This is what I think people should know before they trade, it's a shame to see so many people trading in an environment without a clue on what they are missing out on and I get frustrated when I see others struggling to acquire useful information about trading on various forums and in real life and all too often the poor advice given to people who are new to trading by others.
It appears to me in the trading world much useful information is kept hidden and much of the information given is from people struggling themselves to make a profit or a living. Therefore it's a mission starting out to understand so many things, how to trade, where to trade, what to trade, how do people even trade on a daily chart. If you post a question on a forum it normally is answered very loosely, asking more questions and telling the original poster that there's too many factors to give him an accurate answer. This may be true, but still little good information is actually given. So if you don't know someone in person who is a profitable trader then you will need to dedicate a huge amount of time and normally money discovering some simple stuff. Normally such a thread will lead to talking about how important it is to manage your money and to stick to your stops. When I read these posts I get frustrated, because if you asked a professional in another profession how does he stay at the top of his game, you wouldn't want to hear him go on about how he is ruthless at sticking to his plan, because people know this already, you want to know how they came about discovering an edge, not what is their edge because you should realize this takes years to grasp and cannot be typed out on the internet. Okay some people are actually clueless about money management and need to be told about it but if you can't figure that out then probably just avoid trading because being a good trader is about making better decisions than the majority of others and always thinking. Giving yourself an edge within a single market or across various markets in a combined position simultaneously like I do, an edge can mean being able to read the market, putting in long hours and reading the order book and for others its understanding how markets connect and profiting from seasonal cycles or intra-day volatility or just understanding fundamentals.
Trading is a skill and whilst many people try to trade using just a couple of lines on a chart to tell them when to place an order and spend all their time looking for the holy grail, the vast majority of successful day traders are using experience subconsciously and consciously planted in their head from long hours looking at the screen. Briefly, in my opinion short term traders focus on such tools such as volume and look at where most the value was by using volume. Volume for example tells you something because, if a lot of volume (i.e trades) go through at a certain price, it's likely this price was a good representation of where the products value is. If the price moves away from this value and little volume goes through each price, it can happen because of panic in the market, panic caused by 1 or more large trades or by a swarm of traders being forced to take a stop. In these situations the bigger players in the market could try and push the market and try to push it further from it's value which would be taking advantage of an opportunity they see. Often in this situation the market will ping back to it's value where a lot of contracts/traders were exchanged on the day. Sometimes little volume is a result of a news announcement where traders realize the current price is not representative of the current news and so each price will trade little volume and the market becomes heavily weighted to either aggressive buyers or aggressive sellers. After all this is the driving force behind why markets move, to push a market up, buyers have to be more aggressive than sellers and willing to pay the spread between the bid and the ask as it were. Obviously the value of a market can slowly change with time but is always being pushed around, traders create volatility around the "actual price" but also provide liquidity which helps you buy and sell nearer this price. This was just meant as an example to illustrate it's tough to understand how a market moves and takes time to learn, I myself are still hoping I can achieve it one day, as I trade somewhat mean reverting spreads, which takes out most the work in needing to know where each individual market is going, but that is my edge.
What I really wanted to write is, "I can't understand why people spread bet" but actually I can understand, what I can't understand is how have spread betting companies managed to keep the huge disadvantages so hidden. When spread betting, you can only buy (go long) above where you can sell (go short), which is the same when trading directly on the exchange, but with direct access you can also join a que as the best seller, so when someone wants to buy right now, he will have to pay the spread between the bid and the ask (similar to spread betting) to do so and so he will buy at the asking price, but also someone on the ask (a seller) will be matched to this trade and will be short from the ask price. As my trading approach is to profit from the bid and the ask spread, by queuing and using a hedge as a tool to reduce my exposure whilst I scalp, I couldn't ever do my trading with a spread betting company. Recently the spreads have got tighter on spread betting companies, I guess competition has increased and forced people like IG Index to tighten their spreads. Spread betting companies use the spread between the bid and the ask as their profit, people are constantly paying the spread on both sides and spread betting companies can just hedge the difference in the real market, or hedge individual trades, basically it's run as a casino, which isn't necessarily bad, just you are buying 1 or more ticks away from the actual market price! Okay so their are no commissions on platform fee's or taxes (as it's considered gambling, although I don't really agree with that) but when I traded on Eurex I would pay 40 cents on the Euro to get in an out 1 contract, which typically had a 10 euro tick value. So I could make 25 trades and make 1 tick profit in total and break even. If you made 25 trades with a spread betting company, you've paid 25 ticks. I can understand there are many products out there which move so fast that paying the bid and the ask is not a big deal but soon as news comes out or the liquidity dries up a little in the real markets, the spread betting companies expand their bid and ask miles apart to cover themselves. Now your paying a fortune and possible getting stopped out of trades when in the real market you perhaps wouldn't have been.
My advice is trade the markets directly, see more information, make trades against other traders not against a company who just preys on the fact people want an easy way to speculate on the markets, as it comes with a huge price. I often see bad logic used by people to justify doing something, such as they know someone who is profitable so if he can do it I can. There are always going to be people who are running high on luck for an extended amount of time and also there are going to be some highly skilled people who are foolish enough to not scout their options as a trader. My conclusion is simply spread betting does not mean you can't be profitable but why the hell would you bother with it! You can open accounts with any amount if you look around, you can trade markets with just a couple of hundred dollars margin, which is the money needed to cover the risk of the position.
I believe most people trying to start out by themselves will end up with a spread betting account with charts, with some understanding of support and resistance, some moving averages etc etc. I personally think, there is merit to looking at such tools on a chart, keeping it in mind, but I think it's crazy to be relying on such tools as the main part of your decision making. For example, if there is support at a price, which means the price has bounced of this price at least once. It can be a struggle to push below it, but if the value of this instrument/product lies below the support, it may only bounce of the support again because there are enough traders supporting the price at this level, if enough people do something it's probably going to happen.. I have often seen once the price goes through support, it makes a quick move below it, because of the fact traders have seen this price has broken and a lot of traders have placed their stops below the support, as it's naturally a good place to put it. I know in Eurex I read about the Paul Rotter and he said how in the past he could push the market to people's stops, but nowadays traders have become smarter and don't all place their stops at the same level. So, basically it's my opinion the past plays a part, because so many people will be looking at it but the price will go where it wants, it will travel inefficiently towards it due to the fact traders are people with complex thoughts and opinions.
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