Everything You Need to Know About Spread Betting

canstockphoto27905600During the past decade, the global financial markets have seen some truly groundbreaking ups and downs. From the economic crash of 2007 to indices reaching new heights as of late, such volatility has left some investors worried. Now that the Brexit has been confirmed, there are even more traders who are looking for a viable alternative to traditional stocks and shares. One method which is worth noting is seen in spread betting. To get a better understanding of the processes behind this principle, it is prudent to examine it in greater detail.


Bi-Directional Strategies


The main point behind spread betting is that an investor can make money even if the markets fall. This is in direct contrast to other methods which will require a positive movement in order to turn a profit. Spread betters simply predict in which direction an asset moves. Should this direction be estimated correctly, he or she will walk away a winner.


There are two main options when taking up a position. Those who “go long” assume that the asset will rise. Traders who instead “go short” are assuming that this same asset will lose a portion of its value within a certain period of time. Of course, any movements that are the opposite of either prediction will result in losses.


Many astute traders took advantage of short positions during the financial crisis. As the majority of assets lost a considerable amount of value, they turned healthy profits. In the same respect, other individuals went long in safe-haven commodities such as gold. They were also able to reap rewards.


Defining the Spread


Every spread bet comes with two prices:


?      The buy price is associated with those who go long and expect the value to rise.

?      The sell price is for short-selling traders who expect the price to fall.


If either of these margins are reached, the investor can liquidate his or her assets for a profit (depending upon which strategy they employ). The difference between the buy and sell prices is simply known as the “spread”.


Simple Spread Betting Tips


Not only can predicting the movement of a discrete asset be challenging, but investors will also need to employ a sound strategy to build sustainable wealth over time. Perhaps the most important suggestion is to place limits on the number of markets to be traded. Simplicity here can very well be the key to success and it can be very difficult to monitor numerous markets without missing important movements. Therefore, stick to two or three which are very familiar.


Another trick is to place limits on the amount of capital invested during any given session. It is wise to never risk more than three per cent of the total available funds. Even if the entire session turns out negative, you will still be able to walk away and trade another day.


Other methods include:


?      Setting clear entrance and exit points.

?      Avoiding emotional trading.

?      Monitoring politics, interest rates and related global news at all times.


These three final tips are much easier to embrace when utilising the turnkey solutions that can only be found at reputable spread betting companies like CMC Markets. Please examine these tools and advantages in more detail to fully the efficacy of this software.