Don't Trade the FTSE (Or any other indicies or currency pairs) for at least a YEAR!
This is a rule which I myself have broken many times and have paid the price for it. If like me you are trying to learn the ropes of spread betting with a small amount of funds then I would highly recommend you do not trade the FTSE for at least the first year. The FTSE can easily move 100+ points in a day. So even trading at the low price of £1 per point this could still mean £100+ move aginst you in one day. If you are only trading with around £1000 it will only take 10 bad trades like this to wipe your account out and probably put you off spread betting forever. This is not what you want is it.
I try to stick to a rule of only risking 1% of my trading capital on any one trade. This is another rule which I will cover in another post. Again I have broken this rule which is how I have ended up with a current £500+ loss. If you stick to this rule then you can make 100 trades with your £1000. Law of averages says that you should win at least 50% of the time so if you stick to 1% risk then you should alway live to trade another day.
I have tried to trade the FTSE with only 1% risk but this is a very difficult thing to do. The FTSE can move 10 points in a matter of seconds so you can be very qucikly stopped out of a trade. When I have tried to trade the FTSE I have tried to identify support or resistance lines(which I will cover in another post soon) and place my trade based on these. Identifying support and resistance is a bit of a skill which I have yet to master. Hence the reason for mostly losing money on FTSE trades.
Therefore I have decided that the FTSE can wait until I have more confidence in my ability to trade. I am (for the time being) an position trader. I am buying and holding. As the great Warren Buffet said "Our favourite holding period is forever". This is going to be me from now on. I am going to buy and hold and move up my stop order as the position moves in my favor.
Never click the buy or sell button
I have lost money by making rash descisions when it comes to trading. When I first started I looked at a chart and thought its going up so it will continue to go up so I'll buy. Big mistake. More often than not I was buying at the top and the price started to drop as soon as I clicked the buy button. It's for this reason that I now never click the buy or sell buttons. I prefer to plan my trades and set them up as orders in my spread betting account. I'm even trying not to click the buy or sell button to take any profit. I want to move up my stop loss orders to keep locking in profit untill the move is over so I caputre as much of it as possible. This way I cut my losses short and let my profits run and run and run.
Don't Boredom trade
I have lost alot of money this way. When I have been bored looking at my trading platform I have traded the FTSE and other indicies and equities purely out of boredom. It's a hard thing to resist but this, as I found out the hard way, is no different to gambling. If you feel the urge to trade out of boredom with no strategy behind the trade, run away from your computer as fast as you can. Go find a mirror slap yourself in the face and ask yourself "What am I doing". Turn your computer off. Go outside, sit in the garden, smell the flowers, cut the lawn, make yourself a snack, phone a friend who you haven't spoken to in a while do ANYTHING ELSE to stop yourself from boredom trading. I've been there done that and each time I've done it and lost money I ask myself "why did I do that?" Don't make the same mistake. DON'T BOREDOM TRADE
