LONDON, July 4, 2011 /PRNewswire/ --
Spread betting on some of the world's most volatile financial markets is inevitably going to be fraught at times. The risks are high and losses can exceed your initial deposit. However, because spread betting allows you to profit from falling markets as well as rising ones, volatility can also create impressive profit if harnessed effectively. City Index (http://www.cityindex.co.uk/) looks at some key risk management tools available to you.
Guaranteed stop losses
Protecting your capital is vital in a volatile market. A guaranteed stop loss offers a greater level of spread betting security than a standard stop loss, guaranteeing to close your trade at the exact trigger value you have set regardless of underlying market volatility and the gapping that can occur as a result.
Another way to protect your spread betting trades in the face of market volatility is to hedge with CFD trading. For instance, if you believed that an existing 'long' spread bet on Vodafone worth £5,000 in unrealised profit might lose some of its value, but wanted to keep it open in the hope of a longer-term gain, you could short sell the equivalent of £5,000 worth of Vodafone shares through a CFD trade. Should Vodafone share prices then fall by 5%, the loss in value of your buy spread bet would be offset by a gain in your short sell CFD trade.
Remember that volatility is a necessary evil in spread betting. Without movement in the markets you cannot make a spread betting profit. There is, however, a fine line between a volatile market and one that is too volatile to trade. Remember that standing aside is always an option.
Learn to trade with seminars from City Index's spread betting and CFD trading experts at:
About City Index:
Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.
As a group, we transact in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, contracts for difference ( CFDs) and, in the UK, financial spread betting.
We constantly look to widen the range of assets we offer, improve the performance of our platforms and expand the range of services we provide. The result is that our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer service and support. Visit http://www.cityindex.co.uk/ for more information.
Contact: Joshua Raymond, City Index, +44(0)20-7107-7002, joshua.raymond[at]cityindex.co.uk
SOURCE City Index PR