Spread betting is a type of investing in which you bet on whether a stock or financial index will go up or down. As such it is more like gambling than investing. While there have been a lot written about spread betting strategies to help you earn large profits, you also need to develop strategies for staying in control. Like any form of gambling, it is easy to get caught up in the emotional high of an unexpected profit and make errors that can cost you your life savings.
Financial spread betting can lead to substantial losses. This is because you are wagering on the spread between two points on the index. Your wager is multiplied by the number of points in the spread. This can make financial spread betting more lucrative if you bet correctly. Likewise, you can suffer devastating losses if the index moves the opposite direction. One of the best spread betting strategies for keeping control of your losses is to use a stop-loss limit. This will close out your position if the index moves beyond a certain point in the wrong direction. This will allow you to limit your losses to what you can afford.
It is also important to not get caught up in the excitement of a win. It is human nature to want enjoy the thrill of winning and to want to immediately repeat it. This almost always leads to losses. While you are enjoying the emotional rush, it is unlikely that you will use the diligence and perform the necessary research to make a second winning bet immediately after an initial win. Let things cool down for a couple of days before you jump back into a new position.
Most successful spread betting strategies involve using research, tables and charts. It is rare for traders to work from the “gut” anymore. The most successful traders use methods that are more scientific than intuitive to pick their bets. They do not get emotionally invested in a position, instead relying on hard data to make their picks. You can be sure that spread betting companies are also using scientific methods to give themselves every advantage.
In financial spread betting, like so many other things in life, timing is everything. Making your trades first thing in the morning subjects you to the normal erratic starts and stops that the markets experience in the first 30 minutes of opening. Make your trades after the markets have been open long enough to stabilize. Speaking of timing, you do not have to close your positions every day. You can leave them open over a period of time. In fact, it is usually recommended that beginners do not engage in day trading.
Financial spread betting can be a profitable way to invest your money. However, it is not without its risks. It has much more in common with gambling than investing. Use spread betting strategies designed to limit your losses and keep you from getting emotionally caught up in the excitement of spread betting. You should also investigate methods of using data and charts to help you make your picks. These more scientific methods are favored by spread betting companies for a reason; they work.