When you’re just starting to explore spread betting and stock trading, it’s nice to hear about real examples from ordinary people already making money doing it.
At the same time, you’re acutely aware of the potential for shysters and tricksters to put a front on to try and make themselves ‘look the part’. You’ll come across shiny cars, idyllic waterfalls, infinity pools and Rolex watches, not to mention the wads of actual cash. It all seems too good to be true.
I see tons of examples of this every day in my Instagram feed and I can’t help but wonder why so many continue to fall for it.
Undoubtedly, the tricky part for new spread bettors or traders is finding good, honest, actionable trading advice that can help you go from knowing almost nothing about trading to being competent enough to make surplus income every month.
I hope that by showing you (in a pretty unglamourous but straightforward way) how I managed to make £25,101 in 2018 spread betting the financial markets that you’ll be able to take the shortcut to profits and avoid being bought by the bullshit.
My Five Straightforward Steps of Good Fortune
Whilst I’m reluctant to call anything that I’ve done a ‘success’ (I prefer to stick to the idea that spread betting is gambling and any success is down to good fortune), I do believe my lucky streak can be traced back through five simple steps:
- Trading Plan: I made the conscious decision to create a trading plan for 2018. The ‘plan’ included a trading strategy, a target and the specific ‘tactics’ I would use to execute it.
- Viable Capital: I set aside whatever spare money I could gather from my previous year’s investments and a little spare cash I had to create a pool of money I could afford to lose.
- Risk Management: I had a very clear, crystalised idea of how much capital I was prepared to risk on each trade (I stuck with my 7-10% risk per trade which has served me well over the last 6 years).
- Careful Stock Selection: I didn’t rush into any trades. My reasons for entering positions were always the same: is this stock showing evidence of strength? or is this stock showing evidence of weakness? When stocks looked strong, I bought (or went ‘long’), when they looked weak, I sold (or went ‘short’).
- Doing Nothing: When positions turned in my favour, I almost always added to them. And I made a determined effort to always ‘do nothing’, and hold them for as long as I could because no one knows where the market goes!
Of course, none of this is new information. All of it comes from the great trading books of history written by much smarter and more successful men than I.
I wrote a post all about my top five must-have trading books of all time and why reading them will fast-track your trading skills and swell your bank balance.
No man can always have adequate reasons for buying or selling stocks daily – or sufficient knowledge to make his play an intelligent play.
Jesse Livermore, Reminiscences of a Stock Operator
#1. Create a Trading Plan
Not everything in life is planned. I’m a big believer in spontaneous happenings but when it comes to manifesting wealth, it pays to have a plan.
Sometimes I think the Universe needs to hear or see your plan out loud and proud before it can send you an opportunity to move closer to it. I truly believe there’s a certain power in imagination that cannot be ignored.
Whatever the mind of man can conceive and believe, it can achieve.
Napoleon Hill, Think and Grow Rich
It is with this thought in mind that I created my ‘Trading Plan’. Such a title doesn’t seem to befit my bedraggled collage of ideas, and I use the term loosely, but intentionally, to encourage you to ‘create’ your own success by first of all imagining it.
The Three Key Elements of My Trading Plan:
- A strategy
- A target
- Some tactics for execution
A Strategy
This is your overarching theme. Your chosen strategy. It’s important you write this down at the beginning so that you resist any temptation to be drawn into other areas.
For instance, my strategy was simply to stick to those assets and markets that had historically performed well for me. I had a good win/loss ratio and had shown consistent profits when I traded equities, so that was my strategy.
Strategy: To trade UK equities only.
A Target
The second part of my ‘plan’, as with any planning, was to have a clearly defined objective – or target. I think it’s very important for you to set clear goals but I also think the Universe responds to these clear goals when you truly believe in your attempt to reach them.
My target was to make £20,000 profit over the 12 month period.
Tactics for Execution
How was I going to achieve this target exactly? What was my plan of action? What, specifically, was I going to do to make it happen?
| Specific Tactic | |
| Follow price action | X |
| Only be invested in stocks with strong evidence of sentiment | X |
| Identify potential new stocks at least once a week after markets had closed for the day. | X |
| Check spreads when opening positions | X |
| Don’t over trade – You don’t NEED to be in the market all the time | X |
BONUS CONTENT: Throwback to My Early Days of Spread Betting
If you’ve read much of my blog, you’ll know I’m not really one for too much planning. It wasn’t always this way though. When I started back in 2012, I was quite strict and disciplined about my trading. I recorded everything.
As you can see, I traded way too much. You’ll also see I traded a lot of forex, commodities and indices. I tend to stay away from these nowadays unless something spectacular shows up.
I was pretty good (not perfect, but OK) at recording all the fine details of my trades; entries, exits, reasons for entering etc. I even took screenshots of my ‘entry signals’ so that I could refer back to them later.
