Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading spread bets and CFDs with this provider.You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Nothing can guarantee you success, as the markets can be very unpredictable.
However with better knowledge and understanding, your chances of success greatly improve.
How to spread bet successfully
Call 020 7638 6996 or email firstname.lastname@example.org to discuss opening a trading account.
1. Understand completely, what spread betting is and how it works
What is spread betting ?
It is a trading instrument that allows you to take advantage of opportunities in both rising and falling market. You can open a position based on whether you think a market will rise or fall, if the position moves in your chosen direction, you will make a profit. If it moves in the opposite direction, you will make a loss.
Your positions use leverage, this means when you make a trade you are only required to pay a small deposit and not the total value of the trade. This means both your profits or losses will be magnified. Spread bets are available on over 17,000 instruments including shares, indices, forex and commodities.
Spread betting is extremely popular with traders in the UK and Ireland because the profits are tax free.
How does spread betting work ?
You are not actually buying the physical underlying instrument, such as shares in BP or an Index. You simply place a bet/trade; on the direction you believe the future price of that instrument will move.
Once you have decided which direction a market will move, long or short, you then place a bet based on the amount you want to make or lose per point movement. If the market moves in your chosen direction, you will make a profit and if it moves in the opposite direction, you will make a loss.
The profit or loss is calculated by multiplying the amount of points moved by the amount that you bet per point movement.
As an example, if you believed BP was going to rise in price and it was currently trading at a spread of 300p - 310p. You could buy a spread bet at £10 per point at 310p.
If the price then moved up to 350p - 360p and you wanted to take your profit.
You would close your spread bet position at the sell price of 350p. The price has moved to your advantage by 50 points (from 300p to 350p). Your profit would therefore be £500 (£10 x 50 points).
Of course if the market had moved 50 points against you, you would have made a £500 loss.
Learn more about how spread betting works
2. Develop your trading strategy
A trading strategy should suit your attitude to the markets. Before you settle on one, consider whether it works with your time available to trade, risk appetite and technical knowledge. Here are seven strategies to consider.
Strategy 1: Day trading
Strategy 2: Breakout
Strategy 3: Technical indicators
Strategy 4: Position Trading
For further information on choosing a trading strategies
Strategy 5: Trend Trading
Strategy 6: Swing Trading
Strategy 7: Dividend trading
3. Make a trading plan
Here are five simple steps to follow when creating a trading plan:
1. Define your goals
Write down what you want to achieve from your trading. If possible, break it down into daily, weekly and monthly targets.
2. Assess your market knowledge.
Be honest about your expertise. Which asset classes, regions and markets do you really know? Focus on the areas you understand, and start filling in any gaps in your knowledge. This is very important as the markets you intend to trade will influence your trading plan. For example, a forex trading plan may be very different to a stock trading plan, as market opening hours, volatility and position/contract sizes vary.
3. Decide your acceptable risk
How much of your total capital are you willing to risk on a single trade? And, if you have multiple positions, how much are you willing to risk overall? Most novice traders should start off with lower risk, but deciding your own risk limit is important.
4. Set your risk-reward ratio
It also helps to decide what potential reward you need from your accepted level of risk. Traders often like to use a risk-reward ratio of 1:2 or higher, which means your possible profit on each trade is at least double your potential loss.
5. Start a trading diary
Keeping notes of all your trades from each day and the rationale behind your decisions is a great way of finding out what is working, and what isn’t. Make sure to review which strategies have helped you to achieve your goals.
4. Choose a market and find trading opportunities
Choose a market
You need to choose what instruments you are going to trade; this could be based around your method of analysis whether fundamental or technical. A good place to start could be the level of risk, if you compare the risk of trading a single stock with low volatility against trading crude oil there is a stark difference. It is certainly best to take one market at a time, learn everything you can and feel comfortable trading, before you take on the next one.
Trade forex on a range of major, minor and exotic pairs. More 24 hour markets available than any other platform.
Trade on low spreads across more than 17,000 markets, with some available 24/7.
Find a trading opportunity
You never want to miss out on a trading opportunity, you can receive numerous daily reports including:
Market daily report
Technical analysis reports twice a day
There is also our breaking news service, crucial for taking advantage of event driven news, delivered by telephone, or emailed. Or utilise the platform with buy and sell signals, trade ideas and Reuters news these are just some of the platform's features that you will benefit from.
To view our reports
5. Manage your risk
Set a stop loss to close your position automatically if the market moves against you. Stop losses are free but your position may be closed out at a lower price than your order if the market gaps.
Take profit with a limit order
Set your limit on an instrument and your position will be automatically closed if that limit hits your level.
Guaranteed stop loss
Like a standard stop loss but guarantees that your order will be closed at the level requested by you. There is no cost to set up a guaranteed stop loss, But you will pay a small premium if it is triggered.
Trailing stop losses
No need to adjust your stop. A trailing stop will move with your profits. This allows you to potentially increase your profits as the price goes up whilst still retaining a stop loss at a set distance away. As with standard stop losses, trailing stops can be subject to slippage.
Negative balance protection
Negative balance protection ensures that you will never have a negative balance as our platform provider IG will always bring your balance back to zero at no cost to you.
Go about your business and let the system notify you of any price changes. When an instrument reaches your chosen price you will be notified by email or text.
In order to protect you from large losses, your positions will sometimes be closed out by the dealers/system. If your account equity (cash balance +/- running profit/loss) doesn’t cover your margin requirement. This is a margin call. Positions that are on margin call may also not be closed so it is your responsibility to monitor your positions and maintain enough margin at all times.
6. Why would I spread bet?
Spread betting is generally used by experienced and active traders, who want to take advantage of short term volatility in investment markets.
Tax benefits: In the UK and Ireland, spread betting is considered a form of gambling and is therefore not subject to capital gains tax or stamp duty, which can be a significant advantage for traders
Some traders will use a spread bet to hedge the risk of a share portfolio. For example, if you own shares in an oil producing company but falling oil prices were causing the company’s share price to suffer, you could open a short position on oil to hedge your risk. This would mean that any loss to one position would be offset by profit to the other.
You can also trade out of hours, when share markets are closed, some markets are still open and can be traded, in some cases 24 hours a day. Forex markets are always open and some indices like FTSE100, Wall Street and Germany DAX40 can be traded out of hours.
7. Avoid common spread betting mistakes
The reality is that the vast majority of investors make little or no plan when they start trading and setting a plan and a strategy could help make larger profits and avoid unnecessary losses.
To help you consider the best course of action when trading or just to refresh your memory, below are some of the main mistakes to avoid.
1. Little preparation
2. Not using stop-loss
3. Over trading
4. Over leverage
5. No trading diary
6. Expensive egos
7. Averaging down
8. Long only portfolios
9. Unrealistic expectations
10. Taking too much risk
For further information on spread betting mistake to avoid
Guardian Stockbrokers reviews
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I could not more highly recommend Guardian Stockbrokers, everyone has been brilliant. The attentiveness, training and technical detail provided, has enabled a fast track learning and an ability to manage the portfolio in a way that would far exceed my own capabilities. It is almost as though they own the positions themselves; via their due-diligence and proactive manner of continuous monitoring. Above and Beyond.
Positive: Professionalism, Responsiveness
Professional and proactive I’m really happy that they were recommended to me.
I would recommend Guardian Stockbrokers.
I've known Guardian Stockbrokers since their inception.
When dealing with trading, you want to work with people that are professional, personable and trustworthy.
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Tax laws are subject to change and depend on individual circumstances.
Negative balance protection applies to trade related debt only and is not available to professional traders.