Establishing the Spread Bettors Mindset

Spread Betting Education:  Establishing the Spread Bettors Mindset 

In order to successfully trade in the spread betting environment,

accurate price forecasts will be required to capitalize on price movements that will ultimately unfold in the future.  This essentially means that traders must be able to buy assets before valuations increase, or sell those assets before valuations show declines.  There are many examples of traders that are able to have a few successful trades early on and to make quick profits in the earliest phases.  But in order to do this on a consistent (and long term) basis those entering into the spread betting markets must work on developing the right frame of mind, which will allow you to approach your trades in a methodical, structured and non-emotional manner.  These methods must also be repeatable and traders must loyally follow these methods with consistency.  In this section, we look at some of the most important parts of the process.

Starting with Realistic and Practical Expectations

Perhaps the first part of the process comes with managing expectations in a conservative and realistic manner.  When traders begin spread betting, it can be very easy to become distracted by the possibility of huge gains that can be earned quickly.  And while this is a possibility, most traders start putting real money on the line without making a real attempt to research which factors drive asset prices.  Without this knowledge it is impossible to understand how the financial markets operate, and this can drastically increase the probabilities for failure.

First and foremost, spread betting should be looked at like a business.  This means success requires hard work, patience, and a great deal of practice before it can be mastered.  Spread betting is not gambling, and it is very dangerous to work from the expectation that you will become wealthy overnight.  Expectations should be conservative and tempered, and, if we consistently follow this mindset, a long and successful career in spread betting becomes a very attainable possibility.

Focusing on Probabilities, Not Emotions

The next part of the process in understanding the appropriate trading mentality comes with a focus on market analysis that is logical and based on factual probabilities, rather than intuition or “gut reactions.”  Before taking any spread betting trade, you should ask yourself whether or not the considered position has a high probability of success.  If the answer is not a clear “yes,” it is time to look for other opportunities.  The central task of the successful spread better is to identify trading opportunities that have a high probability of generating a positive outcome (financial gains).  This requires patience and the ability to avoid exposure to markets conditions that are unfavorable.

To do this, traders must remove emotional reactions (as much as possible) from the decision-making psychology.  Spread betting trades can be moving in a positive or negative direction (creating financial gains or generating losses), but, either way, it should be remembered that the market is a dynamic environment, operating under behavioral rules that can be grasped rationally from the broader perspective. For these reasons, traders must do their best to avoid irrational decisions and only execute trades when the probabilities are favorable.

Creating Rules for Spread Betting Trades

Once we understand the idea that emotions have no part in successful trading, we must then create a set of trading rules for active positions – and then obey those rules once trades are active. One of the biggest mistakes made by new traders is to constantly revise trades if they are moving in the wrong direction.  Unfortunately, there is no way to change the market’s momentum once it has started and abandoning our original trading rules usually only adds to potential losses.

Whenever a position is planned, traders should have clearly defined scenarios for when to open and close a trade, and these scenarios must be based on criteria that is both objective and measurable.  Typically, when traders change their position parameters (after a trade is active) emotions tend to be in control because the trade is not moving in the anticipated direction.  It is important to avoid this type of behavior.

Creating a Plan for Each Trade

With these key elements in creating the mindset for a career in spread betting, we can start to think about the various ways actual trading plans can be structured. To accomplish this, we first have to look at our goals as traders. Do you plan to have an aggressive or conservative trading style?  Will you hold positions for the long or short term?  Which asset classes will you look to trade for example, commodities, stocks, or currencies)?  Will you look to diversify into all markets?  When ha have answers to these questions, we can base our trading plan on the strategies that will allow us to achieve those goals and maximize our skills as traders.

Conclusion:  Establishing the Right Mindset is Critical for Successful Spread Betting Trading

Attaining the right mindset might seem like a difficult task as we begin our spread betting careers.  Luckily, there are experienced traders that have blazed the trail previously and when we approach these markets in practical and rational ways, it becomes possible to produce successful results that are consistent and repeatable over the long term.

When traders begin the process with realistic expectations, base positions on probability rather than emotion, and create and follow strict rules for a trading plan, it is possible to avoid most of the common mistakes committed by new traders. Since this can literally mean lost money, it is important to approach these activities in a methodical manner.