Beginners Spread Betting Strategies
I am a beginner to spread betting, having only started in 2009, but it has certainly got me hooked!
When I was young people bet on horse races or the outcome of football matches but financial trading was the preserve of City dealers. Now more and more ordinary investors are giving various spread betting tips a try and the number is growing every year. The arrival of the internet and all the modern technology has made it a far cry from the trading floors of the last century where prices were transmitted by ticker-tape. Now you can sit in the comfort of your own home and as long as you have access to the internet you can try out your own spread betting strategies.
What is spread betting?
This statement is taken from the website of Finspreads which is the spread betting firm I now use and I think explains the concept of financial spread betting quite clearly.
“If you think that an underlying instrument will rise in value, then you ‘buy’ it (known as going ‘long’). Conversely, if you think that it will fall in value, then you ‘sell’ it (go ‘short’). However, unlike full value trading where you actually take possession of the underlying instrument, with financial spread betting you are simply taking a position that allows you to speculate on movements in its price.”
How does spread betting work?
Rather than buying the investment directly, with spread betting you bet an amount on each point or ‘penny’ that its price moves. As the price moves, your profit or loss is simply the price movement multiplied by your stake.
Spread betting firms
There are many spread betting firms now in existence but I have only looked at IG Index, CMC Markets, Finspreads, City Index and NatWest Index. I chose to open my account with Finspreads as they offered something called a “Trading Academy” which allows you to trade for as little as 10p per point for the first eight weeks. This is a really good way to try out various strategies for spread betting without risking the whole of your trading bank.
Spread betting explained
Spread betting currently comes under the UK’s gaming laws so any profit that you make (if you make a profit!) is completely tax free. This was obviously a major advantage over actually buying shares or unit trusts which I had done in the past. The other important point was that you can profit even if the market is falling. This was a difficult concept to get my head round at first but it certainly works. The hard bit is trying to decide which market to trade. Apart from the obvious instruments like indices, equities, currencies, commodities, bonds, options and interest rates you can also trade some rather more obscure items such as pork bellies or lean hogs! In my limited experience I think it pays not to trade every sort of instrument but to develop expertise in a narrow field of knowledge.
Rules of the Game!
Before you start trading it is very important to learn the basic rules of the game and for this you need a good teacher. In one of my magazines was a leaflet from a trader called Ian Williams who advertised a course called “Trading The Easy Way”. You could have this on trial and if not completely satisfied could return it for a full refund of the £247 (this was the cost in January 2009). The course included a very comprehensive manual but more importantly the offer of a free mentoring service by e-mail for 12 months if you had any problems or questions. I have never regretted the decision to purchase this as it gave me a good grounding and Ian was always there if I got stuck!
Onwards and upwards
I now had the three things I needed to get started:
- A computer with internet connection (broadband if possible)
- A comprehensive training spread betting handbook
- A spread betting account with a leading firm
Conclusion
There is great fun to be had in spread betting but as in all things it is wise to be cautious and not risk more than you can afford to lose. I cannot tell you how exhilarating it can be to suddenly make £50 while having your breakfast but conversely I have been devastated when trades have gone against me because I haven’t stuck to my spread betting strategies and thought I could outsmart the market. Believe me the market is never wrong. However if you do your homework, perhaps join a spread betting forum and don’t believe all the advertisements promising to make you a fortune for no effort then I’m sure you will do well. Happy trading!
Original content from Gr8 Free Articles.
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