Spread Betting for New Traders: The Low Risk Alternative?

LONDON, March 29, 2012 /PRNewswire/ --

Spread betting with City Index enables us traders, for those of you who don't know, the potential to profit from a market that's not only rising, but falling as well.

Let me explain, if you - like me - wanted to try something a little different to the more conventional forms of trading and realised that spread betting offers not only easy access to a wide range of financial markets, you'll also know that you can sell and go short on a market and potentially profit.

In addition, at present in the UK, all profits are free from Capital Gains Tax and Stamp Duty - though this is subject to change and you should always seek independent tax advice.

Key Features

Financial spread betting is a derivatives product; allowing traders to speculate on price movements across a wide range of financial markets, such as indices, shares, currencies, commodities and more.

Its low margin feature means you only pay a small percentage of the underlying instrument as your initial deposit; making it easier for the 'average Joe' like you and me to start trading the financial markets when we have little capital - in comparison - to play with.

However, it is important that you remember that the potential for both profits and losses, from an initial capital outlay, is significantly higher than in the aforementioned more conventional forms of trading.

With this in mind, we consider how traders can lower both their risk and their losses.

Lower Risk

Above we covered how spread betting is a margined product, meaning you have the potential to lose more than your initial investment.

However, do not despair, through spread betting provider City Index, traders like us can access several risk management tools to help minimise risk and enjoy a more fruitful trading experience.

Before you even place a trade, it is imperative you create a solid trading strategy, outlining realistic goals - including the losses you are willing to accept - as part of a trading strategy.

Joshua Raymond (City Index Chief Market Strategist) 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,"

"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."

Having a defined strategy in place before you commence trading is an important step for beginners, as well as understanding the market that they trade which is also an essential factor in limiting your risk.

Why not take advantage of the City Index spread betting demo account where you can trade using a virtual cash balance of £2,500, for 2 weeks at zero risk.

Use this opportunity to familiarise yourself with three things:

• The City Index Trading Platform
• Chosen financial market
• Risk management tools

Summary

Financial spread betting can result in losses greater than your initial deposit, due to its leverage feature. Managing your risk effectively is imperative whilst trading.

Use a spread betting demo account to familiarise yourself with the trading platform, your chosen market and the various risk management tools. Aim to trade in the same way you would with your own cash, as opposed to the virtual balance provided, to get a more realistic experience.

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 in over 50 countries. We provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, financial spread betting.

We constantly look to improve the performance of our platforms and expand our range of services. The result is our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Visit http://www.cityindex.co.uk/ for details.