Is a Trading Strategy the Most Important Ingredient In Your Spread Betting?

LONDON, October 4, 2011 /PRNewswire/ --

Fundamentally, the idea of a spread betting strategy is simple. In essence, it means you should know even before you place your spread bet why you are entering the trade, where you want to take profits and more importantly where you are willing to take a loss.

Having a strategy helps to filter out any impulse spread bets that may backfire, and it also removes all emotion from your trading platform decisions. Here are some of the other questions that your spread betting strategy ought to answer:

What do I want to spread bet on?

Spread betting providers such as City Index (http://www.cityindex.co.uk) offer a wide range of markets including indices, shares, commodities, currencies and metals. It is vital that you understand the market or markets you wish to trade before you start spread betting, so your strategy should focus your trading on the markets that you know best.

What is the true value of the spread bet?

Remember, as spread betting is a leveraged product, you control a much larger position than your deposit would normally allow you to trade in the underlying market. The advantage of this is that your winning trades can return much greater profits. However, your losses can be magnified in exactly the same way. This means that risk management and an awareness of the true value of your spread betting trades should play a crucial role in your trading strategy. 

What profit/loss am I prepared to accept from a spread bet?

Most traders make a losing trade at some point. The key is to ensure that your spread betting profits outnumber your losses. With this in mind, you should know beforehand what level of profit and loss you would accept from a spread bet, and use these figures as the basis of where to place your stop losses and limit orders for that trade.

Which stop loss should I use?

Standard stop losses are not infallible, as they only close your trade at the best available price once the stop value has been triggered. Guaranteed stop loss orders incur a small premium but guarantee to close your trade at the trigger value you have set, regardless of underlying market volatility and gapping.

Learn more about spread betting at 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.

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/spread-betting/start-spread-betting.aspx for more information.

SOURCE City Index