Four Valuable Safety Measures for Trading Volatile Financial Markets

Aug 22, 2011, 05:36 ET from City Index

LONDON, August 22, 2011 /PRNewswire/ --

Inflation rose sharply in July as retail prices increased, with clothing and footwear prices recording their biggest annual increase since 1997. Recent figures from the Office for National Statistics (ONS) confirmed the rate of Consumer Prices Index (CPI) inflation rose to 4.4% in July from 4.2% in June.

With such a high level of volatility, it can take just a second for momentum to shift and start heading a trader's way - or against them. Spread betting provider City Index (http://www.cityindex.co.uk/) offers these four tips to protect your trades and your capital.

Small Bet Sizes

Every trader has heard of legendary spread bettors making their fortune on a once-in-a-lifetime trade, but the reality is successful spread bettors consistently make numerous small profits rather than an enormous one-off. Keep your bet sizes sensible to manage your risk and build up incrementally. The less you stake, the less you stand to lose should your spread bet turn against you.

Mobile Trading

Mobile trading is an increasingly popular way for traders to react to sudden price movements in the markets wherever they are. City Index has been voted 'Best Mobile Trading Platform' by readers of MoneyAM for the last two years.

Joshua Raymond, Chief Market Strategist at City Index, states: "Since the release of City Trading™ [City Index's mobile trading app for iPhone™, Android, BlackBerry, Windows 7 and Java], the percentage of total trades placed on our mobile platforms has risen from less than 3% to 15%, which underlines just what an impact the City Trading™ app has had on traders' behaviour."

Guaranteed Stop Losses

With a guaranteed stop loss you pay a small additional premium on the trade to guarantee that your order will be executed at the exact level that you set, regardless of any market gapping.

For example, imagine you bought £2 per point of the Wall Street Index at 10100, and highlighted 9950 as your maximum loss level - a £300 loss allowance (10100-9950 x £2). You could use a guaranteed stop loss order to ensure that, should volatility push the Wall Street Index lower, straight to 9900, your trade would still be closed out at 9950.

Stand aside

The ultimate risk management tool available to every trader is their ability to weigh whether a trade is worth the risk or not. Remember, standing aside is always an option if the market conditions are not right for trading.

Learn more about risk management in spread betting at:

http://www.cityindex.co.uk/spread-betting/how-to-manage-risk.aspx

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 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. Visit http://www.cityindex.co.uk/ for more information.


SOURCE City Index