Spread Betting For A Living

Spread Betting For A Living

March 1, 2011 by Harry Category: blog

No Comments - “Spread Betting For A Living”

I know it’s been quite a while since I last posted anything. My life just seems to get busier and busier these days. Still maybe one day I’ll be spread betting for a living then I can spend more time on the site and improving my knowledge.
I was looking back through an old 2009 diary the other day and I seen some notes from my first trades as a spread better. I opened my first live spread betting account with paddy power on 12th February 2009. I funded the account with £50 and shortly after added another £50. The interesting thing is some of my first trades were in the FTSE. “What?” I hear you cry. “You spread bet the FTSE with only £100 in your account. Nutter!” Looking back now it certainly was a crazy time for me. I think the only reason I didn’t lose it all in one go was because I used stop losses right from the very beginning. This would seem to be something that is engrained into me. I think I’m very cautious when it comes to risk, which I guess is a strange statement for a spread better to make.
I soon realised that if I continued to “gamble” then I was going to get no where and I would be out of the game before I’d given myself a fair got at it. So I brought a book. The financial spread betting handbook by Malcolm Pryor. I don’t recall how I discovered the book, I think I must have just been Googling around or stumbled across it on Amazon . I was fascinated by this book, and still am. I personally think it’s one of the best resources for a spread betting beginner. It contains so much useful information and gets you started with some excellent strategies.
So why am I recapping my spread betting history? Well I seen a post over on spread betting central from a newbie to the spread betting world. He is basically on the path I was two years ago. When you start to read and study the art of spread betting it can get very complicated, very quickly and unnecessarily so (In my opinion). If Gary is reading this then I would emphasise the KISS (Keep It Simple Stupid) philosophy. Don’t get bogged down with to many indicators and think that one holds all the answers and is the key to the ‘Holy Grail’. I think the ‘Holy Grail’ is a state of mind. You first need to conquer yourself and learn how you operate in order to succeed at spread betting. Accept that losses are a fact of life and are unavoidable. Accept that you will be tempted to over trade. Learn to wait for the right opportunities to come along, never trade for trading sake. These are just some of the lessons that need to be learnt on the path to successful spread betting.
You may think I am rambling on about the same old things here but for the spread betting beginners out there such as Gary these are important lessons and the earlier you learn them the better. The overall goal of this spread betting blog is to help others avoid the same mistakes I have made.
So onto the good stuff. My latest trades. Well unfortunately there have been no new trades for me. I’ve been adjusting stops but even that has stopped with the recent dip in the market. To be honest at the moment I just haven’t had the time. My problem is I keep taking on more and more things and I just seem to be getting less and less done. Still when I’m spread betting for a living I’ll have much more time to dedicate to spread betting. It’s funny financial spread betting has really become a passion for me. I enjoy everything about it. Hopefully one day I’ll make a career out of it.
Until next time,
“May the markets be with you!”
Harry,
The Spread Betting Beginner

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Shobhit Seth is a freelance writer and an expert on commodities, stocks, alternative investments, cryptocurrency, as well as market and company news. In addition to being a derivatives trader and consultant, Shobhit has over 17 years of experience as a product manager and is the owner of FuturesOptionsETC.com. He received his master's degree in financial management from the Netherlands and his Bachelor of Technology degree from India.

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Samantha Silberstein is a Certified Financial Planner, FINRA Series 7 and 63 licensed holder, State of California life, accident, and health insurance licensed agent, and CFA. She spends her days working with hundreds of employees from non-profit and higher education organizations on their personal financial plans.

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Forex Leverage: A Double-Edged Sword

10 Ways to Avoid Losing Money in Forex

Spread betting refers to speculating on the direction of a financial market without actually owning the underlying security.

Guerrilla trading is a short-term trading technique that aims to generate small, quick profits while taking on very little risk per trade.

Investing is allocating resources, usually money, with the expectation of earning an income or profit. Learn how to get started investing with our guide.

An outright option is an option that is bought or sold individually and is not part of a multi-leg options trade.

In sports betting, a parlay bet is a bet made up of two or more individual wagers. Combining bets makes them harder to win but increases their payout.

The HSX or Hollywood Stock Exchange is an online prediction market where people place virtual bets on the performance of the entertainment industry.

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Spread betting can yield high profits if the bets are placed correctly. Most spread betting traders are successful only after creating a systematic trading plan following years of experience. Only a small percentage succeed and the majority fail. We look at the important factors for success and profitability for spread betting.