2017 marked the first time I’d intentionally ‘planned and recorded’ my trades since I went through my first retirement from blogging in 2013.
#2. Viable Capital
I started trading with £7,875 in 2018. This was my ‘viable capital’. In other words, this was money I knew I was OK to lose.
It was the total amount I’d accumulated for trading/investing by the end of 2017 after my takings plus a little bit of my surplus cash from other projects thrown in.
Only trade with what you can afford to lose.
I can’t stress how important it is to not gamble with money you can’t afford to lose. When you do this, you tend to make rash decisions and find it difficult to hold onto your winners (or cut your losers quickly).
Being unable to do these two things will prevent you from becoming a successful trader.
#3. Risk Management
The primary purpose of risk management is to protect your capital. You are going to have losing positions when you trade. Therefore, you need to protect yourself from them as much as you can and the way you do that is through proper risk management.
Risk management only works if you follow your principles/rules and to be honest, it’s hard to get right when you first start trading.
I started off as a small account trader with just £500, and whilst I would have loved to not risk any more than 3% per position, the size of my trading capital just didn’t allow for that possibility.
So, I had to risk 10% of my trading capital for each trade I opened. The reason was simple; 3% of £500 is £15. With £15 risk per trade, my position sizes would have to be small (maybe £1 per point or even less), and the positions I opened would need very tight stop losses.
Tight stop losses sound good in theory, but in practice, they usually end up losing you money because all your positions end up getting stopped out too soon – even when the market moves in your direction.
Of course, ‘small’ is a relative term but when I say small stop losses, I’m referring specifically to those that aren’t at least 10% away from the market price.
Remember, each trading day has swings in price that could be up to 5% and with tight stop losses, you often fall victim to them.
Risk Management Example
- Total capital: £500
- Risk per trade: 10%
- Total risk per trade: £50
You don’t want to put more than £50 at risk for each trade. Sticking to simple maths, that allows you to open 10 trading positions for your initial capital.
Now, depending on how good lucky you are at trading, you might ‘win’ or make a profit on 4 of them and ‘lose’ or make a loss on 6 of them.
That means on the 6 you lose, you lose £300.
To be a profitable trader, your winning trades need to recover that £300 loss and make extra on top. To make a 20% total account profit (even with the £300 loss), all you need to do is make sure your four winning trades make a profit of more than £100 each.
In the language of the trading wizards, you need a risk:reward ratio of 1:2 (risk £50 : reward £100).
Here’s a video to explain it in more detail (with images and pics and stuff) for those of you bored with my writing.
#4. Careful Stock Selection
It can be easy to rush into trades. Especially when you have no open positions. Your eagerness to get in the market is oftentimes the most likely culprit for you crashing out of it later.
My advice here then is to slow down. Stick to whatever reasons you have for opening positions and don’t rush in just because you have no open positions.
When & Why Do I Open Positions
The first thing to note is that I never try to ‘predict’ reversals. I never try to get into any move before the move happens. Sometimes I get lucky and the price moves further in the direction it is already going after I get in.
My reasons for opening positions are always based on the same simple analyses:
- Is this stock showing evidence of strength?
- Is this stock showing evidence of weakness?
If a stock is showing evidence of strength (indicated by a settled upward price trend over a 12, 6 or 3 month period), I am a ‘buyer’ of this stock – I go long.
If a stock is showing evidence of weakness (indicated by a settled downward price trend over a 12, 6 or 3 month period), I am a ‘seller’ of this stock – I go short.
A Note on Timeframes
I always try to take a wider view of things. I rarely get sucked into short term moves, especially intraday ones.
Also, all three timeframes don’t need to be going in the same direction. I’m really just interested in the last 3 months, but I do take a look at the last 6 months and 12 months to get a wider context.
#5. Do Nothing
The hardest part of all. Do nothing. Yes, once you have yourself a winning position, you need to learn to hold it for as long as you can to get the most out of that win.
It’s not as easy as it sounds, because even prices that are moving in your favour have volatility, and that means you sometimes find yourself in fear that you are going to lose all of your gains. This can lead to prematurely closing positions.
After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting.
Jesse Livermore, Reminiscences of a Stock Operator
How I Traded to Make £25,101 from Spread Betting in 2018
I wasn’t sure whether to include this or not because I’m not sure how much value it will add for you. I’m happy to share the trades I placed to make my tax free income, but the real value in this post is in sections one through five above which tell you HOW I did it.
