LONDON, February 20, 2012 /PRNewswire/ --
Often a popular choice for new traders, financial spread betting can offer an easy entry level into the financial market due to its low margin feature and high leverage.
Allowing traders to go both long and short on trades, spread bettors can profit from a market which falls as well as rises.
This high leverage feature allows traders to deposit a small percentage of the total value that they wish to trade; increasing exposure which has the potential to magnify profits.
However, should the market move against their position, it could result in losses greater than the initial deposit made.
Planning & Risk Management
Before you start trading, it is imperative that you put in place a clear trading strategy with realistic targets and a risk management plan.
Joshua Raymond, Chief Market Strategist at City Index commented: "One common mistake I find from spread bettors is that they can go into a position without having a clearly defined profit or loss strategy," states Raymond.
"This can make trading very difficult and leave spread bettors open to what I call 'impulse trades' where they may enter or close a trade prematurely."
Raymond goes onto say that having a defined trading strategy and plan in place before a trade is placed is an important step for beginners, as well as understanding the market that they trade.
Managing risk by way of stop loss and limit orders locks in profits at predetermined levels set by you in order to minimise losses.
To do this you must consider how much you are willing to lose before you place your spread bet.
Planning before you trade not only provides you with clear and concise guidelines to take you through - what can be - an emotional experience when trading, but also limiting your losses and leaving you valuable time to focus and react to market movements as they happen, allowing you to learn from both mistakes and successes as your spread betting strategy develops.
Summary
Learn more about spread betting as an alternative form of trading by downloading the Free Spread Betting Guide at: http://www.cityindex.co.uk/learn-to-trade/free-spread-betting-guide.aspxx
Spread betting is a leveraged product which can result in losses greater than your initial deposit. Ensure you fully understand the risks.
About City Index:
Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through City Index.
As a group, we transact in excess of 1.5 million trades every month in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, CFD trading and, in the UK, financial spread betting.
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