Three Spread Betting Questions to ask Yourself Before a Trade

LONDON, January 6, 2011 /PRNewswire-FirstCall/ -- It can be easy to rush into spread betting without first considering all the factors. Here, financial spread betting provider City Index (http://www.cityindex.co.uk) suggests three key questions to ask yourself before you press 'buy' or 'sell' on your next spread bet.

Am I completely confident spread betting on this market?

You should never open a spread betting position on a market without fundamentally understanding how it moves, how its price movements are affected and how volatile it can be. For instance, if you were preparing to place a spread bet on British Airways shares without knowing that a spike in crude oil prices may force BA's price downwards, you would probably be fighting a losing battle. Understanding a market means that you can react swiftly and effectively as relevant news emerges.

Is there currently any news activity which may affect this market?

Every spread bet that you place needs to be carefully researched and thoroughly thought through. If not, you run the risk of overlooking a crucial detail that may affect the market in a big way. For example, the price movements of commodities such as soybeans, wheat and pork bellies can be influenced by everything from political decisions and weather forecasts to crop reports and seasonal factors. Spread betting with any kind of frequency requires you to be completely up-to-date with the developments that may affect your market/s.

How much am I prepared to lose on this spread bet?

Financial spread betting (http://www.cityindex.co.uk/spread-betting/) is difficult and even the best traders make a loss from time to time. Therefore it is important to consider how much you are willing to stake on a spread bet - and also how much you are willing to lose on it. By doing this you can set out your stop losses in line with your expectations and consequently accept your worst-case scenario before you even open the spread betting position.

Remember, it is infinitely easier to make a loss at spread betting than it is to make a profit. Whilst you want to give your profits room to run, you also need to be able to cut your losses before they become severe. This is a balancing act and it takes time, practice and analysis for every trader to find a spread betting strategy that works for them. With this in mind, a spread betting demo account ( http://www.cityindex.co.uk/learn-to-trade/demo-account.aspx) can be a good place to try new things without risking real money.

To learn more about financial spread betting, visit http://www.cityindex.co.uk/spread-betting/.

Alternatively, see a list of upcoming free spread betting seminars at http://www.cityindex.co.uk/learn-to-trade/seminars.aspx.

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

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