Starting Out in Spread Betting
If you're new to spread betting, then you may head to a website and start scratching your head once you've set up an account. The various charts and tables, spreads, margins and differing stocks are all obstacles that the beginner should have some understanding of before putting their money down and it's rarely as easy as you first thought it might be. If you're looking to open a spread betting account, but would like some advice on how you should start out, then this article has some tips:
Learn the Ropes Properly
Taking to spread betting as a rookie and placing a few thousand on the first thing you see will more than likely get you stung very seriously. Before starting, make absolutely sure you understand the implications of spread betting and how it works, including how much you can lose along with how much you stand to win. Companies such as Tradefair offer spread betting demo accounts that you can place dummy bets on until you're confident to go in with real money.
Limit Your Portfolio
Unlike stock market investing, spread betting is speculative and difficult to predict and profit from over the long term. It's important that you don't get carried away and spread bet your pension. Short term gain is often good to go for within your portfolio, but you should never use more than 20% of your total investments for this end you'll sleep a lot easier.
Betting on changes in the UK FTSE 100 is a good place to begin, while blue chip companies can also be good as they are more liquid. The US Dow Jones Industrial Average and Foreign Exchange is too generally too volatile for beginners, and emerging markets and commodities are particularly rocky at the moment.
Don't Average Down
If the stock market moves against you, cut your losses and move on never increase your position. You can, however, increase your position if the market is with you.
When placing a bet make sure you consider the various risk management tools available to you. Using tools such as a stop loss or limit order will benefit you should the market move against you. Most trading platforms have wide ranging risk management tools to help you check all of them out and see how they fit in with your trading.
People who trade in the stock market rarely make a profit straight away. It takes experience and technique to become adept in the stock market, and no one can claim to be the master of it even Warren Buffet! Initially, be strict with yourself and bank any small profit and work out a strategy rather than hedging your winnings on further bets.