Broker of the month: ETX Capital, read our expert and client reviews here
Strategy is key to spread betting. Having a clear idea of how you want to trade will give you the best chance of maximizing profits and reducing losses.
If you are just getting started in spread betting and looking for basic strategy that promotes good trading we’ve put together a quick summary of three simple spreads betting trading strategies that should help you find your feet.
Here are three strategies to get started on the right track:
1) Never over trade.
It’s temping to smash straight into the market and trade as large as possible. But this is the quickest way to lose your money. When you get started bet small relative to your account size. This means if you have £1,000 on your account allocate no more than 10% of that to the margin of each trade and keep at least 50% free for variation margin (covering your profit and loss).
The principle is the same if you are trading with £100k. You shouldn’t use more than 50% or £50k as initial margin, or have a single position that accounts for more than 10% of your account.
Spread betting brokers provide access to well over 3,000 instruments to trade and having a diverse range of positions will spread your risk. If you have too fee large positions and one moves against you it can quickly wipe out your account. Having lots of small positions will help you manage your profit and loss more effectively.
2) Cut your losses, run your profits.
The last point in never over trading bring us on nicely to the most important part of spread betting strategy. Always cut a losing trade and run profitable ones for longer. The best traders in the world only get it right about half the time, but what makes them good traders is that they are not in a rush to take profits and realise when they have called the market right to let a position run and bank big wins. If you call a trend or reversal well, there is more to be gained from adding a trailing stop and profit limit tan taking a quick turn and looking for another opportunity.
Equally important is cutting losses. As with profitable trades where letting it run make big profits. With losing trades, letting them run will run up big losses. If a position or trade is not doing what you hoped, cut it out and keep your power dry and move on to the next trade.
3) Choosing the right spread betting broker
As spread betting is commission free (the charges are built into the spread and overnight fee) it’s easy to become complacent about which broker you use. Tight spreads and low financing charges are the key to efficient trading. If you are jobbing in and out of positions everyday trading with a broker that offers even slightly tighter spreads can increase your profits by up to 20%.
Core Spreads, currently have the tightest spreads in the industry and offer a pretty good welcome bonus of up to £10,000. It’s always worth having more than one spread betting account so if you trade intr-day it’s worth switching to take advantage of both the tight spreads and welcome offer. You can open an account here… or read the review here.
Featured Spread Betting Brokers
|IG||ETX Capital||City Index|
|Best for experienced traders with large range of markets and tight spreads and cryptocurrencies||Best for traders with large accounts. A solid all rounder with institutional pedigree.||Best for traders with large accounts. A solid all rounder with institutional pedigree.|
| Visit IG
Read Expert & 3+ Client IG Reviews
| Visit ETX Capital
Read Expert & 30+ In Depth Client ETX Capital Reviews
| Visit City Index
Read Expert & Client City Index Reviews