LONDON, January 4, 2012 /PRNewswire/ --
Speculating on the stock markets with spread bets can be a nerve wracking experience for any trader. City Index explains how emotions can lead to costly mistakes while a considered strategy and risk management tools can help to achieve more profitable trades.
Emotions can make it difficult for a trader to pick the right moment to close a position. Impulse decisions in the heat of the moment can be costly, reducing a profit or increasing a loss by causing a trader to exit a position too early or too late.
To a certain extent, emotions are necessary evils in financial spread betting. Traders need to fear the risks as this means they will manage them more effectively. They should also be greedy enough to let profitable spread bets run on and maximise gains.
At the same time, you cannot allow your heart rule your head. Financial spread betting with any kind of frequency requires logic and consistency. Off-the-cuff decisions will not contain either of these traits and will make it impossible to develop a solid trading strategy.
One way to stop your emotions clouding your judgement on the trading platform is to build them into your spread betting strategy alongside risk management tools.
It is always advisable to carefully consider entry and exit points as well as stop loss levels and limit orders based on how much profit/loss you are prepared to take at the outset.
For example, you might decide how much you are prepared to lose before you open the spread betting position, and set your stop loss accordingly. By doing this you essentially remove your fear from the spread bet, as you cannot lose more than you are willing to. If you find that you are still trading with fear, it is probably a sign that your trade size is still too large. Equally, if you set a limit order to the specific price at which you would like to exit the spread bet, greed will not cloud your spread betting decision-making either.
By setting these up in advance, your earlier common sense will help to manage any anxieties you may later have when you see the markets fluctuate.
Financial spread betting is complicated enough without having to referee an internal emotional debate as you trade. For this reason, many traders begin with free trial accounts to grasp the basics and become comfortable and confident with spread betting. Whether trading via mobile or by computer, a carefully considered spread betting strategy is a must for every trader.
Learn more about financial spread betting at: http://www.cityindex.co.uk/spread-betting/
Spread betting and CFD trading are leveraged products 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 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, 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.
SOURCE City Index