. Binary option trading is very user friendly.

 

As with all trading, take care and don’t risk more than you can afford to lose.  

 

How to trade binary options

Here’s what the trading screen looks like on binary.com 

Binary 2

 

 

Here’s how simple it is to place a bet using binary.com

Decide what market you want to trade. In our screenshot we are trading the forex [arrow 1].

Then decide what pair of currencies you want to trade from the drop down menu [arrow 2]

From there decide on how long you wish the trade to last using the drop down menu [arrow 9]

You then decide on your stake amount or change it to payout that you want [arrow 8]

Decide on what way you think the market is going to go? Higher [arrow 5] Lower [arrow 4]

Hit the purchase button [arrow 5]

You will then see a view button where you can watch the outcome live…

Binary trade

What Strategy to trade Binary Options

There is no way there is a one strategy suits all. Not in any trading.

I have been testing various strategies over the last few weeks as I get so many requests regarding day trading systems that work.

I’ve had many systems sent to me over the years. Some are just so complicated it’s ridiculous. Others are ripped of from other sellers. Some that have merit I still have.

I’m going to keep testing my own strategies for now though. Because if I find something that really works and I have faith in it, you’ll know it’s worth a try.

As far as you can go regarding a system to use, Visual ballistics is as good as any. If you are using 2 minute trades, just watch the chart. If there are higher highs over 1 minute buy higher. If there are lower lows over 1 minute buy lower. It’s miniscule trend trading. Seriously, you’ll be surprised at your win rate.

Here is another strategy that many newbies opt for…

You need to use minute charts with this strategy so try volatility index.

You first identify the trend. You then place three bets all of the same stake 10 seconds apart from one another and all on the same market.

So you place your first bet, 10 seconds later you place the second bet, 10 seconds later you place the third and final bet. Don’t fret over the 10 seconds gap in placing the trades, as close to that as possible

I have been practicing this and there is some merit to it and I did win more than I lost.

The problem is that I like to know the theory behind my trading strategies. But I don’t on this.  It’s like hedging in a way. You can win all 3, win 2 and still make a profit. Or you can lose 2 and make a small loss or lose 3 for a total loss.

Really simple… but as said, have a try and see how you get on. Just use 1 or 2 quid stakes.

I’ll keep testing an hour a day and I’ll let you know my results. I had just over £50 in my binary account when I started contemplating the possibilities, so let’s see if any of these trading ideas work.

binary 3 10 seconds

Little Acorns Profits Update

Just a quick update on the Little Acorns profit and loss for the last couple of months.

March – April produced 3.1 points profit from 28 selections.

April – May produced 4.3 points from 20 selections.

This gives me a new points stake of  3.83

So chipping away. But a profit is a profit.

 

Little Acorns profits

I’ve started to collect more data from the races like type of race and number of runners. I may start to add current form. Hopefully over the years some sort of pattern might emerge that can help improve profits even further.

Also I have started using the 2 steps back strategy (last few weeks) for staking as apparently is the most profitable staking plan to use. It looks promising.

If you haven’t got a copy of little acorns yet you can get it here

Little Acorns Profits Update

3/10/2016Sean Ban1.82Winner
3/12/2016Kylemore Lough1.79LSandown
3/14/2016Clondaw Cian1.7WinnerPlumpton
Agincourt Reef1.74WinnerPlumpton
3/16/2016Boy In A Bentley1.78WinnerBangor-on-Dee
Giovanni Di Bicci1.89LKempton
3/17/2016Pearlysteps1.93LTowcester
Beyondtemptation1.92LHexham
3/19/2016Treaty Girl1.84LFontwell Park
Always Resolute1.69WinnerNewcastle
3/20/2016Katachenko1.87WinnerCar
3/22/2016Ticking Away1.89LSouthwell
3/23/2016Drumlee Sunset1.76LWarwick
Havisham1.7WinnerKempton Park
3/29/2016My Little Cracker1.69LSouthwell
Gambit1.58LWolverhampton
3/30/2016Siri1.75WinnerLingfield Park
3/31/2016Belami Des Pictons1.75LBangor-on-Dee
4/1/2016Florrie Boy1.96LNewbury
Pursuitofthestars1.9WinnerLingfield
Rasasee1.86WinnerWolverhampton
4/2/2016Ennaadd1.96LKempton
Aston Cantlow1.9WinnerUttoxeter
4/6/2016Clotilde1.66LLingfield
4/7/2016Hakam1.93WinnerChelmsford City
4/8/2016Broughtons Fancy1.98WinnerLeicester
Sterling Silva1.84LLeicester
George William1.91LWolverhampton
4/9/2016Mardale1.51LSedgefield
Magical Path1.69WinnerWolverhampton
4/13/2016Sutter County1.69LNewmarket
4/14/2016Paddy Power1.59LChelmsford City
4/16/2016Tasleet1.83LChelmsford City
September Stars1.7WinnerNottingham
4/21/2016Vieux Lille1.96LExeter
4/22/2016Ballycoe1.89LPlumpton
4/25/2016Combe Hay1.92WinnerSouthwell
Moonshine Ridge1.74WinnerSouthwell
Marshgate Lane1.82WinnerWolverhampton
4/27/2016Auntie Barber1.81LBrighton
4/29/2016Girling1.5Winner14.5MaidenChepstow
Udontdodou1.74L15.2MaidenThirsk
4/30/2016Tomily1.67L14.2Nov SBrighton
Discoverie1.79L17.2Nov HSedgfield
5/6/2016Encore d’Or1.9L15HLingfield
Ami Desbois1.6L14.25Mdn HHexham
5/9/2016Monks Stand1.95Winner13.5Nov StakesBrighton
Valentino Boy1.92w14.4Median ASMusselburgh

