Financial Spread Bet - How to Make Profits from Them?

In the UK, betting/gambling is big business - and online betting is huge and growing. Traditional gambling avenues have been through sports - horse racing being the oldest and now football is becoming a major sector. Traditionally, gambling bets have been considered private in the sense that any monies won or lost have been outside the tax system. This seems an anomaly: Why would tax authorities give up the chance to gather mountains of tax from the hordes of winning punters?

The cynical (and correct) reason is that to tax gambling winnings, the losses of the losers would have to be made deductible against income. And I think we all know there are many more losing punters than winners. Bookmakers, who make profits, are taxed. That way, the tax authorities are kept happy, and do not forego any lost tax on the gambling losses. It's a cosy system.

That brings us to the financial spread bets. We who spread bet on the financial markets place bets on a continuously changing profit/loss scenario in the Dow, the FTSE, Gold, Currencies. By contrast, sports betting is fixed odds - you either win a fixed amount, or you lose. And because financial spread betting is a leveraged product, only a small fraction of the total value of the product is put up by the trader.

Just like giving a Formula 1 racing car to a 17-year old, for the inexperienced, financial spread betting can be extremely hot to handle. That is why I recommend the three pillars of successful spread betting:

Pillar 1 - You need a good understanding of your character and motivations. Financial spread betting can play havoc with your emotions, and you need to be prepared for setbacks (and bonanzas!). Luckily, there are several online trading personality tests (free) that can pinpoint your strengths and weaknesses.

Pillar 2 - You need a sound money-management strategy that makes use of stop-loss orders. Management of stops can make or break your account! When in a trade, I like to move my protective stop up to break-even level as soon as is practical. In any case, I use the 3% Rule, which means that if a trade goes against me and I get stopped out, I will lose no more than 3% of my account size. Luckily, with a calculator, this can be worked out quickly - before the trade is made.

Pillar 3 - The least important pillar is what is your trading strategy! This may surprise you, as we are constantly bombarded by one miraculous system after another, as if by buying it will guarantee instant profits. But if you use very simple chart-based methods that have worked for generations, all you need to give yourself a great chance to make profits is Pillars 1 and 2, together with: Either a trend-following system (buying on the dips in a bull market), or a Fibonacci/Elliott-based system for trading turning points that I explain in other articles.

But the key to success is to be consistent and disciplined with your methods. You must preserve your capital at all costs - using the 3% Rule should ensure this, if you let your profits run.