Spread Trading Tips

  • 01

    Use discipline

    Decide on your trading strategy and stick to it. It can be tempting to try and change your technique midway through a trade, but it is extremely risky. There is a chance that revising your plan on such short notice will work to your advantage, but generally if you enter a trade with a certain plan in mind, throwing away that strategy and replacing it with something else is not advisable. For example, selling your current ‘long’ position in a falling stock and hurriedly shorting the stock instead is a high-risk strategy; you might recover your position, but you could double your losses instead.

  • 02

    Set realistic goals

    Whilst it is often a good idea to have a clear goal in mind when you place a trade, it is wise to be pragmatic about results. In other words, it is extremely unlikely that you will change your life on your first trade. By managing your expectations more effectively, you can help yourself from becoming too disheartened if the markets do not go your way – something that is inevitable sooner or later, since even the most successful traders do not make money 100% of the time.

  • 03

    Understand your market

    If you were planning on investing in a company, would you hand over your money with no questions asked, or would you take the time to research the company, looking at previous performance, current forecasts and any information you could find concerning the business?

    In this regard, online trading is no different. As with regular investing, it is wise to do your due diligence before trading a stock, commodity, index or currency pair. It is certainly not impossible to make a profit without conducting analysis beforehand, but properly researching a product prior to trading it may help you make better informed trading decisions.

  • 04

    Be prepared to cut your losses

    Sometimes it can be better to close a trade that is going badly and accept the loss that goes along with it rather than staying in the trade and hoping that your position will recover. Though positions can sometimes recover, it is always worth remembering the following; just because a stock has already fallen by 90%, there’s no guarantee that it won’t subsequently fall by another 90%.

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