Finspreads

Finspreads

October 25, 2010 06:24 ET

5 Common Spread Betting Mistakes and How to Avoid Them

LONDON, ENGLAND--(Marketwire - Oct. 25, 2010) - Spread betting is difficult and even the best traders sometimes get it wrong; the key is to learn from your spread betting mistakes so as not to make them again. Here, spread betting provider Finspreads (http://www.finspreads.com) takes a look at some common trading errors and how to avoid them.

Mistake 1) Not understanding leverage

In financial spread betting, only a percentage of the total value of your trade – the margin – is required as a deposit in order to open a spread betting position. This allows you to leverage your profit (and loss) potential by increasing your exposure to an underlying asset with the same initial investment, creating the possibility of spread betting losses that are significantly greater than your initial outlay. Understanding leverage and the true value of your trades means that you can manage your potential spread betting downsides more effectively.

Mistake 2) Not having a spread betting strategy

Spread betting can be emotionally draining, particularly if you do not have a defined profit and loss strategy in place for each financial spread bet you place. By outlining where you wish to cut losses and let profits run to beforehand, a spread betting strategy helps to eliminate the possibility of impulse trades where you might open or close a spread bet prematurely or belatedly without really thinking it through.

Mistake 3) Not knowing the market

Being familiar with how a particular spread betting market moves, what affects those price movements and exactly how volatile it can be can make a huge difference to you spread betting, as it gives you the opportunity to react quickly and correctly when relevant news emerges. For example, if a spread bettor does not know that a spike in crude oil prices would raise airline costs, they could be fighting a losing battle spread betting on British Airways shares. An added benefit of solid spread betting research is that it helps you to work out where to place your stop losses...

Mistake 4) Not using stop losses

Risk management is of paramount importance in spread betting. By using stop loss orders, in particular guaranteed stop loss orders, you can ensure that you never lose more than you are willing to without capping your profit potential. 

Mistake 5) Not continuing with spread betting education

Even seasoned spread bettors can keep their trading skills sharp by looking for new ways to maximise their spread betting potential. From technical analysis to candlestick patterns, Finspreads spread betting seminars are designed to expand your knowledge of how to analyse the financial markets whatever your level of spread betting experience.

To get more out of your spread betting, visit http://www.finspreads.com/why_finspreads.aspx.

Spread betting carries a high level of risk to your capital with the possibility of losing more than your initial investment and may not be suitable for all investors. Ensure you fully understand the risks involved and seek independent advice if necessary.

Contact Information

  • City Index Group
    Joshua Raymond
    +44(0)20-7107-7002
    joshua.raymond(at)cityindex.co.uk
    or
    New Century Media
    Jonathan Smith / Alex Nekrassov
    +44(0)20-7930-8033
    jsmith(at)newcenturymedia.co.uk
    alexnekrassov(at)newcenturymedia.co.uk