Spread Betting Guide for Traders Looking to Place Their First Trade

LONDON, March 19, 2012 /PRNewswire/ --

Spread betting is the act of speculating on the movements in a market's price. Through Finspreads, you can trade on all major financial markets, including the leading American and European indices, world currencies, global equities, commodities, bonds, and more.

Buy and Sell

Similar to traditional trading, in spread betting you will be shown two prices; the buy and the sell price.

If you expect the underlying market's price to rise, you will 'go long' and buy at the offered price. Alternatively, if you think the underlying market price will fall, you 'go short' and sell.

For every point the market moves in your favour, you will profit. For example, if you go long and buy and the market rises; your profit will be the point movement multiplied by your stake.

However, unlike more traditional forms of trading where you own the underlying instrument - in spread betting you do not, you simply take a position allowing you to speculate on the price movements of that instrument.

With this in mind, if the market does not, for example, rise in the way you had expected and instead falls - in the same way your profit is calculated by the point movement being multiplied by your stake; so is your loss.

Trading Plan & Strategy

The aforementioned risk of loss is also found within the low margin feature. Whilst a welcome feature for new traders; enabling them easy access to a wide range of financial markets as the initial deposit is only a small percentage of the underlying instrument - it also comes with high levels of risk as any loss will be magnified so you could end up losing more than your initial investment.

With this in mind, steps must be taken prior to placing a trade to help limit these potential losses.

A comprehensive trading strategy provides solid guidelines which will help protect you from trading on impulse during in volatile market movements.

It will also answer questions such as:

• What kind of trader do I want to be?

• What markets do I want to focus on?

Summary

Spread betting with Finspreads offers traders, both new and experienced, the potential to profit from a wide range of markets regardless of the direction in which they move.

It is imperative you remember that as a leveraged product, spread betting the financial markets can result in losses quickly exceeding an initial outlay.

This alternative form of trading is not suitable for all traders and you should make sure you fully understand the risks involved. It is advisable that if in any doubt, you seek independent advice.

About Finspreads:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a Finspreads spread betting account.

Finspreads is part of the City Index Group of companies, one of the world's largest providers of derivative trading services for retail investors. Visit http://www.cityindex.com/ for more information.