Little acorns profits

A day trading system

 

A Day Trading System

There are hundreds of money making opportunities online to take your pick from. From blogging courses to horse racing systems and Amazon seller programs to spread betting systems. Also many day trading systems.

As we all know, some of these opportunities are total winners… others not so.

Here’s the funny thing though. When it comes to a financial trading systems how can you possibly buy a losing one?

If you were doing exactly as the system rules advised and over a reasonable time frame of use or testing it was losing you money, you could just do the opposite of the rules to make money.

Although this approach probably won’t work with longer term trend trading as they are proven and less random due to the time frame.

It is quite possible though that the idea has got potential with many of these crappy forex systems that are floating around online… or maybe not so crappy after all?

When I spoke to the author of the little acorns horse racing system, he made a very valid and intelligent point. If you tried backing the selections that his system Little Acorns produced, you’d be unable to make a long term profit.

So it gave me the idea that doing the opposite of what a losing system is suggesting could turn the same system into a profitable one.

 

So why won’t this strategy work with long term trend trading?

Well it might, but as mentioned, because of the long term nature of the trades. The whole idea of longer term trend trading is to smooth out volatility and reduce trading the shorter term and far more unpredictable price movements. Also it’s likely to be too tricky to realistically test.

These long term trades can last for 2,4,10 years and more. So when do you decide that the system is not profitable? After 1 year, 3, 10?

It’s just far too complicated and time consuming to consider. Also I think there will be too many variables to make it a viable option. It’s confusing me trying to think about it!

 

A Day Trading System

But… if you were day trading, turning a losing spread betting system into a winning one might just work, and work well with a decent staking plan.

I think you could achieve some great results over various trading time frames, 2 minutes, 5 minutes, 15. Or maybe even a single day trade on binary using higher or lower.

 

A strategy that is worth testing

I really fail to see how some of these day traders really have any edge when trading the markets in such a small time frame like 1 or 2 minutes. More to the point, are the movements that day traders are trying to trade in these minute windows even systematic at all? Are the movements likely to more random?

If the price movements in these minute time frames can be considered random then could you randomly pick winning trades?

The theory is there. So you could test it like this…

Let’s say that you take note of 8 minutes of price movements. At each minute interval you make a note of whether the price was higher or lower than the last price. So you will have something looking like this. H H H L H L H L [H = higher L = Lower]

From there you could then test how often that exact sequence of higher and lower repeats itself exactly and immediately in the next 8 minutes?

So you may generate something that looks like this

HLHLLLHH

LHLHHLLH

HHLHHHHH

And so on…

The System rules may operate something like this.

Record 8 minutes of price movements every minute.

H H H L H L H L

On the ninth minute you place a bet of one point using binary at minimum odds of evens that the market will be higher.

You’ll be placing the bets using the Fibonacci sequence for 8 bets.

If the first bet is lower and you lose you then place 2 points on your next selection that the price will be higher. If that loses your next bet will be 3 points that the price will be higher… and so on. You stop at a winner or after a maximum of 8 losing bets.

Winning system

It’s like random v random

If you didn’t manage to make a profit after a few months of testing you could then try it the opposite way round. So instead of copying the last 8 results you simply do the opposite. L L L H L H L H

Once you hit a winner you record another 8 minutes of price action and repeat.

One trade a day system.

You could test this out by recording the price of the DOW or FTSE as an example for eight days and then place the same or the opposite bets and monitor results.

It’s all about the odds though

As long as the odds are in your favor you could make a profit. You are just trying to make a point every sequence.

 

It’s pretty simple really. 

You could test this type of strategy out on anything you fancied really; football over 2.5 goals, racing favorite’s winning sequence, or even live black jack.

It is some good food for thought if you are considering day trading or even developing your own system.

So just to recap, you do the opposite of what losing systems tell you to do.

Maybe there is some smart trader/programmer that could design something that could test the theory?

Anyway… test, test, test. It’s not going to cost you anything other than a few minutes of your time every day.

Fear of failure and losing as a trader

Fear of failure

Fear is a big deal. It can save our lives when we need it most, but also it affects us negatively in situations where it needn’t.

Fear of failure is a pandemic. It ruins the hopes and dreams of so many. It sounds crazy… but is certainly very real to many might have been successful traders and entrepreneurs.

When trading the markets, fear of losing can send a trader of sound mind barmy. When a mild mannered man or woman becomes obsessed with their losing positions it’s often the begging of the end for them.