NOTE: Although popular in Europe and particularly in the United Kingdom, spread betting is illegal in the United States. The Commodity Futures Trading Commission prohibits the sale of foreign security futures products to retail investors based in the U.S. 1

Assume a stock is trading at 300 pence. But due to its illiquid nature, the bid-ask spread is wide at 290–310 pence. Because of the wide spread, a buyer who pays 310 pence for their position doesn't make a profit even if the stock jumps 3.33% to 310 pence.

Now take a similarly priced but highly liquid stock. Its spread is tighter at 298–302 pence. A buyer who pays 302 pence for the position will profit after a smaller move. Betting on instruments with tight spreads improves the potential for profits significantly.

How much total trading capital is available? How much money will be used per spread bet? How frequently will spread bets be placed? Answers to such questions help create an efficient trading plan.

Having £50,000 and blowing £25,000 on a first bet will leave you at a significant loss. With the remaining £25,000, you need to gain 100% profit just to recover your lost money. The profitability of spread betting can be improved substantially when one enters with a clearly defined spread betting plan, which is based on total capital, bet amount per sequential bet, and frequency of placing the bets.

Structuring bets properly can allow one to be profitable in the long run, even if your losing trades outnumber your winning trades. Consider Ami, who on average wins 4 of every 5 bets, while Ben only wins 1 of every 5 bets. Whose trades are more profitable?

On the surface, the answer would seem to be Ami, but it depends on bet sizing and the risk-reward scenario.

The key is placing bets in the right size given the risk versus potential reward. Losing multiple small bets for the chance of a single big win can pay off if trades are structured properly.

A UK-based spread betting firm like CityIndex offers spread betting across 45 global markets, with asset classes including stocks, indices, forex, commodities, metals, bonds, options, interest rates, and sectors.

Most novices tend to simultaneously play around in multiple markets and securities without a clear understanding. One should build expertise in a few asset classes. Attempting to generalize will lead to mounting losses.

Most spread betting firms offer a free practice demo account. Learn the tricks of the trade, backtest the structured betting plan, and practice it multiple times before jumping in with real money. Markets will remain forever, but real money lost during an initial phase of ignorant and inexperienced attempts will be difficult to recover.

Once comfortable with virtual returns, enter with real money. Start small and then expand as the betting profits increase.

Spread betting is available on leverage , which magnifies profit (and loss) exposure despite limited capital. With £100, a 10% leverage margin can allow one to make bets for up to £1,000. Leverage is a double-edged sword. It magnifies profits when a bet works favorably, but also the losses if it goes wrong.

Successful spread bettors use leverage efficiently with tight controls, while novices get tempted to take large positions and end up blowing their accounts. Controlling the leverage usage, based on a realistic availability of the capital amount, is necessary for success in spread betting.

While devising a trading plan, or while comparing performance from different trading activities, it is important to factor in the tax benefits available in spread betting. This is a very significant factor in making genuine profits.

Spread betting, though illegal in the U.S., is very popular in the U.K. and European countries. It offers potential for high profits, but most traders when they start due to inexperience. Building sufficient knowledge, selecting the right instruments, and practicing and backtesting a trading system can assist in generating profits from spread betting.

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A: You can but it takes time to acquire the knowledge. First pitfall is being seduced by penny shares which promise huge percentage rises. Next one is being attracted to quick win 'Day Trading' systems.etc perhaps trading. Sure you can get lucky e.g. KMR, but projects can easily get delayed and before you know it 12 months have passed and you're still waiting, e.g. Minco! Today I mostly trade wider trends using highly liquid, large cap stocks which are traded 1000's of times a day by the banks, funds.etc. It's a case of 'buy high and sell higher' and of course 'the trend is your friend'. Never buy a share just because it is cheap - it can get a lot cheaper! Same for a rising price - no such thing as it can't go higher. Of course penny shares will always have a place, say in 10% of a portfolio. But they should be the exception NOT the rule. As long as you cut your losses short and let your profits run, you will make money. However you need to apply a strict stop loss, say 7% - 9% from your entry point. And you leave it with your broker so it will be executed automatically and without you being able to change your mind. Turn off your monitor and stop looking at live prices. That's what I've learnt! Even if you are wrong 7 times out of 10 (or more) on your stock picking, as long as you apply the above discipline you will make money. I prefer to let my profits run, the reason being you need to cover costs, i.e. the other losing trades!
Do not try not to average down or add to a losing share. Keep it running of course assuming that your stop loss has not yet been hit. And rather, try and add to winning positions, those that are really going up. The reason behind this is that the smart money will be doing the same.
Also, you can increase your chances of success by trading with say, 'sector rotation'. The big money moves in and out of sectors. You just need to be aware and take advantage. Recently money came come out of energy and in to the more defensive stocks e.g. banks. It's one of the reasons why the Dow has taken off of late, money was rotating in there from smaller caps after the market recently decided to re-asses risk, figuring while these companies may not double overnight, neither will they halve.
A simple moving average trend following system will never get you in at the bottom since these systems never buy a falling share price. Nor will they get your out at the top. The aim is to grab the chunk in the middle. But you will have the vast majority of the market's money trading in your direction and moves up can be swif.
Just respect the leverage and obey your rules and over time you will make money.
A: Different strokes for different folks really. It really depends how active, what trading time frame you use, average length of trades, percentage capital at risk...etc.
Perhaps it would be helpful if you did the sums backwards? In other words, how many points do you need to make in a year; from that you can see how big your stakes need to be and how much money you would need to survive a losing streak.
For those thinking of doing it, a backup fund is needed for security and to take some of the stress away. Also, a part-time job (hours - non trading times) would be sensible. Think of it as you would any business. You need a business plan, finance to see you through the first 6-12 months. Taking your profits out at the end of each month will not work. It needs a structured approach. Ideally you'd only want to be taking half or less of your income out of the account so that it can still grow constantly. Taking exactly what you make out and keeping the account the same size isn't going to work, because as soon as you hit losing streaks your account is going to start shrinking rapidly.

