Are You Doing It Right? Spread Betting Mistakes to Avoid

Spread betting is one of the most accessible forms of trading the financial markets, with its low margin feature; it provides an easy entry level for new traders.

You can also go long or short on market prices, making it possible to profit even when prices are falling. This allows spread bettors to magnify their gains, but can also magnify losses which can exceed your initial deposit.

This is why it is important for traders to fully understand the risks as well as the rewards when placing trades.

Spread betting is a tax-efficient way of trading the price movements of thousands of financial markets.

However, tax laws remain subject to change. And because spread betting is a leverage product, you only need to deposit a small percentage of the total value that you wish to trade. The following will outline 5 of the most common spread betting mistakes and how you can avoid them.

Leverage

Understanding leverage and the true value of your trades means that you can manage your potential spread betting downsides more effectively.

Unlike traditional trading with spread betting you only need to deposit a relatively small amount in order to gain a large exposure and this means that your return on investment is magnified, both for gains but also for any losses that you may experience.
Having a spread betting plan and strategy that outlines profit targets and acceptable losses against the fluctuations of the market could also help to minimise losses and lock in profits.

Spread Betting Strategy

Spread betting can be an emotional experience. Through a carefully considered profit and loss strategy, the likelihood of trading on impulse and netting eventual losses is lessened.

For example, a solid trading strategy can help you avoid the common mistake of taking profits early and letting losses run. Some of the more experienced traders aim to cut their losses early and let profits run before cashing them out at a predetermined/targeted level.

Know the Market

Understanding the nature of your chosen markets, what affects its prices and its level of volatility can have a huge impact on your spread betting position. Understanding these factors will allow you to react quickly and correctly when relevant news emerges.

To understand your chosen markets, keep up with the news to help capitalise on the latest information by opening your spread betting position before anticipated market movements occur

Summary

There are many more secrets to successful spread betting. Ensure that you fully understand the risks, form a solid spread betting strategy and continue to follow the news to understand the nature of your chosen markets better.

Spread betting is a leveraged product which can result in losses greater than your initial deposit. Ensure you fully understand the risks.

 

Images from City Index

 

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