Continuing from our previous blog, we've summed up that spread betting is a form of investing that shouldn't be practised by individuals who seek to "make money fast", based on its high risk nature. However, high returns and consistent profits are still inevitable to achieve, but only for the minority that understand certain concepts. The type of person you need to become in order for you to be a success, is an investor that takes a strategic approach towards diversifying and risking money. Here's three commandments that may assist you in your journey of becoming a trader. Baring in mind there may be many more, but we're only focusing on three for now.
1) Don't invest with money your not willing to lose - when your looking to fund your account, always keep in mind that wins are not guaranteed, so no matter how effective your analysis may be, there's still a chance that you will lose your investment. Have a monthly plan with realistic targets that work accordingly with a risk management strategy; this should be in your favour, not influence you to risk your monthly food budget just so you can attempt to make more money.
Eg, Monthly income is £500, an individual may be willing to lose £50 seeing as it's 10% and it's not even going to buy them new huaraches, why not. Using a £1 stake size, -£10.00 stop loss, and a take profit of +£20.00, an individual has the opportunity to gain 40% of there investment through one trade. By placing three trades a week, which is 12 trades a month, an individual could potentially make £240 residually, just from risking £50. Now there monthly revenue has increase from £500 to £740.
2) Always have a second form of income - Simply put, trading is not for the unemployed. Always have another source of income, whether it be a day job or a part time. Reason being, when you make predictions based on the fact that if things don't go right you'll need to starve, or won't be able to pay your direct debits; the majority of your analysis will be overrun by emotions. This is a head line factor for failure; don't allow emotions to overcome your logic when executing a trade.
3) Have a long term objective - this will keep your mind In play when things don't go as planned. If you start spread betting for the wrong reasons, your emotions will over come your will power if losses become more frequent. This means that the pain associated with spread betting will over shadow your reasons to stay committed and see it through. This is a stage that majority of traders go through, your mental mind frame will be tested by your actions towards your emotions. As mentioned previously, "making money fast" is not a good enough reason to trade, although it's one of its benefits. See it this way, what happens when you don't make money?
Every loss is a lesson that your suppose to learn from, in order for you to achieve consistent profits, you'll need to master the art of learning from your mistakes and not allowing you emotions to over cloud your logical thinking. Take time to read "Trading in the zone" that'll give you the understanding you need to adopt a certain type of mental structure.
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