LONDON, December 28, 2011 /PRNewswire/ --

Everybody knows that the secret of good spread betting is to cut your losses quick and run your profits before selling them for as much as possible. But the best way to make spread betting work for you in this way is with carefully considered Entry and Exit points in the market. Spread betting provider City Index looks at how to plan your next trade.

When it comes to spread betting on the financial markets, our instincts are not always wrong but they are not always right either. You could make 50 pounds on one hunch but lose 100 on another, and you would have learnt nothing to aid your future trading in the process. Because of this you should always follow a spread betting strategy, including carefully considered entry and exit points.

Determine your entry and exit points

A common mistake amongst spread betting beginners is to focus too much on their entry point and not at all on their exit. Your exit from a spread bet is every bit as crucial, if not more so, to your bottom line as your entry, and so it deserves as least as much attention.

One method is to set a price target based on a risk-reward ratio. For example, if you are looking to take a spread betting position with a 50 point risk, you might use a strategy that targets a 3:1 profit. This would mean that, for every 1 that you risk, you would aim to receive 3 back. Applied to the above scenario, your 50 point risk would see you target a profit of 150 points for the spread bet.

Place stop losses effectively

Once you have opened a financial spread betting position, your money is at risk. For this reason, you should immediately put a stop loss in place.

Some traders would keep their stop loss fixed in a low position to give the market room to fluctuate. Other traders might move their stop loss to trail the market or lock in a profit or breakeven result. The decision is yours, but never risk more money than you can afford to lose.

Open a free demo account

To implement their strategies risk free, many traders register for a free spread betting demo account with City Index. This enables them to experiment with entry/exit points, stop losses and limit orders without the psychological impact of trading. It also helps to ensure that any experimental strategies are not cut short because of emotion and are seen through to a clear conclusion.

To learn more about the financial markets as well as the tools and strategies for successful spread betting, visit http://www.cityindex.co.uk/spread-betting/ at City Index.

Spread betting and CFD trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.

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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, City Index transacts in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. They also provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, spread betting.

For more information, visit http://www.cityindex.co.uk/

SOURCE City Index