Winning spread bets don’t necessarily make profits

Joshua Raymond the City Index resident market strategist wrote a nice article on Linkedin (The truth about whether trading is actually winnable) which is basically about how unfair it is that everyone assumes that 90% of spread betting traders lose money.

There were lots of data, charts, and information about how actually 60% of trades in a month were profitable.

But no actual information about whether the net profit or loss was positive or negative.  One would have to assume that as this is basically an article promoting spread betting that if the clients were net up at the end of the month they would have said so.

Placing winning trades is not difficult.  It’s actually very easy to get bets right.  After all, the market will only do one of two things.  That is, it will either go up or down and you are either right or wrong. And with even the most basic use of market timing, a trader can get an edge. However, the difference between good and bad traders and those who make money is the trading strategy employed once a position is open.

It is well known that traders and investors do not get it right all the time.  That is why diversification and breathing room are the foundations of trading.  Where investors and traders always go wrong is that they cut profits too soon and let losses run on for too long.  What traders should do is cut losses and run profits.

However, as with all gambling, spread betting (unless it is being used by professional traders or hedgers) is primarily the playground for “fun money”.  Fun money being a small percentage of an overall portfolio allocated to high risk, high reward trading strategies.  Therefore it’s usually emotion that gets the better of traders.

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The thing about losses is that they can get seriously out of control very quickly.  Which can result in one losing trading wiping out the profits of ten profitable trades.  That is a more realistic overview of why people say that 90% of spread betting customers lose money.

Of course, if you want to improve your spread betting strategies you can study up by reading spread betting books.  These books don’t promise to make you rich, what they do is help consistent approach to financial spread betting.

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