Profitable Trading - it's Not Easy, but it's Possible

LONDON, November 26, 2012 /PRNewswire/ --

When hosting our seminars I regularly get asked "how do I make money trading the markets?"  Spread betting is just one way you can get access to thousands of global markets from one account, with one of the main benefits being that any capital gains are completely tax free (although this is a UK law that depends on individual circumstances and is subject to change).  Attendees to our regularly held seminars and webinars come not necessarily to hear why they should use spread betting or how to trade online, but they want to be told the winning formula that'll make them a millionaire in the shortest space of time possible.  Unfortunately, in answer to the original question, Capital Spreads is an execution only broker so we cannot offer advice, however we can educate new or experienced investors by informing them about what strategies are popular and most importantly, where clients continually make the most errors.

As the title to this article suggests making money via any form of investing is not easy - otherwise everyone would do it.  One of the most common mistakes that people make, in particular beginners, is that they have unrealistic expectations believing that all they have to do is place a few £10 bets and they'll spend the rest of their lives trading via a laptop from a beach in the sun.  So the first thing to appreciate is that trading is tough, you're not going to become an expert overnight and those who do master it are generally in the minority.

In fact the failure rate tends to be much higher the shorter your time horizon.  Most people who start spread betting fall straight into the trap of choosing the shortest time frame and the most unpredictable markets to trade.  It's no wonder so many first time traders fail so quickly when they jump into the deep end only to realise shortly after they don't know how to swim.

Not long ago I met someone who said it took them about five years to learn the hard way before becoming a profitable trader.  They started by making most of the common errors beginners suffer from and then spent lots of money on various courses before losing more money until eventually after years of practice they found a technique that worked.  The key was finding suitable a risk management strategy which helped to control the emotional side of trading.  Controlling one's emotions is a very important part of any type of trading or investing and so once you've cracked this then a lot of the other things fall into place because decision making can become so much more rational.

Often it can help by going back to basics and going over those first steps taken when starting out, for example ensure that you are trading a market that suits you.  It can take people a long time to realise that they may actually be trading a market that doesn't suit their risk management style, it's too volatile or they simply don't understand it.

One thing is for certain though - a profitable trader isn't one who is prone to running their losses.  This tends to be one of the most common mistakes and the main contributing factor to the good old 80/20 rule (80% of retail clients who trade on margin lose money).  Some traders allow losses to build as the market moves further and further against them, in the hope that the market will turn and the trade will eventually come back into profit. This is a strategy that losing clients employ as it's in human nature not to want to incur a loss.  Even those in the know are often still guilty of doing it.

To become a profitable trader takes hard work and effort.  The path is long, the path is undulating, but for the few who make it the journey is well worth it.

While LCG attempts to ensure that the information herein is accurate at the date the information was produced, however, LCG does not guarantee the accuracy, timeliness, completeness, performance or fitness for a particular purpose of any of the information provided herein and under no circumstances are they to be considered an offer, solicitation to invest or be construed as giving investment advice.

Spread betting and CFD trading carries a high level of risk to your capital and you can lose more than your initial deposit.

Capital Spreads is a trading name of London Capital Group Ltd which is authorises and regulated by the Financial Services Authority.