Betting on markets is like betting on anything.
I've developed quite the soft spot for social betting website BetAble.com as you might have noticed so I am going to use betable to illustrate a point that I have come to understand about trading (forex or shares).
Take this bet I set up yesterday. In it you can choose to bet on what the first character of the headline in Friday's metro newspaper will be.
Metro is a free newspaper given out in London. The bet is on what the first letter will be in the main headline. In the event of something wacky, or no possible winner the "other" option will win.
This is a good example of how trades work too.
Now if the potential winnings are greater than the number of ways you could loose then over time one would expect to grow ones stake. In a bet such as this we can eliminate less likely options and increase our changes of winning. For example we could look at the headlines on the front of today's metro. All headline start with a consonant from the later and early groups.
Likewise with the markets we can eliminate the less likely to form an educated guess. If we set things up whereby we are able to mitigate or minimise losses we create a situation where we are able to loose more than we win and come away with a profit.
The method of setting a stop loss at 1% of the total fund means that if the market goes up when we bet down (going short) or down when we bet up (going long) is a bit like saying I bet £1 if I'm wrong but £20 if I'm right.
That would be pretty sweet and eventually you'd make a fair amount of money.
The way I see things is that spread betting (a form of trading) is not so different. Correct me if I'm wrong.
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