subject: A Beginners Guide To Financial Spread Trading [print this page] I first started financial spread trading in the 1990's. To say I dived in head first is an understatement. I had attended a couple of seminars and completed a home study course as well as reading countless books about financial spread trading. I was now eager to earn my fortune. Sadly, it didn't turn out like that. I had no patience and no trading plan. I traded everything and anything and lost a great deal of money. Here are some of my own tips that I wish I had followed when I was a beginner.
Demo Account Trading Open a demo account. All the best financial spread trading companies will allow you to open one free of charge. You can then start placing trades using pretend money. Although trading with a demo account will not feel the same as using real money it will give you a feel for the markets before you start using your hard earned cash.
Start Small When you have gained some confidence using your demo account start trading using very small amounts. Most companies will allow you to place trades for as little as 1/1/$1 point (some even less than that). It does not matter if you only make a small profits. Don't forget this will mean you only make small loses. The important point is that you will be gaining experience and learning to read the markets correctly.
Don't Use Money You Need For Other Things - As harsh as this may sound, you really should only be trading money you can afford to lose. If you are trading with money that you need for other things such as the rent, mortgage payments or other bills you are certain to fail. You simply will not be able to make sound decisions if you are trading with money you are terrified of losing.
Cut Your Losing Trades Short I don't know anybody who likes to admit they are wrong! This fact makes cutting your losing trades short a very hard things to do. It takes experience, courage and above all else, a great deal of discipline. But unless you learn this golden rule you are not going to survive in the world of financial spread trading. New traders, in particular, often find admitting that they are wrong an almost impossible task and simply refuse to close losing trades leading to even greater loses. Cutting your losing trades short is an essential part of your money management. Even if you are correct on less than half of your trades, as long as you cut your loses short and let your profits run, you can still make money. Having three or four winning trades out of ten can make you a winner if you keep your discipline.
Let Your Profits Run Just as important as cutting your losing trades short is allowing your profitable trades to run as long as possible and not close them too soon. Sometimes it may be tempting to close a trade just for the sake of taking a profit. Resist this urge. Ask yourself why you want to close the trade? You may be throwing away even more profit by closing your trade too early.
Don't Get In The Way Of Trends You wouldn't get in the way of a speeding train, would you? When a market is moving in a major trend think of it as a train and don't get in the way. If you do, you are likely to get hurt. A mistake often made by those new to financial spread trading is to buy or be long in a down trend or sell short in an up trend.
The Danger Of Too Much Information Today there is just so much information out there on the internet, on the TV, in newspapers and magazine. In my opinion, you should stick to you trading rules and ignore what others are telling you.
