Spread betting is not easy at the best of times. While it can have huge payoffs, you don't want to go in without a solid plan. Creating a spread betting strategy is an absolute must if you want to move up in this exciting world of financial trading.
However, doing so can be confusing if you are a beginner. What constitutes a winning plan, after all? If the answer was simple, then everyone would be making a killing with a great spread betting strategy!
A lot of your plan is going to have to come from your own knowledge. You need to get a feel for the market so you can start to understand what works and what doesn't. However, there are certainly some very useful tips and tricks that will allow you to start from a good position rather than from square one! Here are some of the best tactics you can try out to succeed at spread betting:
Your first trade should be very safe. In fact, it should be for no money at all! Choose a trade, and write it down. Now follow that trade, noting down what happens and at what point you exit. Do this a few times, until you are comfortable with the process and understand what makes a good trade.
Pick a market
It might be tempting to try your hand at trading in a wide variety of different markets, but this would be a big mistake if you are just starting out! Instead, focus on just one or two. This will allow you to get a really good feel of how they work. Once you know them inside-out, then you can expand into other areas.
Learn the ropes with social trading
Working out what makes a successful financial trader and what will lead to failure can be tricky. It takes a long time and can be a bumpy road! You can learn the ropes from the professionals, however, by starting out with social trading.
This involves following other traders, copying their bets to your account. You can simply follow successful traders and let them do the work for you, but it is usually a better idea to observe the trades they make very closely. Not only does this lead to more successful social trading, it also will prepare you nicely for spread betting on your own.
Use a stop-loss
You should always use a stop-loss, especially when you first start trading. This is one of the best ways to control the risk associated with the practice. Basically, it means that if your trade falls in value, you can automatically exit if it hits a certain point.
Many people set this at about 15 to 20 per cent below the original value, but that depends on how much you are willing to risk. Sometimes trades dip slightly before becoming profitable, so it is best not to set your stop-loss at lower than ten per cent as you could end up missing out.
Stick to a manageable level of risk
You don't want to risk it all on every trade; far from it! It is usually a good idea to decide beforehand exactly how much of your account you are willing to gamble on. This is often the difference between a well thought out trade and a poorly planned one that ends up failing.
A good estimate for when you first start out is to risk no more than one per cent of your account. So for a £1,000 account, you would want to risk no more than £10. This might not seem like much, but it is a good way to limit yourself based on your financial means.
Spread Betting and CFDs are high risk investments and losses may exceed your initial deposit.