Trading is a skill that requires practice. It is important to learn from every trading experience, regardless of whether they netted you a profit or loss. A City Index trader offers 10 top spread betting tips to help you in your trading.
- Know your market
Spread betting offers over 12,000 markets to trade, so it is important that you choose one that you really understand and are comfortable with. A successful trader has the ability to identify and understand events influencing market movements, such as economic data, and their likely impact on the price actions of the instrument he wishes to trade.
As a spread bettor, you need to take a clear view on the direction in which you think prices will move in the future and it helps to research your trades using the news and charting tools available through the secure ITP area of the City Index website.
- Never overtrade
We always recommend that no trader should ever trade beyond his or her financial means. This means that you should never use up your entire cash balance as margin for a single opening trade, however promising it may seem at the time you open your trade. Market volatility is unpredictable and could easily leave you with little surplus in your account to allow for price fluctuations, if the market moves against you. Always have extra margin to cover your position should prices move against you.
- Set realistic trading targets and stick to them
When trading in general, it pays to safeguard yourself against emotions such as greed, fear and hope. As with other forms of trading, it is easy to get carried away and make impulsive spread betting decisions.
It therefore helps to outline a trading plan, which should provide a general set of rules that you can refer to when making important spread betting decisions. A trading plan need not be complicated and could specify things such as:
- Profit goals (per day, month, year)
- Maximum losses you are prepared to take
- Size of the trade at any one time
- Entry/exit point
Without rules, it is easy to give in to your impulses, making irrational spread betting decisions that you may later come to regret. Of course, as you become more confident, these rules can be changed and adapted to any new strategy you may wish to adopt.
- Cut your losses
In a losing situation it is easy to let losses accumulate in the hope that prices will turn around. By getting out of loss making positions early you will be able to cut your losses before they become too large and this is where Rule 3 will come in handy.
- Use stop losses to manage your risk
You can place closing orders (stop losses) on trades both online, via your mobile and over the telephone to help minimise your losses. Remember that a standard stop loss does not protect you if prices gap so always consider a guaranteed stop loss for added protection. There is a small additional charge for a guaranteed stop loss and these are not available on all our markets.
- Expect losses
Even the best traders get it wrong so netting a loss on your trade doesn’t make you a bad trader. It is important, however, to analyse your losing trades and learn from your mistakes. Don’t get emotionally attached to your trades.
Some traders even believe that the best lessons they have ever learnt come from losing trades as opposed to winning ones.
- Be disciplined
Some traders can be so emotionally involved in a position that they may make ‘impulse trades’, whereby they either get in or out of a position prematurely. So it is vital that you stick to your trading plan and not let your emotions take over. Consider the appropriate levels to take profit and losses and stick with it.
- Don’t put all your eggs in one basket
It is always advisable to trade a variety of markets to spread your risk. If you place a large trade in one market, your trading account will live or die by that one market. By spreading your trades across a variety of different markets or sectors, you are diversifying your risk.
- Don’t trade on rumours
Rumours in the market place are a regular occurrence and, just like Chinese whispers, can quickly deviate from reality. By undertaking proper and timely research before placing your trades, you should feel much more confident in your positions. Always form your own opinion about every trade so that when you are ready to trade, you are confident that you have taken a valued and considered view.
- Keep informed and up-to-date
Make use of all the resources available to you to maximise your understanding of the markets. Your trades will move in tandem with the live market and by being in a position to react to market news, you will be in a much better position to open new trades or exit positions quicker than if you were not keeping up to date with market events. The City Index Internet Trading Platform is constantly updated to give you the latest news and information from well respected news providers and market analysts.