The following is a guest post about spread betting. If interested in submitting a guest post, please read my guest post policy and then contact me.
Spread betting is becoming more popular among investors in the United Kingdom, Canada, Australia and some EU countries, partly due to advancements in technology. Spread betters can easily download apps for iPad and Android devices and make their bets anytime and anywhere. There’s huge profit potential to be had, however, if you bet wrongly on the price movement, there are also equally big risks. Before taking the plunge, it’s important to consider these tips on how to maximize your profits.
What is spread betting?
Spread betting is basically betting on price fluctuations – either up or down – rather than buying into the stock market itself. If you’re predicting how much an index will go up, the more accurate you are with your prediction, the bigger you win. What’s more, spread betting is no longer restricted to betting on a stock market index, such as the FTSE 100. This means you can gain easy access to different markets such as individual stocks and shares, funds, indices, commodities and currencies.
Education and research
Spread trading is not a skill that you can acquire overnight. To learn the ropes about spread betting, read books, subscribe to financial magazines and attend courses and seminars. Most spread-betting companies run online seminars or provide free online guides that explain the fundamentals of spread betting.
Some spread betting companies offer you the opportunity to practice trading virtually. A demo account is an excellent way to get a feel about how different markets move.
When it comes to minimising your expenses, compare the pricing and platform offered by different brokers when opening an account. Try a few demo accounts before you decide on the broker that offers the best spreads and user friendly interface.
To become a successful spread better, you need to research about the markets and companies in order to make wise and informed decisions. Prices are also affected by economic conditions. Understand how the markets work and how volatile the markets are and you will stand in a much stronger position to bet.
Adopt a strategy
To avoid being too emotional when it comes to placing a bet or closing a position, you should adopt a strategy. Do not use all your life savings. Start small by betting from as little as 10 cent a point to keep the risks low. Build up your confidence and capital over time. Specialize in a few markets that you know well rather than plunging into all markets.
Although the market is very volatile and moves quickly, you don’t have to react quickly to the stories you read in the newspaper or to a slight fluctuation in prices. Ask yourself, “What is the rationale for placing the bet or closing the position?” Do not cut your profits if you think the market is going your way. Likewise, if you feel the market is starting to reverse, take your profits and exit.
Use Stop Losses
Finally, a word on stop losses. A stop loss is an order to close the bet when a spread moves a certain number of points against your favor. You can arrange to have these in place with your broker, at whatever level you decide, but it’s important to have this agreed limit, to manage any losses you may incur. This gives you a get-out option at any time and may save you significant amounts in the long-term.
Author Bio: Sam Hartness is a finance graduate, currently based in Washington D.C. He is a regular contributor to various business and money-management blogs.