Spread betting guide | Robbie Burns
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Robbie Burns, also known as the Naked Trader, is back with The Naked Traders Guide To Spread Betting.
Many investors are instantly concerned by the word ‘betting’, however Robbie demonstrates how the associated risks can be managed and even introduces us to a new investing idea which he calls the ‘Spread ISA’.
Using similar strategies you may already be accustomed to, we uncover Robbie’s thoughts on how we can use spread betting to grow substantial sums of money.
Let’s take a look.
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Robbie gained popularity whilst writing a column for the Sunday Times called ‘My DIY Pension’.
He disclosed his investment decisions from 2002 and eventually managed to turn a £40,000 account into £500,000 by 2018.
One of a small community of ISA Millionaires, Robbie continues to share his investment decisions on his Naked Trader website under ‘Robbie’s Trading Diary’.
From 2006 through to today, Robbie has provided more than 1500 trades.
Before looking at his spread betting techniques we quickly analyse the stats from all his recommendations.
From Robbie’s closed trades, his equity curve looks like this.
There would likely have been slightly more volatility than the curve suggests, but nonetheless we can see over the 14-year period how his account grew.
Robbie’s average trade is held for 198 days.
He has a winning strike rate of 78%.
His average win value is £1473 and his average loss is £355, providing a risk reward ratio of just over 4.
The average stop loss position is 11%.
Overall, very healthy stats. Now let us move on to the spread betting principles which have contributed to such returns.
Robbie is aware of the stigma when talking about spread betting at social events, acknowledging that people instantly relate the topic to gambling, and do not take him seriously.
He’s since claimed to be a window cleaner and even an owner of a cat boarding home, or anything that does not relate to the word ‘betting’.
Once fully understood and applied correctly however, spread betting does not need to be associated with gambling in the way that most people perceive.
“It’s a tool with so many advantages that I think it’s crazy that people either ignore it, or even worse think it’s too complicated, its actually extremely simple”.
Before we move on, it must be noted that buying and selling shares through a spread betting company does not mean you own any shares of the business, but in the same way as owning shares, you still receive dividend payments.
You are in effect betting on whether the share price is going up or going down, which is not entirely different than buying shares the conventional way.
The term spread is determined by the price at which you can buy a stock, also known as the offer, and the price at which you can sell a stock, also known as the bid.