You Can't Gamble Your Way Out Of A Stock Market Crash

Spread betting is addictive and dangerous. They permit customers to 'invest' by credit cards, the are no overall deposit limits, and you can ruin yourself in a few hours. There was an article in the Times on 10 Aoril 2009 with an example of one IG Index customer who was left feeling suicidal:
http://www.timesonline.co.uk/tol/money/investment/article6072968.ece

Berware and take care. At least some of the spreda betting companies do not care where their business lesaves you and will seek to blame you without accepting any personal responsibility themselves.

Everyone has to pay their school fees some time or other. Maybe yours were too high first time around. And by the way CFDs are just grown up spreadbets - the margining and leverage are the same. See my trading do's and don'ts :

http://mamamarkets.blogspot.com/2009/04/trading-dos-and-donts.html

strictly speaking we are all trying to make money through the stock markets either "conservatively" by value investing or not so conservatively re spread betting etc...... but it is gambling all the same as there is nothing guaranteed ...... it is all up to one's risk strategy.... some people do make fortunes day trading and some lose their own and other people's money..... I have recently invested in the market and will do so again in the next few months as I believe the market will rise in the next couple of years and that belief is based upon the idea that people in the west simply can't hack a prolonged reduction in their standard of living and are resourceful enough to come up with new techniques and ideas to make money..... my belief but it is just a belief..... the doom and gloomers may be proved right but it doesn't look that way now

Only after twenty years of investing did I turn to spread betting. I've been spread betting for two years now and have made a decent sum from it.

My advice would be:

1) Avoid betting on share indices. For most of us, this is a mug's game.

2) Choose your bet size correctly. The biggest mistake is to take a bet that is too large and costs too much when it goes against you.

3) If you use leverage (via SBs, CFDs or other derivatives), then you MUST have liquidity.

4) In other words, if you plan to spreadbet seriously, then keep lots of cash close at hand.

5) If you can't meet your margin calls (demands for more cash to fuel losing bets), then you can be closed out of a position immediately.

6) Expect spreadbetting companies to give you the runaround. They will do everything in their power to make you lose and, therefore, make them win.

7) In particular, watch out for short-term share-price spikes aimed at triggering stop losses. Market-makers do collude with SB companies to manipulate the market in this way.

8) Finally, watch out for margin rate changes. For example, the margin for one of my small caps tripled from 25% to 75%, which forced me to cough up £40k within days. If you can't meet this call, expect to be stopped out without mercy.

Cliff (Fool freelancer and shareholder)

You will not want to read this hdag - but - you should only bet with money you have and can afford to lose.
To try and mend your finances by spreadbetting would be very foolish indeed
I have been on the Traders' University pre course - and it looks easy doesn't it? But the real world and one's emotions prove otherwise
Best to cut your losses - but see what Cliff thinks

Thank you colin106 and Jonesey12,what I might do since I fully paid for it is to attend but not to hold any expectations since most of these places do not refund fees.If it proves real gamble then I am out of it.
I still would like to hear what Cliff would say to me.

Hdag, I went to a similar course and shelled out a lot of cash for the privilege. I came away knowing nothing more than what I could have gleaned from various easily available websites or from the public library.

It is a big con and at the end of the course they will probably recommend a trading platform which nets them a commission so they can increase their profits even more.

Try and get out of it if you possibly can.

Good piece, Cliff. One confession is worth ten exhortations. We feel your pain.

As a longtime investor who has literally never placed a bet in his life-- be it on index, row of coloured balls or sluggish animal-- it often strikes me that gamblers are really buying the excitement of uncertainty, not the possibility of profit.

They like playing Russian Roulette, but with their money rather than their lives. They're welcome, but it's nowt to do with investing.

Spredbetting/cfd's are the most risky types of gambling around. Online gambling itself has been proven to be addictive and hypnotic due to the method of delivery, internet, mobile phone.

Combined with the uncertainty and volatility of markets, the use of credit cards, human nature to chase losses, the fact that 4 out of 5 people lose, the speed with whivh losses can occur, the fact that even professional traders who work for banks for many years still get into problems, the lack of real risk warnings which set out all the former, the lack of tight regulation by the FSA, the whole thing is dangerous.

I am of the view that unless much together regulation is enforced the whole thing should not be marketed or permitted to be sold to retail investors. Trading is for traders, not for retail investors. Tax free profits are not of much use whyere most people lose, and based on the Times article above some neraly lose their lives.

Spread betting/cfd companies need to be held to the highest standards, which curretly they are not, otherwise stopped. And it is good that fool.co.uk is actually not talking up spread betting as a form of investing, as is nearky always the case elsewhere.

Scotland on Sunday ran a Top Trader competition recently with each player having £2000 of virtual money to spend on CMG spreadbetting in a 1 month period with the winner getting £1000. 300 people entered. I'm a total newbie and although I started well, like the article said, whatever I bet on, it went the opposite way. I was left with £54 at the end of it. The 10th place holder had £2300, only making £300. The winner made £21,000 - a friend of mine whom I'd told about the comptetition. He'd spent 13 years investing in the Stock market so knew what he was doing. Still waiting for my commission though :-)

Spread-betting is seriously scarey biz if you dont know your stuff and it's your own mony that's involved.

Nice update Cliff. :-) Traders should take great heed of this lesson. It's a free lesson and worth a lot of money £££ ! For sure brkrs and MM's are getting very agresssive on thier margin management to the point of ruthlessness- you will get closed out if funding headroom is adequate and margin calls are not met. Caught almost similarly myself. Equally watchout on the net positions of committments of traders balance between a) the small guys ((that's us folks) and b) the large speculators ( e.g. hedge funds etc ) and c) the the commercials ( eg industrials, farmers, suppliers, who usually get it right and are on the "good2 side of trading and get it right. So, going forewards, counter party risks come seriously into play wherebey if you are say "short" , and if the commercials are net short you oughta reasonably be ok, however if the big speculatives end of net short too , watchout cos' the risks increase that you won't get paid out. .The inverse is equally true for "long" positions.

Only point Cliff i would disagree with is on trading indexes your point 1). This for me represents a better smoothed balance that represents the overall investment herd as an aggregate and easier to judge the direction of movements rather than going for individual stocks which can have too many individual specifics - a personal instrument choice. There always of course pro's and cons. :-)