Spread betting does not involve traders buying and selling the product itself, but rather trading on the movement of the product. The more the stock moves in the direction that the trader has predicted when taking their position, the more profit they will reap. Of course, the reverse is also true; if the stock moves in the opposite direction than was expected by the trader, the greater the losses that will be incurred.
The most basic trading strategy - buy low, sell high - sounds simple enough, but in reality things tend to prove more difficult. How do you know when a stock is really at a ‘low’, or has reached its ‘high’?
Trading patterns can highlight the generally optimistic nature that many people possess, with a surprising amount of traders sticking with a trade well beyond an advisable point, as they cling on to the hope that a negative position will somehow turn itself around.
Before making a trade it is recommended that the trader fixes a point at which they will extricate themselves should things not go their way. However even if you begin a trade with this intention, it can be tempting to shift the goal posts mid-trade if things aren’t going well, but you should stick with your initial decision. You can hang on in the hope that the stock value will shift direction, but there is no guarantee that such a policy won’t prove a costly mistake. It’s far better to accept a small loss and move on, rather than to lose all of your money.