<\/div><\/span><\/li>\n<\/ul>\nWhat are the Risks of Spread Betting?<\/h2>\n Regardless of what asset class you are investing in, there will always be the risk that you can lose money.<\/p>\n
This is no different from the spread betting industry. Your potential losses will come on two main fronts. Firstly, if the price of the asset you have traded goes against you, you\u2019ll lose money.<\/p>\n
For example, if you go long on oil, but the price of oil goes down, then you will have made a loss. These losses will only be realized once your trade has been closed.<\/p>\n
The biggest risk that you need to consider is that of liquidation. This is because you will be required to cover the margin on your spread betting trades, which is based on the amount of leverage you obtain. For example, the broker might ask you to deposit 5% of the total amount you wish to trade. If the asset then went down by 5%, and you didn\u2019t add more funds to your account to cover the margin, your trade would be closed automatically.<\/p>\n
Managing the Risks of Spread Betting<\/h2>\n <\/span><\/p>\n
Although the risks of spread betting are plentiful, you can mitigate these risks by implementing a number of risk management strategies.<\/p>\n
\n<\/i> \nTip 1. Always install stop-loss orders<\/h4>\n<\/li>\n<\/ul>\n The most important risk strategy that you can employ is that of stop-loss orders. This is where you choose a pre-defined price to automatically close the trade, in the event that the trade goes against you. For example, let\u2019s say that you go long on Twitter shares at \u00a3120. As you do not want to lose more than 10% on your trade, you can install a stop-loss order at \u00a3108. This means that the trade will automatically close at a loss of 10% if the price of Twitter hits \u00a3108. If you don\u2019t utilize a stop-loss order on your trades, you could lose a significant amount of money.<\/p>\n
\n<\/i> \nTip 2. Consider taking profit orders<\/h4>\n<\/li>\n<\/ul>\n In the same way that you should install a stop-loss order to protect yourself from the risks of a sudden market downturn, you should also think about cashing out profits automatically.\u00a0 This is known as a \u2018take profit\u2019 order, and you can set this at any amount. For example, let\u2019s say that you go long on natural gas at a buy price of \u00a3150. You might decide to set your take profit order at 20%, which means the trade would close automatically when the price hits \u00a3180.<\/p>\n
\n<\/i> \nTip 3. Know your market<\/h4>\n<\/li>\n<\/ul>\n You should only trade markets that you know well. If you have good knowledge of currencies, then focus on forex. Similarly, if your experience is from within the traditional equities space, you should only trade stocks and shares. By trading markets that you don\u2019t know well, you stand a much higher chance of losing money.<\/p>\n
\n<\/i> \nTip 4. Understand market gapping<\/h4>\n<\/li>\n<\/ul>\n Market gapping is when the price of an asset changes outside of standard trading hours. If the move goes against you, you won\u2019t be able to close the trade until the markets reopen. A standard stop loss will not protect you in this scenario either. However, although it will cost you slightly more in fees, you should consider installing a \u2018guaranteed stop-loss\u2019. This will ensure that you close your trade automatically, even if market gapping occurs.<\/p>\n
\n<\/i> \nTip 5. Take losses when they come<\/h4>\n<\/li>\n<\/ul>\n Regardless of how you decide to trade, losses are something that all investors experience. You need to be emotionally prepared for this, as some spread betting traders are unable to handle the effects of losing money. If and when one of your trades is unsuccessful, don\u2019t dwell on it. If you do, you might find that you engage in more reckless trades in order to recoup the loss. Crucially, if a trade is going against you and you haven\u2019t set-up a stop-loss order, know when to cut your losses.<\/div><\/span><\/p>\nConclusion \u2013 how to spread bet online<\/h2>\n If you have read my guide on spread betting from start to finish, then you should now have a good understanding of how the industry works.<\/p>\n
As you now know, traders are fond of spread betting platforms because of the ease at which they can access the financial markets. Whether it\u2019s currencies, stocks, and shares, futures, indices, or commodities \u2013 spread betting allows you to speculate on assets in a matter of seconds. Spread betting also enables you to wager more than you have in your account via leverage.<\/p>\n
However, you should also have a firm grasp of the risks of spread betting. As I have outlined in my guide, you should install a range of safeguards on your trades.<\/p>\n
This should include stop-loss orders at a minimum, as well as \u2018guaranteed\u2019 stop-loss orders to cover market gapping. Just make sure you are fully prepared for the risks of spread betting before you take the plunge.<\/p>\n
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