How to Handle a Financial Spread Betting Loss

LONDON, January 30, 2011 /PRNewswire-FirstCall/ -- How do you react to a financial spread betting loss? Do you ignore it? Do you take a break from the trading platform? Do you stake more money than usual on your next spread bet to try to recoup the difference? Here, spread bet provider City Index (http://www.cityindex.co.uk) looks at effective five ways to handle - and learn from - a financial spread betting loss.

Expect it.

Financial spread betting is not easy. If it was, everybody would be doing it. Consequently, even the most successful spread betting traders make a loss from time to time.

Understanding that you too will make losing spread bets is a crucial step in developing your financial spread betting. For every spread betting position you open, you first need to consider the worst-case scenario of the market going against your spread bet, triggering your stop loss and resulting in a loss.

Naturally, every trader wants every spread bet they place to be a profitable one, but you also need to be relatively comfortable with the potential downsides. If you are not, the psychological effect of making a loss can prove detrimental to your subsequent spread betting.

Minimise it

A frequent mistake among traders of various levels of experience is to keep a losing spread bet open in the hope that the market will soon turn around.

Naturally, this can and does happen, but the problem is that this creates a temptation to hang on to spread bets that are doomed to fail as well as those that may eventually break even. As a rule, try to cut your losses short and let your profits run. Remember, spread betting success is as much about minimising your deficits as it is about maximising your profitable spread bets.

Prevent it.

Or, at least, know that you did everything that you could to prevent it. This means visiting spread betting seminars such as those offered by City Index (http://www.cityindex.co.uk/learn-to-trade/seminars.aspx) and honing your trading strategy with a spread betting demo account.

It also means doing your homework on the financial markets, using fundamental/technical analysis in order to fully understand those you plan to open spread bet positions on. If you have a good reason for opening every spread betting position, it is far, far, easier to accept when one goes against you.

Also bear in mind that a significant aspect of risk management is sound money management. Knowing how much you have to trade, how much you actually want to trade and what the true value of every spread bet you open is invaluable. Failing to prepare is preparing to fail, as they say.

Learn from it.

Nothing beats the university of life when it comes to your spread betting education (http://www.cityindex.co.uk/Learn-to-Trade/). So when you make a financial spread betting loss, do not simply put it behind you and move on straight away. Consider what went wrong and learn from your mistakes.

Some spread betting traders make the same mistakes over and over again and consequently never improve. Those who learn from their errors and cut them out of their trading become better spread bettors for it.

Learn to get the most out of your spread betting at

http://www.cityindex.co.uk/spread-betting/.

Open your free spread betting demo account in less than 60 seconds at http://www.cityindex.co.uk/learn-to-trade/demo-account.aspx.

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, contracts for differences (CFDs) and, in the UK, spread betting.

We constantly look to widen the range of assets we offer, improve the performance of our platforms and expand the range of services we provide. The result is that our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer service and support.

Spread betting and CFD trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.

SOURCE City Index