When considering a financial spread betting system, very few traders even think about writing a trading plan, and fewer still actually write one, yet it remains one of the building blocks of success whether in financial spread betting, or in any other form of speculation, trading or investing. Were I to write a book about spread betting, it would be entitled, ‘How to win at financial spread betting’ and the first chapter would be entitled, ‘How to write a spread betting trading plan’.

I suspect the primary reason for this, is the natural excitement with which we all rush into the market, fired up with enthusiasm at our new and exciting enterprise. The prospect of writing a plan seems dull and boring, and far removed from the flashing lights and numbers that we are now drawn to, like moths to a flame. If you trade without a plan, you are far less likely to succeed than if you have one – why – the answer is very simple. A trading plan is written when you are detached from the market, and includes trading rules written in the cold light of day, not when you are under pressure in the market and being influenced by the twin emotions of power and greed. I have devoted a complete site to how to develop and write a trading plan, so this will simply be an overview. If you would like to know where to start and how to write one, please just follow the link in the left hand sidebar.

The first point to make is that your spread betting plan will be specific to you, and nobody else. It can be as simple or as complex as you like, and should only have trading rules that you intend to stick to – don’t just put rules down to fill out your plan. Have a financial objective as this will provide a measure of your success. Specify the financial markets you propose to trade, along with trade sizes and money management rules that we looked at earlier. Try to be specific, don’t make vague statements that have no meaning, what you are trying to achieve is a plan that someone else could pick up and follow to the letter, a little like a good recipe. Writing a trading plan for financial spread betting is just the same as for any other market, so where do you start? Here are the main points that I would consider in developing your plan:

  • Start by specialising in one niche market, or country specific market. Learn all you can about trading in that market such as oil, one or two currency pairs, a sector of the stock market etc. Try to become an expert in a particular field
  • Decide on a trading strategy to suit your personal circumstances. If you have a full time job, then longer timescales will be more appropriate.
  • Decide on your trading style – are you a fundamental trader or will you base your decisions on technical analysis
  • Decide on your trading capital and try to set financial goals ( be sensible and realistic – very small profits are fine to start with on a monthly basis even if only a few pounds!)
  • Define how you will make a trading decision – the criteria you are going to use – this could be based on technical details such as breakouts, two bar reversals, moving averages, or any other indicator/indicators you choose, but you must have a detailed plan for making your decision
  • Define your risk and money management rules
  • Try to set risk and reward targets for your trades. If you are prepared to risk £50 then you must be looking at a 2:1 or even 3:1 return as you must accept that some trades will be losers.
  • Keep a manual record of your trades along with your stop positions. This is something I have always done – many people find this strange in the days of spreadsheets and pc’s but I prefer an old fashioned book which has columns detailing the trade, date opened, unit price, stop loss positions, contract details etc All in one place and easy to see all the contract details and associated stops. Long trades are entered in black and short trades in red.
  • Keep a trading diary and learn from your mistakes
  • Produce a small profit and loss statement each month so you can monitor your progress – yes it is just like running a small business which is exactly what is should be.Please do take the time to write a trading plan, even if it is only very simple. It will force you to think about what you are doing and to put it down in black and white which is a good discipline, as it will highlight what you are doing and why. When markets are moving fast is not the time to make trading decisions based on instinct fear or greed – this is why you have a trading plan.

Please do take the time to write a spread betting plan, even if it is only very simple. It will force you to think about what you are doing and to put it down in black and white which is a good discipline, as it will highlight what you are doing and why. When financial markets are moving fast is not the time to make trading decisions based on instinct fear or greed – this is why you have a spread trading plan.