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The Virgin Spreader chronicles my journey into the world of spread betting.

This spreadbetting blog starts from day one of a novice spreadbetting career. I intend to hunt down as much advice on spread betting as possible, talk to as many professional spread betters as possible and develop a winning spread betting strategy. And I will write it all down here. If you have anything you would like to contribute PLEASE get in touch!

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Home The Virgin Spreader The Virgin Spreader Spread betting research shows why the house always wins
Spread betting research shows why the house always wins PDF Print E-mail
Written by Virgin Spreader   
Tuesday, 24 November 2009 16:27
A crucial piece of spread betting research has been published - and it sheds insight into why the spread betting houses win more often than not.


The purpose of the Virgin Spreader blog is to pass on information that I have learnt and discovered that will hopefully help myself and others make a success of spread betting.

One of the points I have pressed on many an occasion is the that a trader must put aside emotion. It was emotion combined with a lack of strategy that saw me clean out my spread betting account first time round.

And speaking to a colleague earlier this week I found out that other put a lot more at stake; her housemate had lost close on £5000 worth of savings on spread betting.

I have been finding it difficult to find any information and statistics on the state of the UK spread betting industry in order to try and get a bigger picture on the kind of people who do spread bet; their motivations, their techniques etc etc.

But today I came across a gem of research from Australian research firm Investment Trends. Investment Trends have produced a very important piece of research on the state and nature of UK spread betting.

What interests me is this:

More than 80 per cent of frequent spread betters use technical analysis to decide on their positions, with less than half using business and economic news. Perhaps rather worryingly, 40 per cent of frequent traders say that they rely on their instincts or gut feelings to make a decision.

Amazing.

The research shows an over reliance by spread betters on technical analysis; remember technical analysis works a great deal of the time but surely you are risking your capital by failing to take note of the daily financial, economic and corporate news? This is where trends ultimately come from and this is where trends are turned, indeed understanding your spread betting environment is essential to making money.

Perhaps an over reliance on technical analysis explains the profession the majority of spread betters come from: the financial and IT industries.

Both professions built on a bedrock of data processing and numeric analysis.

However the biggest issue I find here is how prone spread betters are to emotion, 40% admit to relying on gut feelings to make a decision.

I believe, and my own experience has proven, that relying on your emotions to place a trade suggests a poor understanding of both technical issues and environmental issues (news etc). Perhaps this is how most people who are new to spread betting start out?

Until spread betters start taking a more sober and disciplined approach to trading the house will always win.