There is no such thing as easy money . In reality all profits are a factor of work, be it risk or actual labour. If you are just starting out bet very small and measure the results. Betting with real money however small is different from doing it on paper. However, if you bet too big, random market swings will blow you out of the game. This is called 'gamblers ruin'. If you bet too big you will always lose even if you are generally right. Spread bet are leveraged but you should avoid using too much of this leverage on any one single bet.

Warning: It is difficult to make a living from day trading - findings show that 80% lose money on spread betting. You have to be very disciplined and if you are day trading it is very easy to end up in a situation where you make money one day only to give it back the day after. I don't do it for a living, and don't think I could handle the added pressure of having to make a certain amount every week. That said, I have been trading for many years and been doing ok, one thing is that for sure you would need to put more than £2,000 in Ayondo if you want to take matters seriously!
Look at it another way though. Say you start with £20k while you have a full time job, and you manage to grow the account by 30% a year every year. After 7 years or so you'll have over £100k if you don't touch the profits. Then, you could consider leaving the full-time job being much more experienced and able to trade.
A: My father used to train race horses. I would go to the track in the mornings with him and this 'the one that got away' sort of talk brings back memories. Every gambler has a story and a strategy. I always wondered where they got the money to stake with.
I'm just here to explain a little about how the business works. That said, your emotive tone causes me concern. Sound investing is founded on detachment and a sober view of things. You are already talking like you need to chase your losses come hell or high water. Please do be careful, I know a lot of people who would love to take that 100K off of you.
You put up these arbitrary goalposts, e.g., 'two years then I'll be expert and play the big bucks'. Why two years? I worked with traders for two years and they better understood how to interpret what was happening in the market, but I never got a sense that they suddenly became great visionaries.
You seem like a nice person but looking for an angle - in your case spread betting strategies. There is quite plenty of material on this site and the Internet on strategies which you can peruse, but I do know what causes me concern. To me it's not much different and setting you up to be preyed upon like Inside Track. For instance, I happened to read a hilarious forum post on a crashing house price forum about some woman in Surrey who bought all these buy-to-let places in the usual dumps like mini-England in Spain and Orlando (the latter being the white trash capital of the world IMHO btw). It was apparant from reading about the place in Spain that she bought it sight unseen. Can you imagine buying a home without ever even looking at it in person!?!?! Shocking, sad and laughable. The point is that the woman assumed buying a house = make money. Perhaps you are assuming that 2 years spread betting every day = make money?

I can only say that prudence and a good education has kept me debt free and allowed me to live my dreams of living in Europe. You need to define happiness for yourself first at the outset before you proceed. Reading your e-mail, I am concerned that happiness for you is the thrill of a gambler.
A: A very interesting question indeed... here is my honest opinion. Unless you have extremely large capital I personally think it is very hard to make enough income from just trading. Let's say you can make 20% after all costs a year which would be good going. You'd need £300,000 to make £60,000. And of course if you take the money you aren't increasing capital
But what I think is that if I needed to live off my trading completely I would be a much worse trader. Why? Because of the pressure of having to make money all the time. To suddenly rely on trading to replace your income can surely not be void of emotion. Add to this the volatility of day trading and that's why it can be so dangerous. What happens if you start to approach your deadline and realise you haven't r
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