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Currency Spread Betting – 5 Secrets You Should Know

Currency spread betting. Foreign exchange. FX. Forex. It’s all one and the same thing and if you’ve read my entries under Forex you’ll know my view on this particular method of financial trading. But I’m not totally against it. I really do believe you can profit from it provided you adhere to certain conditions, one of which is not to expect too much from it.

First let’s remind ourselves of the anomaly. Thousands of web sites and sales letters try to convince us that making massive profits from betting on currency fluctuations (forex) is easy and anyone can do it. Yet over 95 per cent of people who try to do it fail, and often lose all their money.

How can you give yourself the best chance possible of joining the tiny elite that actually do profit from it (at the same time not being part of the trading team of one of the big banks that dominate the forex market)? Here are five secrets that should put you in pole position to succeed.

1. It’s not the unregulated, uncontrolled market they make it out to be.

All the web sites selling forex related information and software tell us that the forex market is huge. It trades around $3 trillion worth of currencies each day, with many thousands of traders, big and small, pitting their wits against each other. So you can’t get market manipulation, because it’s so huge no-one could manage to do it.

Well, it’s certainly true about the size of the forex market. But it’s not quite as uncontrolled or free of manipulation as it’s made out to be. In fact, only about 20 huge multinational banks control at least 90 per cent of what’s going on in the forex market at any one time. They have thousands of professional, experienced traders working on their behalf to earn them profits. These are the people you’re up against, so do your homework before you start trading with real money.

2. Profits in forex are not as enormous as is made out.

You can’t regularly earn thousands a week with an investment of just a few hundred. The web sites that tell you that you can are lying, pure and simple. The huge banks that make the lion’s share of all the profits in currency spread betting make on average 30 per cent a year. That’s a handsome profit margin by anybody’s standards, but it’s not the phenomenal percentage that the sellers of forex information and software would have you believe you can achieve with your limited capital.

3. To survive and profit in forex you need iron self discipline.

Before you enter any trade you need to know exactly what your target profit is and how much you are prepared to lose if the market goes against you. Set a realistic stop loss level of the lowest (or highest, depending on whether you are going long or short) the market has been over the last two months (or whatever other trading period you consider applies), plus another 20 per cent.

This means you need a certain minimum amount in your account, and even then you probably need to be modest in your ambitions. Otherwise you will soon lose your money. You need to be able to ride the volatility. Look at the charts and do the maths.

For the same reason you need to set your profit limit, so you exit the trade as soon as it has been reached. Don’t be tempted to go for another few points. Be satisfied with what you have won. Losers are destroyed by the main driving forces of the market – fear and greed. Self discipline will free you from both.

4. Practice with a demo account first.

This is vital. Nearly all brokers offer demo accounts. Or you can find one through searching. Practice with your demo account for as long as it takes until you have regular profits. Don’t be tempted to trade with real money until you have achieved this. And even then start with a Forex Mini Account.

5. Find yourself a genuine mentor as soon as you can.

He or she must be a real trader, not someone who makes their money by selling information on how others can trade.

Find yours by going to our home page and completing the form for your free mp3 interview with Vince Stanzione, Secrets of Successful Trading.