Financial spread betting is easier to understand than many believe. This simple ten point guide offers you the tools to enter the financial spread betting market with more understanding. It can be applied to currency trading too.
1. Practice makes perfect
If you are a novice then the world of financial spread betting is full of dangers. I would suggest opening up a "demo" account. There are plenty of companies that will allow you to do this. They usually give you up to $10,000 to play trade with. Get comfortable and then go to real money.
2. When opening up a real account
Companies will let you set up for as little as $200. I would suggest setting up your first account with a minimum of $1,000. This will allow you to absorb more losses than with $200 or $500, keep your betting size to small fraction. I suggest that 2% is an ideal maximum risk but with a small account 5% is generally figure used.
3. Start Slow
The UK FTSE 100 is a good place to begin. The blue chip stocks are even better as they are more liquid. The US stock market and Forex (Foreign Exchange) is generally too volatile for a beginner.
4. Increasing your profits
The best time to bet is when you believe the market is going to move sharply either up or down. This is done only by studying the market and noticing trends and practicing also helps. There is software to buy that can help you predict the market.
5. Never Average Down
This means simply never increase you position when the market moves against you. Although if you are up then increasing you position can be advisable; a good example would be when you open at $1 a point on the FTSE at 6000, stop loss at 5900. The market moves to 6100. That means a profit of $100. In this example you buy another 50p and moving your stop to 6000. Should the market move against you, you will break even on the $1 point per trade but be $50 up on the 50p per point trade. (If this doesn't seem to make sense just read again slowly and it will become clearer).
6. Daily Bets
If you decide to bet daily make sure that you have access to the all information constantly. For the beginner it is easy to spot general trends that take place over days rather than hours. Daily betting can lead to small losses accumulating into large sums. The desire to cover you losses becomes greater.
7. When betting
To make sure that you are covered always use firms that give firm quotes on the screen. Use proper regulated firms. There are unscrupulous people out there who will not think twice about taking your money.
8. Telephone betting
If you close a deal by phone then state your requirements firmly and accurately (ask them to repeat back to make sure). Check you contract note carefully and never ever expect advice as it is against the law.
9. Minimizing your losses
When placing your bet always use a stop loss (maybe even a guaranteed stop loss) and perhaps a limit order. This will then protect you if the market suddenly turns against you.
10. Profits
In the first six months don't expect to make a profit. You will be refining your technique in the real world environment. Please be strict with yourself and bank even small profits rather than betting them again for bigger gain. It will take a long time before you know technical analysis very well. The first six months will also be about finding out about yourself and if you can deal with losing money. If you cannot handle the fear of losing money then step away.
Financial betting can be confusing and scary. If you feel overwhelmed then just sit back watch the markets and wait until you feel safe to stick your toe back in the water.
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