Tag Archives: Emotions and IQ

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Spread betting trading : Emotions and IQ

Contrary to what most novice traders believe, success in trading or financial spread betting is not down to your understanding of winning strategies, trading systems or even money management techniques. Of course, all these enhance your chances. However, most successful traders agree on one basic premise. The single most important element of successful trading or spread betting is the mental or emotional aspect. Unfortunately, this element is usually the last to crop up in the mind of the novice trader or spread better and as such it is usually the last to receive any attention.

If there is anything that we hope to pass on to you on this website, it is this: true mastery of financial spread betting will only come once you have mastered what I refer to as spread betting emotions and the attendant emotional response to the markets.

Notice that we wrote “emotional response”. This is because no single trader or spread better has any control over the markets. The only control we have is over ourselves and our decisions. As we conduct our analysis, the best that we can hope for is that we interpret correctly what the data is saying. As professional traders say, the market has a mind of its own and it will do what it wants. While our analysis may turn out to be correct or wrong, the real determinant of whether or not we end up winners or losers is our emotional or mental reaction to the result of our position in the market. How you deal with your spread betting emotions is crucial to your success.

Consider for instance that unlike with most other activities, in trading as in financial spread betting there is really no starting or ending point. The wheel is in constant motion and you decide when to get on and when to get off again. Either way, the party goes on. This presents a number of challenges for novice traders and the professionals alike. Spread betting emotions often lead to over trading for this reason.

Even after conducting analysis, where does the novice spread better find the initial confidence to pull the trigger especially when faced with all sorts of contradictory spread betting emotions?

• Good times may be easy to deal with but, how do you deal with the emotional drain of down times without digging yourself deeper into the loser’s hole?

• If you find yourself in a bad trade, how do you work your way back out? Quite often, the best option is to cut your loses and get out of the trade asap. But try telling the novice spread better that a small loss may well be the best way to learn an important trading lesson. Bottom line is that this is emotionally difficult to accept.

• How do experienced traders push through the ceiling of profitability that caps their initial trading years and make a truly fabulous living?

Trading and financial spread betting are performance-oriented activities. Stress and mental pressures can inhibit your ability to function effectively with potentially nasty implications for your bottom line.

Here are a number of important points to note as you develop a winning mental attitude to financial spread betting:

• Intellect (at least in the academic sense) has nothing to do with your ability as a spread better. Success is not a function of how smart you are or how high your IQ is. This is hard to accept for most people.

• No matter how long you have been spread betting, there is no customer or client goodwill built up each day in your business. Each day is a clean slate. Try and maintain a sharp focus during the trading day. Just as importantly, make sure you take time out of the market every now and again to recharge your batteries. The market can be mentally draining and spread betting emotions can often run high—even for the most experienced players.

• Success in financial spread betting is not a factor of how much effort you put in. Simply put, the traditionally 9-5 work ethic doesn’t apply in this business! A trader could sit in front of a screen all day waiting for a trading opportunity and have nothing happen. Patience is crucial. There is a temptation—often driven by what I like to refer to as spread betting emotions—to take marginal trades just so you feel like you are doing something. Do not fall into this trap. Spread bet only when there is a clear money making opportunity.