Spread betting offers access to thousands of markets from all around the world, and is often seen as a sound introduction to trading because of its relatively low risk and ease of trading. However, to be successful, even the novice spread bettor will still need to develop and adopt a strategy of their own; something that helps minimise losses, because they will occur, and maximise profits, because they will also occur.
Limit Your Markets
There are thousands of spread betting markets available, and when cutting your teeth it can be tempting to try your hand at dozens of these markets. ETX Capital has a list of some of the available markets to give you an idea. However, to enjoy a greater chance of success, you will need to get to know the market that you trade, which will be impossible if you are trading 20 markets.
Choose a small number of areas, and preferably those where you already have some degree of understanding. If you know the pound inside out, or have a solid working knowledge of commodities, then stick to these areas to develop a solid but simple spread betting strategy.
Knowing when to exit a trade can be one of the most challenging factors to the novice bettor. On the one hand, if you hang around too long there is the potential that the profit you have built up will quickly erode, while exiting a trade too early means that you may not have squeezed as much profit as possible from a particular trade.
Once you do exit a trade, don’t dwell on it, but do track results so that you can learn whether you would have been able to make more profit, and to determine more effective pointers and signals.
Using Stop Losses
You will find that many accounts now require that you place stop losses on every trade, and even if they don’t you should get into the habit of doing so. The simplest form of stop loss will limit your loss to a certain percentage from your entry point, for example 10%.
Setting stop losses will also enable you to calculate the amount you could potentially lose.
Avoid Betting On Tilt
One of the principle benefits of employing a simple spread betting strategy is that it can help to overcome some of the emotions and psychology in spread betting. Making a loss can be difficult, chasing a loss can ruin you.
Lamenting a missed gain can be equally as destroying. With an effective strategy in place, it enables you to look beyond individual trades and to your overall performance, therefore sidestepping potentially ruinous emotional spread betting.