Because you can trade in thousands of markets, spread betting is an attractive option for investors. You can use this tool for higher returns with a small deposit, and it can result in tax-free gains. In order to avoid failure it’s important for you to have an effective management plan for risk and losses. Read some of the steps that you can use below to avoid experiencing failure at spread betting.

Risk Management

By using gearing or leverage you can make more money with a smaller deposit but keep in mind that this strategy can also reduce the amount of cash that you have to invest from your account. The professionals at CMC Markets Risk managementrecommend that you watch the margin, your number of bets, and the activity on your position. These are mistakes that can place you in a volatile market and reduce your account balance quickly to a close-out level. You should have plenty of money in your account that accommodates the market swings that can occur at a very rapid pace. Professionals suggest that you have enough capital in an account so that losses can be covered and a close-out avoided. You should never risk greater than 5% from your account on one single trade. It’s a good idea to treat your positions just as you would your investment portfolio – diversity is good.

Plan Trades

In order to make money you should try to plan all of your trades before you make them. This means that you will use a more objective approach, understand what you have to lose, and can be more objective about the position that you are taking. Study the profit that you can make from your trade, keep records of your results, and even make charts of your successes and failures so you can begin to see the trends of your trading patterns. Some websites offer you spreadsheets that you can use to track your trades and to help you run winners and cut losses effectively. In all trades you must have a disciplined strategy in place so that you won’t overextend your limits. You can’t hold on to losing positions without paying the price, so make sure that you have an effective plan in place to follow throughout your trading.

Use Stop Losses

If you have concerns about losing money, you should use a safe strategy called stop losses. This is an order that will close your position if a certain price moves against your trade. It’s imperative to know how stop losses work and to understand when they will take effect. This will be an effective tool that will keep you from losing money and failing to make a profit with your trade. Ask your adviser about trailing stops as well so that you can be totally prepared for trading successfully without loss.

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