Does Spread Betting Present a Lower Risk Alternative for New Traders?

LONDON, February 22, 2012 /PRNewswire/ --

Spread betting allows traders to go both long and short in a market, meaning that they can profit regardless of whether markets rise or fall.

Another advantage to spread betting is that at present in the UK, all profits are free from Capital Gains Tax and Stamp Duty - though this is subject to change and you should seek independent tax advice for more information.

As a derivatives product, financial spread betting allows traders to speculate on the price movements of a range of financial markets including indices, shares, currencies, commodities and more.

Offering a low margin feature, spread betting requires you to deposit only a small percentage of the full trade value.

However, the potential for both profits and losses from an initial capital outlay is significantly higher than in traditional trading.

With this in mind, we consider how traders can lower their risk and ultimately their losses.

Limited Risk Accounts

Limited Risk Accounts offer an alternative to standard spread betting.

Helping you to manage your trading risk by placing a Guaranteed Stop Loss Order (GSLO) on every position you make, a Limited Risk Account is an ideal starting point for new traders.

Key Features of Limited Risk Accounts are:

• Guaranteed not to lose more than your account balance (read more below)
• Enjoy the same spreads as the standard account
• Small additional charge applicable per trade
• All charges are shown on your account, not hidden in the spread

Through City Index, you can spread bet with lower risk on a range of markets, such as equities, forex and indices.

Guaranteed Stop Loss Orders

Working in the same way as Standard Stop Loss Orders, GSLOs guarantee to close your trade at the trigger value, i.e. a predetermined level set by you; this is regardless of underlying market volatility and gapping.

The Key Features of GSLOs as part of a Limited Risk Account are:

• They are guaranteed - you cannot lose more than your account balance
• All trades placed have a Guaranteed Stop - which you can place just 5% away on UK100 equities
• You are offered the same spreads as a Standard Account
• No margin closeout level to monitor
• Wide range of popular markets

Summary

As a leveraged product, spread betting can result in losses greater than your initial deposit. Risk management is imperative to trading. With this in mind, a Limited Risk Account can potentially offer new traders with a lower risk option.

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 in over 50 countries. We provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, financial spread betting.

We constantly look to improve the performance of our platforms and expand our range of services. The result is our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Visit http://www.cityindex.co.uk/ for details.

SOURCE City Index