Spread Betting is great fun and can be very profitable! However before you start Spread Betting consider the following sage advice from our own spread betting forum admin guy.
For obvious reasons it is essential that you have a strong background knowledge about your chosen market. Some of the basics are; that you need to know when the underlying markets trade, as well as when is the last day/time of dealing on any single bet.
And you definitely need to be able to access live prices at all times when you have got an open position, as prices can move very rapidly and you need to be able to respond to that.
Other basic aspects that you need to be aware of is what units you are trading in. Indices are typically traded per point, whereas some currencies, due to their volatility can be traded per 0,0001 move in the future price. You also need to know what the initial margin requirement of your chosen market is. This is basically the deposit the spread betting company require from you to cover any potential losses from adverse movements in price. You also need to stay abreast of any planned announcements that might affect the development of your open positions.
Create profit goals with a timeline; determine the maximum size of any open position and thereby the maximum losses you are willing to take. Have a clear rule for entry and exit before even thinking about conducting a trade. Without discipline and a clear cut strategy, emotions and the psychology of the crowd is bound to influence your trading, and this in turn means that you are bound to carry losses long term.
Never come close to using your entire margin on a single trade. You should also diversify your investments in different markets, “don’t put all your eggs in one basket”. Always cover your back with the aid of closing orders in the shape of guaranteed stop loss functions. Make sure that you are familiar with the differences between guaranteed and non-guaranteed stop-losses.
Don’t let losses run so that the impact accumulates, if your position does not perform as expected kill it early on. Even the best traders experience losses, the important thing is that you analyse them, so that you can learn from your mistakes. At the same token you should not cut your profits short. If instead your cut your losses short and let your profits run in a controlled manner, depending on the situation, you are on the right track.
It can be rather stressful to have open bets running on a daily basis, as you constantly need to stay abreast of the news. Anytime a breaking news story can send your position either skyrocketing or in the ground. If you are not able to follow the news consistently while having open positions you should seriously consider whether spread betting is really something for you.
It should be obvious that conducting spread betting based on market rumours, without a guaranteed stop loss function, while letting your losses run and cutting your profits short is a dead certain way to get yourself killed financially. Unfortunately too many investors fail to obey at least one of these golden rules.
Please leave a comment in the chatroom if you have any experiences or questions associated with spread betting. I will endeavour to answer them all, time permitting, in the forum.
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