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Some other tips that I would suggest you consider and that certainly work for me are the following:
1. Have a ‘hedge’ or two in the portfolio If you are long equities overall, having done your homework on the stocks you are trading, being aware that the market can take a tumble out of the blue is a good mindset to have; having an inversely correlated position on like a short index play or currency pair that moves in the opposite direction, for example dollar swiss, will allow you to mitigate a draw down.
2. Take a frequent breaks it’s amazing, to me anyway, what a week or two away from the markets can do for your trading when you return. Don’t get yourself into a situation where you “need” to be next to the screen constantly - you are basically feeding an addiction here. If you are comfortable with your positions, entries and account margin situation, then there should be no real need to watch every tick movement.
3. Avoid at all costs ever, ever, ever being on margin this screws with your mind as you (a) have either over traded or (b) the market is telling you that you are wrong (in the short term anyway) - probably a mixture of both. Either ways, you don’t want to be there. Finally, I read a very interesting article recently on perhaps the most well known hedge fund manager of recent years - John Paulson, the man who made $15bn shorting the US housing market in 2008. Here is a quote from him that he made following a halving of his flagship Advantage Plus fund in 2011, and another 12% drop so far in 2012 “Sometimes it’s difficult to interpret the markets, so we’re not going to play a winning hand every day. Our goal is not to outperform all the time - that’s not possible. We want to outperform over time.” If even revered hedge fund managers with ‘more money than God’ accept that it is not possible to make money all the time and also experience drawdowns of the magnitude that Paulson has, that, in itself, should illustrate to spreadbettors & CFD traders that trading is not easy and the first base is always risk control.
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14 www.financial-spread-betting.com | July 2012