90 percent of spread bets are unsuccessful, and one magazine article said that only two percent of traders make considerable sums of money. A source at one spread betting company said that spread betting accounts remain operational for an average of only six months before the customer gives up. Failure can often be attributed to a small number of common mistakes.
Spread bettors must specialise. They have to choose an index, commodity or currency pair. A scattergun approach might be fun for a while, but will not make money.
Failure is likely if a trader has no plan. Risk and profit objectives must be established prior to trading. When a plan has been created, it must be adhered to. Traders can be discouraged by losses and so pass up on future good trading opportunities. Neglecting to use stop loss orders can cause large losses.
Traders often fail to realise that any news they read has already been processed by the market. Inexperienced traders will frequently enter a market due to a story in the morning paper which has already had its effect.
Failure is probable if a trader relies on “gut feelings” and “hunches” instead of sound technical reasoning. A common problem is for there to be too much impulse and not enough research.
Traders might have a directional bias, always wishing to be long or short. A good trader should be equally happy trading in either direction.
Failing trades should be exited as soon as possible. Newcomers to spread betting can become emotionally or, even worse, financially committed to a single trade, and are unwilling to take a loss. Traders should be able to admit they have made a mistake.
It is possible to overtrade. A study by the University of California entitled, Trading Is Hazardous to Your Wealth, stated that the most prolific traders experienced the poorest results, while those investors who traded the least made the most money. A trader should not wish to be permanently “in.”
Losses are likely if you attempt to run before you can walk. People with sizable savings might be tempted to stake big money per point at the start of their endeavour, instead of pennies per point for the first few months. Impatience is wholly incompatible with spread betting.
A sure-fire way to lost money at spread betting is to place undue reliance on online mentors. Many people offering themselves as spread betting specialists online really know no more than anyone else.