Sound game plan goes out the window faster than a Tottenham team losing at Chelsea again.

Fear of failure and losing as a trader

The fear of losing is often so great that a trader will close a trade for no other reason other than fear. Their system’s signals or strategies ignored and often only to see the position return to profit sooner rather than later.

This fear fuelled lack of discipline is so intense that any financial loss incurred is accepted almost gracefully rather than stand the pain any longer.

From my experience, if more time was spent on conditioning beginner traders emotionally there’d be far greater numbers of people investing safely and profitably in the financial markets.

Conditioning your mind for financial trading success

Just like a runner will condition their body to accomplish a certain distance or time, the same can be done (in essence) for a financial trader.

A trader should learn how to condition their minds to the inevitable losses that will occur in trading. The fear of losing money is likely induced by common mistakes, misconceptions and even the reality that you can’t afford to lose this money. If you can eliminate these mistakes and problems you can eliminate the fear.

If this is done you will be inclined to make better trading decisions which will then in turn increase profits. You will become fearless of the financial markets.

Now we do not want to confuse being fearless with losing respect. We just don’t want to feel the dread of losing more than you can afford to. Or feel the need to kick yourself hard for making irrational decisions because you were afraid.

What is fear?

Fear of failureWe have all felt it at some stage in our lives. The overwhelming panic, the shakes the adrenalin produces, the desire just to run away. Scientists call it fight or flight, yet other scientists disagree.

If you were attacked by a thug for example, this is a real and potentially dangerous situation. Your feeling of fear that you encounter here is correct. You are either going to stand and fight or run. This is fight or flight. You are in fear of being hurt and you recognise danger.

Now, the exact same feelings of fear may be induced by the fear of butterflies (Lepidopterophobia) trying to tell the person with the condition that they are being ridiculous is futile, their fear is real; as real as if they were being attacked by the thug.

The reality is that we know that the person is in no real danger from the butterfly… but they don’t. And this is the same type of fear traders feel when the markets go against them.

Realistically the financial markets are not going to physically hurt you. You are not in any danger. You just think you are.

Fear and emotions almost co-exist here and it is what has led scientists to believe that fear may have evolved into choice.

If we learn to understand that the financial markets are not to be feared and choose not to be fearful of them, and that we simply take or open the right or wrong position, then what is there to fear?

Oh yes loss of money… but that again is not going to cause us any real physical harm.  All that is going on is that somehow since we have been evolving, the fear of being attacked by a wild animal and being attacked by a butterfly has become muddled.

When you feel fear of losing money in the markets remind yourself that this is not dangerous, you are not in danger and physical harm will not be encountered.

Essentially then as there is no real fear, you should be able to overcome this false fear indicator.

When trading the markets and you are feeling fearful it is likely to be because…

  • You can’t afford to lose money
  • Your stakes are too high
  • You do not understand that trading is about winning and losing
  • You think the markets can hurt you
  • You are afraid to fail, fear of failure

All the above are recognizable, but it is Fear of failure that is the real hidden demon here. As a trader, the inability to accept that you are wrong leads many traders on to taking bigger losses. Instead of taking a loss, you are frozen in the stock market headlights praying the markets will turn back round. Fear has paralyzed you. Many traders just don’t even know it.

This hidden fear is basically a fear of failure (atychiphobia), you cannot admit you are wrong, deep down you’re scared to admit it.

Adjusting the errors mentioned above from your trading will certainly help control the fear of loss but there may also be another solution.

How to Overcome Traders Fear of Losing

Meditation benefits

I read an interesting quote on Quora recently that got me thinking.

The root of all problems is the voice you hear in your head or your thinking mind. This voice is also referred to as ego.

The only way to overcome the ego is through meditation. The scientific fact “that all matter is made of energy” has been the base of meditation since time immemorial.

Meditation allows one to experience this energy and become one with it.

Meditation has now been scientifically proven to beat depression. Since this revelation, it is true to say that meditation as a health benefit is now mainstream. So then maybe this guy’s quote on Quora carries some weight on really how to overcome fear? And overcome fear of failure itself.

I’m not going to give you a spirituality lesson here or start to preach anything to you. My point is that meditation could be the trader’s best friend; maybe everyone’s best friend?

I have meditated for some years; I totally vouch for it improving feelings, emotions and overall wellbeing. You can read more about its benefits here. I have found it stills the mind like nothing else and reduces any stresses amazingly.

In my opinion overcoming fear of the things that are really of no danger to us could give one more freedom in life. Fear of starting a business, fear of failure and fear of public speaking… they may all be manageable or even eliminated by meditation.

If you think that understanding fear is not essential to a trader’s success that’s fine, each to their own. But if you can understand my reasoning then surely meditation is worth a try? It may help you in other areas outside of trading too.

Failure is not all bad

Failure does have its place though. If the likes of Einstein or Edison never failed the world today could be an entirely different place today… So in essence failure can also breed success.

 

Sometimes by losing a battle you find a new way to win the war. Donald Trump