August 31, 2014

Financial Spread Betting mistakes to avoid

Financial Spread Betting provides traders with a highly accessible entry into the financial markets. With slick user interfaces on offer underpinned by the mechanism of leverage, Financial Spread Betting can provide some advantages but also plenty of big risks.

In order to increase you chances of success, the following tips are presented and aim to help you reduce the risk of this leveraged service.

  • Failure to understand the concept of leverage. Leverage is the reason why you can enjoy big gains from a relatively small deposit. But leverage is also the reason as to why you can lose far more than originally deposited if your trade goes in the opposite direction.
  • Failure to consistently keep up to . Things in the market move incredibly and so much as a rumour can cause big movements. Therefore, it is important that you keep up to date with all the latest news and think about how it could affect your position.
  • Little thoughts about a strategy resulting in impulse trades. How long will you let your profits run for? How long will you let your losses run for? How long are you prepared to let your trade run for in the hope of a recovery to counter a loss experienced? These are all important things to consider as part of your strategy in order to discipline yourself and establish some form of rhythm.
  • Lack of understanding as to what influences your market. Just like you may run a SWOT plan if you’re running a business, you should conduct something similar for your market. For example, you should consider all the aspects that may affect your spread betting position. For example, could new regulatory changes bring down the share price of stocks within the banking sector? Could new political factors affect the share price of a defence company? It’s important to anticipate and think ahead as to how various announcements could impact your position.
  • Failure to learn from mistakes. It’s important to learn from your mistakes within financial spread betting. If you are experiencing too many unacceptable losses, you should go back to the drawing board and analyse why.