Tips for Spread Betting Beginners

 

If you're looking to invest some of your money, then stock market listed shares, while still adverse to risk, are what you should take up most of your portfolio with. However, you may want to be a bit more adventurous and go outside of traditional trading by opening a spread betting account, which can be a useful addition to your portfolio. Using 10-20% of your portfolio on spread betting can allow to 'hedge' stock trades, or potentially make quicker gains by trading on margin. However, it's important that you understand the risks of spread betting before you get started in real trades. If you're looking to open a spread betting account, then take a look at CMC Markets, while this article provides a useful starter's guide.

 

Using Simulator Accounts
Even if you're comfortable with stock investments, spread betting markets can be difficult to understand on first glance. To combat confusion, you should set up a simulator account to help you fully understand the software you’re dealing with, and to ensure you don't make simple mistakes. If you do well on the simulator, it's important not to think you'll be good enough to quit the day job and become a professional trader. Instead, use the simulator merely to learn the ins and outs of spread betting, rather than using it as a test of how 'good' you can be. Once you're confident enough you can move onto the next step.

 

Start Small...
People who don’t fully understand what they’re doing can lose a lot of money. The biggest faux pas is to bet too much money in their early trades, only to see their portfolio wiped out quickly through a few basic errors. In the first few months it's important to start small – think a maximum bet of £1 a point. Doing this will put you ahead of a number of other traders who've thrown caution into the wind.

 

Using Stop Losses
Using stop losses might seem like a conservative move, but it's an important one to make. It can be frustrating when it prevents higher moves in a positive direction, but it can also save your account from dropping as much as 10%-20% in a single trade. If you don't use a stop loss, then it's quite possible that just one trade could devastate your account. Just consider that, 'More money has been lost by people not using stop losses than all the other reasons put together.'

 

Watch the Bid Offer Spread
With spread betting there are no broker fees or commissions to be concerned with, but you will need to look out for the 'hidden' charges within the bid off spread. As constant trading in stocks will take bites out of your money with broker fees, in spread betting the more your spreads will eat into your overall profits.

 

Specialize in a couple of markets
You won't find a top city trader specializing in multiple markets, so you shouldn't either. You need to focus on just a couple or perhaps three different markets so you can really follow what's happening. The UK FTSE 100 is often a good index for beginners to start with, as it doesn't give itself into the volatility of the Dow Jones or emerging markets. Basically, there's less potential risk and likelihood of getting carried away.

 

Winning isn't easy
Successful investing and trading at any level takes experience and patience, and it can be very hard to continue winning over the long run. If you want to make money, don't take speculation lightly.

 

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