My Spread Betting Demo Account Diary

Oct 25, 2010, 06:39 ET from City Index

LONDON, October 25, 2010 /PRNewswire-FirstCall/ --

Two weeks in the life of a real spread betting demo account holder:

Day 1

Logging into my spread betting and CFD trading demo account with City Index (http://www.cityindex.co.uk) for the first time, I'm greeted by a screenful of numbers that blink red and blue constantly as prices rise and fall. I've never tried spread betting or CFD trading before but, galvanised by the professionalism of the trading platform before me, I immediately place a spread bet - taking a 'buy' position on the UK 100 Rolling Spread. The market falls slightly. I decide to absorb the loss of GBP1.79 and immediately close out. After all, I've only got another GBP2498.21p of virtual credit left for my first foray into spread betting and CFD trading.

Day 2

CFD trading today, and to begin with I make a few small profits ranging between GBP5 and GBP15 in quick succession. I do this by making CFD trades on one point spreads, buying at what I estimate to be a low position and then selling as soon as the spread rises by two or three points. CFD trading in this way feels a little like sprinting between the stumps in cricket, seeing if I dare to squeeze in one more run before the fielders retrieve the ball. It requires a lot of attention, but it seems to be paying off - until, that is, the Wall Street CFD market suddenly falls rapidly and provides me with an unrealised loss of GBP120. I close out to see that I've now fallen back below my original GBP2500 spread betting and CFD trading demo account balance. A change of tack may be required.

Day 4

I decide that whoever initiated the concept of the stop loss in spread betting and CFD trading is a genius. Every CFD trade and spread bet I make is now accompanied by the swift addition of a stop loss order ( http://www.cityindex.co.uk/spread-betting/how-to-manage-risk.aspx), partially to ensure that I don't accidentally bankrupt my spread betting demo account, but mainly so that I can secure any unrealised profit in which I find myself by increasing the position of said stop loss. The beauty of this technique is that it allows the still-open spread bet or CFD trade to run on, potentially into even greater profit, whilst also ensuring that even if the market in question suddenly falls I will still make money.

Day 7

Having spent time beforehand soaking up expertise from an array of spread betting and CFD trading blogs, I sign into my account today armed to the teeth with trading tips. I'm limiting my spread betting and CFD trading to major indices only, mainly because opinion online seems to dissuade beginner spread bettors away from the greater unpredictability of specific companies. My research of the spread betting markets ( http://www.cityindex.co.uk/range-of-markets/) delivers in style as, by the end of the day, spread bets on Germany 30 and France 40 have generated a combined return of about GBP400. UK 100 and Wall Street CFDs are not performing as well however, so with stop losses firmly in place I decide to let them run overnight. The stop loss is proving a vital risk management tool, particularly in view of the fact that spread betting and CFD trading can result in losses far greater than the initial deposit you put down.

Day 8

Profit. I'm almost speechless when I log into my spread betting demo account to discover that that the pretty mediocre CFD trades I left running overnight now stand at an unrealised profit of GBP1200. It's all I can do to close out straight away, forcing my account balance past the GBP4300 mark. I then realise I probably should have just moved my stop losses up, but I was too delighted to think logically in the heat of the moment. After a few minutes though I get cocky and start to believe that I've got the measure of this spread betting and CFD trading lark. A couple of GBP200 losses on Lean Hogs CFDs and Crude Oil quickly assure me that this isn't the case.

Day 11

Since making that large profit a few days ago, my spread betting demo account (http://www.cityindex.co.uk/learn-to-trade/demo-account.aspx) has simply been haemorrhaging (virtual) money. Every spread bet and CFD trade I place seems to repel the market price in the complete opposite direction. The most infuriating thing about spread betting and CFD trading is the fact that, Bullseye-style, you get to see exactly how much money you would have made if you had just bought instead of sold. When my account hits GBP3500, I decide to cut my losses and sign out. Some days just aren't meant for spread betting.

Day 14

I log out of my spread betting and CFD trading demo account for the final time with a balance of GBP3600 - meaning a profit of GBP1100. It could have been more, but it could have been a lot less too. My celebrations are muted somewhat when I remember that this isn't actually real money.

So, what has my demo account taught me about financial spread betting (http://www.cityindex.co.uk/spread-betting/) and CFD trading ( http://www.cityindex.co.uk/cfd-trading/)?

That spread betting and CFD trading are difficult and extremely risky? Definitely.

That the greater your understanding of spread betting (and indeed the products you spread bet on), the greater your chances of success on the trading platform? Absolutely.

That even if you understand spread betting in the greatest depth, it still doesn't guarantee success? Undoubtedly.

And finally, that - for a beginner to spread betting or CFD trading - trying a demo account before risking real money is a must? Without a shadow of a doubt.

Sign up for your free spread betting and CFD trading demo account at http://www.cityindex.co.uk/learn-to-trade/demo-account.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.

*Spread betting and CFD trading are exempt from UK stamp duty. Spread betting is also exempt from UK Capital Gains Tax. However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.

SOURCE City Index