Summary: The below article contains what we believe to be 3 of the most important spread betting tips for the financial trader. We hope you can use them to make money!
1. Start Small. There is a lot to be said for learning 'by doing' and it is a great way to really understand a subject or technique. With spread betting, that could prove to be a very expensive experience. No matter how sure of your analysis, opinion and trade you may be, start by using small amounts of money and risk.
The larger markets (gold, oil, many currencies and most stock indices) can be volatile and impacted by a wide range of unforseen events. Therefore, we suggest that a newcomer to spreads starts with an affordable amount of money and risk in an asset that ought to be less volatile and therefore less likely to cause a bankruptcy!
Remember that spread betting in financial markets is one of the most high risk ways to gain market exposure. Finding ways to lessen that downside risk as much as is reasonably possible while still keeping upside potential must be at the forefront of a trader's mind.
In the world of hedge fund management these are the dream trades and are known as asymmetrical bets. This means that there appears to be (and hopefully is) very limited downside but unlimited upside. Managers of hedge funds (information here) specialise in going in big when they see such an opportunity. This is an unusual form of fund management (information here) which is why it is only really the hedge funds that can operate this way.
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Typically these are not regular things. They won't show up in any spread betting system. These are opportunities that have come about through thorough research and analysis and might have taken months to investigate and may take months to play out. In other words, the holy grail of trades.
2. Use A Stop-Loss. A stop-loss (information here) is an automatic method of closing a trade at a pre-set level or number. For most investors, a stop-loss is often more theoretical than real, but it is used more frequently by traders.
Spread betting has the capability to create very large profits or losses in a short space of time. That can be wealth creating or ruinous depending upon the circumstances. One very reasonable way to try and limit some of this downside is to regularly use a stop-loss.
For most people, a stop-loss will be about capital protection. But it is also a great way to create a little peace of mind during what could be a nerve-wracking trade. There are limits to just how closely one person can (and perhaps should!) watch a market. By establishing a limit at the outset, it does relieve some of the pressure that something catastrophic might happen whilst away from the pc screen.
This is one of the spread betting techniques that many professionals swear by. Take note.
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3. Always Bank A Profit. Financial spread betting offers some unusual opportunities that many other forms of investment do not.
For example, it is possile to trade outside of the normal market opening hours (both early in the morning and on into the evening). This means that it is often possible to see a quote where the spread market is moved but the actual stock exchange is not open. In other words, market sentiment has changed, but the market itself has not. Therefore, it may be that a trader has opened a position and the position has become profitable without the market actually being open!
Opportunities like this should be grabbed! Take the profit by closing out the trade while you can. Unless of course, it is obvious that there is about to be a much bigger market move that is about to make you very wealthy!!
It is human nature to want to run our winners to the very last moment. We all suffer from this in trades, investments, business deals and much more. It will be important to cultivate the self control to be content with a profit and close out the deal up. While trading in major markets, such as spread betting forex, there can be news from all sorts of unseen directions that can influence prices for and against you. That is just life. It is your job to make a profit and get out unscathed.
Bonus Spread Betting Tips: Read Widely. There is actually a lot
of great information around - especially online - that can help a trader
to find ideas and improve the depth of their understanding. Some blogs
about financial spread bets that we like can be found
here,
here
and
here. Of course, there are many more. Be sure to keep reading and learning - it could prove to be very valuable!
However, as with any website (including this one) it is a wise idea to think closely about the spread betting instructions on offer before using them. Firstly, the site author might be wrong. Secondly, there might be a large number of people that have recently read the same post or page and are now looking for the exact same opportunity that you are. This problem will be most acute when the site in question is not offering concepts but daily spread betting tips or some sort of tips forum. Such sites will be the catalyst for lots of people doing exactly the same thing - don't get caught in the herd.
If you would like to read more, please follow these links:
Spread Betting Financial Markets For Beginners
Who Are The Main Spread Betting Companies?
How To Spread Bet - 7 Important Lessons For A Beginner
How Easy Is Spread Betting Shares?
Spread Betting Forex Markets
FTSE Spread Betting Information For Beginners
What Spread Betting Software Should You Use?
How To Make Successful Financial Spread Bets