Using the steps above, I placed the following trades. After broker fees (interest on margin and stock ‘borrowing’ costs) of £2617, I finished the year with £25,101 tax free profit
Enjoy!
| Stock | EPIC | Direction | Open | Open Date | Close | Close Date | Size | Profit/Loss | Balance |
| Just Eat | JE. | Long | 770 | 10/01/18 | 861 | 20/07/18 | 10 | 910 | 8785 |
| Tullow Oil | TLW | Long | 217 | 11/01/18 | 260 | 24/05/18 | 20 | 860 | 9645 |
| Wizz Air | WIZZ | Long | 3480 | 18/01/18 | 3702 | 25/06/18 | 2 | 444 | 10089 |
| Wizz Air | WIZZ | Long | 3550 | 23/01/18 | 3702 | 25/06/18 | 2 | 304 | 10393 |
| Just Eat | JE. | Long | 801 | 25/01/18 | 858 | 20/07/18 | 10 | 570 | 10963 |
| Cineworld | CINE | Short | 225 | 12/02/18 | 251 | 15/03/18 | 20 | -520 | 10443 |
| William Hill | WMH | Long | 318 | 13/02/18 | 290 | 24/04/18 | 10 | -280 | 10163 |
| Dominos Pizza | DOM | Long | 327 | 13/02/18 | 370 | 12/06/18 | 10 | 430 | 10593 |
| AG Barr | BAG | Long | 625 | 15/02/18 | 750 | 10/12/18 | 10 | 1250 | 11843 |
| AG Barr | BAG | Long | 652 | 12/03/18 | 750 | 10/12/18 | 10 | 980 | 12823 |
| AG Barr | BAG | Long | 630 | 15/03/18 | 749 | 10/12/18 | 10 | 1190 | 14013 |
| Dominos Pizza | DOM | Long | 340 | 27/03/18 | 368 | 12/06/18 | 10 | 280 | 14293 |
| Just Eat | JE. | Long | 703 | 10/04/18 | 857 | 20/07/18 | 10 | 1540 | 15833 |
| Redrow | RDRW | Long | 605 | 11/04/18 | 590 | 12/06/18 | 10 | -150 | 15683 |
| CYBG | CYBG | Long | 304 | 30/04/18 | 287 | 31/05/18 | 20 | -340 | 15343 |
| Playtech | PTEC | Short | 773 | 03/05/18 | 570 | 23/08/18 | 10 | 2030 | 17373 |
| Tullow Oil | TLW | Long | 200 | 04/05/18 | 259 | 24/05/18 | 20 | 1180 | 18553 |
| Tullow Oil | TLW | Long | 202 | 06/05/18 | 260 | 24/05/18 | 20 | 1160 | 19713 |
| Paypoint | PAY | Long | 995 | 01/06/18 | 940 | 12/07/18 | 10 | -550 | 19163 |
| KAZ Minerals | KAZ | Long | 990 | 05/06/18 | 910 | 15/06/18 | 5 | -400 | 18763 |
| Playtech | PTEC | Short | 805 | 14/06/18 | 570 | 23/08/18 | 10 | 2350 | 21113 |
| Syncona | SYNC | Long | 260 | 04/07/18 | 280 | 09/10/18 | 10 | 200 | 21313 |
| Hays | HAS | Long | 200 | 13/07/18 | 193 | 20/07/18 | 20 | -140 | 21173 |
| Petrofac | PFC | Long | 570 | 25/07/18 | 525 | 19/11/18 | 10 | -450 | 20723 |
| Drax | DRX | Long | 353 | 06/08/18 | 420 | 14/11/18 | 10 | 670 | 21393 |
| Royal Mail | RMG | Short | 450 | 31/08/18 | 280 | 27/12/18 | 10 | 1700 | 23093 |
| Easyjet | EZJ | Short | 1520 | 04/09/18 | 1120 | 23/10/18 | 5 | 2000 | 25093 |
| Easyjet | EZJ | Short | 1480 | 06/09/18 | 1115 | 23/10/18 | 5 | 1825 | 26918 |
| Avast | AVST | Long | 280 | 11/09/18 | 262 | 26/10/18 | 20 | -360 | 26558 |
| TalkTalk | TALK | Short | 134 | 25/09/18 | 120 | 17/10/18 | 20 | 280 | 26838 |
| Drax | DRX | Long | 370 | 25/09/18 | 420 | 14/11/18 | 10 | 500 | 27338 |
| Royal Mail | RMG | Short | 350 | 09/10/18 | 282 | 27/12/18 | 10 | 680 | 28018 |
| Drax | DRX | Long | 410 | 05/11/18 | 380 | 15/11/18 | 10 | -300 | 27718 |
| Britvic | BVIC | Long | 860 | 03/12/18 | 800 | 06/12/18 | 10 | -600 | 27118 |
Want to Learn How I Trade in a Day?
You can watch my video series on YouTube if you want to learn all the different bits and pieces of how I trade. I don’t profess to be a teacher, I’m just sharing the things I’ve done that have made me money and might make you money too.
If watching YouTube isn’t your thing and you’d like a more structured video series (to watch at your leisure), then you can get access to my Trade in a Day video Series via Teachable here for just £199.
It contains everything I’ve learned in the 8 years I’ve been trading and might help you take the shortcut to profits on your trading journey.