LONDON, January 29, 2011 /PRNewswire/ -- Timing is vital in every form of financial trading, and spread betting (http://www.cityindex.co.uk/spread-betting/) is no exception. The points at which you open and close a financial spread betting position dictate the size of any profit or loss you eventually make. It is therefore vital that you learn to enter and exit your spread bets at the right times.
Unfortunately, many traders do not. A recent study commissioned by Barclays Wealth analysed the actions of retail investors investing in equity mutual funds between 1992 and 2009. The study revealed that the market timing decisions made by the investors actually slashed their returns by an average of 20 percentage points over the 18 year period.
Though not a spread betting study, the principle remains the same. Timing your entry to and exit from each trade is a fundamental part of financial spread betting.
Entering a spread bet
When financial spread betting, do you do extensive homework before every trade? Or are you an instinctive spread bettor, basing most of your trading decisions on hunches? Traders who understand the way a market moves and what might affects that movement will be in a stronger position to time their entry to a spread bet. Remember, all successful traders know exactly why they have entered a trade.
In order to help time your entry to a financial spread bet, you might also employ charting techniques or follow expert market commentaries, both of which are offered by City Index at http://www.cityindex.co.uk/.
Exiting a spread bet
You should never forget that your exit from a financial spread betting position is just as important as your entry to it. "Cut your losses and let your profits run" is an oft-cited trading mantra, but it is easier said than done. Sandy Jadeja, Chief Technical Analyst of City Index, says: "As a trader it is easy to enter a position hoping it will move in your favour forever. But at some point the market will turn and you may find yourself holding on for dear life wishing that your position would turn from red to black. The key to long-term success is knowing when you should cut a losing position."
A strong understanding of your market and the news activity surrounding it will pave the way for timely spread betting exits. You can also put in place stop losses and limit orders to automatically close your spread bets at set trigger prices.
Ultimately, the more time you dedicate to understanding the markets, the stronger your timing will become when spread betting on them. With this in mind, you can sign up for a free 2-week trial of the City Index daily market newsletter at http://www.cityindex.co.uk/market-analysis/daily-newsletter.aspx and keep up with all the latest activity.
Alternatively, open a spread betting demo account at http://www.cityindex.co.uk/learn-to-trade/demo-account.aspx and practice trading the markets with a GBP2500 virtual cash balance.
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, CFD trading (http://www.cityindex.co.uk/cfd-trading/) 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. For more information, visit http://www.cityindex.co.uk/.
Share this article