2. Protect your capital
Cricketer Geoff Boycott was famously tight with his wicket. If you believe the rumours, he could go whole days at the crease without scoring more than ten singles.
The rumours are rubbish, of course. Boycott was one of the most prolific batsmen there had ever been. He amassed hundreds, thousands of runs – but he did it through protecting his wicket. As he said, you won’t score any runs when you’re out.
There’s an analogy here with spread betting. You won’t win any money if you run out of money. Therefore, your first responsibility to yourself is to protect your capital.
Set aside an amount of money to bet with. It’ll need to be something you can afford to do without long-term – possibly forever. Earmark it as your spread betting fund – and then guard it as tightly as Boycott did his wicket.
The easiest way to set aside your spread betting cash is to open a deposit account (not a credit account, where you borrow money to bet – making it a lot easier to lose track of how much you’ve spent!) with a company like Sporting Index and deposit the relevant funds with them.
When calculating how much you could win or lose from spread betting, always consider the potential downside first: how much could you lose? Then consider the advantages of winning.
If losing will cost you too much, don’t bet. The reward needs to outweigh the risk. So think about how much you can afford to lose, rather than how much you’d like to win. (And if you’re thinking about how much you need to win, then it’s probably time to close the spread betting account and take up gardening).
There’s another parallel to be drawn here – this time with Nassim Nicholas Taleb, a New York stock-market trader. He says that it doesn’t matter how many times you win if the cost of losing doesn’t bear thinking about. And he’s right.