London, England -- (SBWIRE) -- 04/19/2011 -- Spread betting provider City Index (http://www.cityindex.co.uk/) takes a look at some common spread betting errors, how to avoid them and most importantly, how to learn from them.
1) Not understanding leverage
In financial spread betting, only a percentage of the total value of your trade – the margin – is required as a deposit in order to open a spread betting position. This allows you to leverage your profit (and loss) potential by increasing your exposure to an underlying asset with the same initial investment, creating the possibility of spread betting losses that are significantly greater than your initial outlay. Understanding leverage and the true value of your trades means that you can manage your potential spread betting downsides more effectively.
2) Not having a spread betting strategy
Spread betting can be emotionally draining, particularly if you do not have a defined profit and loss strategy in place for each financial spread bet you place. By outlining where you wish to cut losses and let profits run to beforehand, a spread betting strategy helps to eliminate the possibility of impulse trades where you might open or close a spread bet prematurely or belatedly without really thinking it through.
3) Not knowing the market
Being familiar with how a particular spread betting market moves, what affects those price movements and exactly how volatile it can be can make a huge difference to you spread betting, as it gives you the opportunity to react quickly and correctly when relevant news emerges. For example, if a spread bettor does not know that a spike in crude oil prices would raise airline costs, they could be fighting a losing battle spread betting on British Airways shares. An added benefit of solid spread betting research is that it helps you to work out where to place your stop losses...
4) Not using stop losses
Risk management is of paramount importance in spread betting. By using stop loss orders, in particular guaranteed stop loss orders, you can ensure that you never lose more than you are willing to without capping your profit potential.
5) Not continuing with spread betting education
Even seasoned spread bettors can keep their trading skills sharp by looking for new ways to maximise their spread betting potential. From technical analysis to candlestick patterns, Finspreads spread betting seminars are designed to expand your knowledge of how to analyse the financial markets whatever your level of spread betting experience.
To get more out of your spread betting, visit 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, CFDs and, in the UK, spread betting.
We constantly look to 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/.