Winning investors are obviously those who are making money from the markets. Winning investors are not necessarily those with the most complex strategies or the most fashionable tools and charts. Winning investors get the job done and are only concerned with one outcome: money in the bank.
Spread Betting Tips: What Winning Investors Spread Bet On
So what do winning investors spread bet on?
- Volatile Assets
The nature of the spread bet is such that winnings are a function of how far an asset has moved in the chosen direction. Therefore, a spread bet will not win anything significant in an asset that just sits around in a tight, constricted range. This situation not only does not produce profits, it ties up badly needed capital. A trade opportunity with better promise may shop up and if margin capital is tied up in active e non-performing trades, it can lead to more frustration. So winning investors will do their homework properly to ensure they only put their money in assets with enough volatility to get trades decided quickly.
- Trades with Greater Risk-Reward Ratios
Believe it or not, a spread bettor does not need to have more winning trades than losers to make money. Those who do not know how this works will quickly dispel this notion as an anomaly. However, if you understand how this works, then you will understand why millionaire traders like Bill Lipschutz only trade when there is a setup that promises a much higher reward than risk.
With regards to spread betting, what is meant by risk and reward? Risk may refer to the number of pips used as the stop loss, while reward is the number of pips that exists between the trade entry point and the Take Profit point. A trade which risks 30 pips as stop loss with a potential to gain 120 pips has a risk reward ratio of 1:4, which is good. This means that it if a spread bettor gains 120 pips in a trade, then it will take a sequence of four losing trades to wipe off profits. If a spread bettor wins a trade with a risk-reward ratio of 1:1, then it only takes one losing trade to erode profits. This is why winning investors only spread bet on trades that will produce a high risk-reward ratio. This is a strategy which has been tested over time and found to be a good strategy.
- Assets That They Understand
Winning investors only spread bet on assets whose behaviour and character they understand. Trading assets that are familiar and properly understood guarantees a higher degree of success than trading assets which are unfamiliar. For instance, what are the chances of a trader placing a successful spread bet on an asset whose volatility pattern is not known? It would be difficult to predict the outcome of such a bet with certainty. It would be easier for a spread bettor in the UK to place a spread bet on an asset like Lloyds or Barclays, than it would be for such a trader to place a spread bet on Banco Santander. These are all bank stock assets, but they operate under different conditions and under different fundamental influences. Winning investors know that chances of winning a spread bet improve with assets which are better understood, and that is what they go for.
- Popular Events
Winning investors spread bet on poplar events for which information is readily available. For instance, those who spread bet on soccer are more likely to spread bet on the English Premier League (EPL) than in a league based somewhere in a far flung corner of the globe. The EPL’s marketability has spread it far and wide and even people in remote villages have at least heard of Manchester United or Arsenal. How many people can readily reel off the names of teams playing in the leagues of South East Asia? It is far easier to spread bet on an event such as how many times Lionel Messi would score in a game than on how many times Ikechukwu Ezenwa would concede for Sunshine Stars. One player is better known and has greater visibility than the other. So winning investors will keep their spread bets to assets or events that are better known and have more information in the public space than others.