Spread Betting Techniques and Tips

Spread betting is a simple exercise which when goes right is very profitable. There are number of methods that are used to judge the entry and exit points in spread betting.

Use Stop Losses

Stop losses are integral part of spread betting. It is designed to implement your expectation.

When the loss in bet goes beyond the acceptable level one can stop the losses from accelerating further and become a serious loss.

A stop loss is made at a level where one is comfortable with and properly reflects the noise of the instrument he or she is trading. Never set stop loss level too close to the price one opened the trade. At the same time setting the stop loss at too high level will result in higher losses. So be absolute disciplined.

Stake Sizing

In spread betting careful consideration is given to the size of stake before entering a trade. A large stake will lead to large possible loss. So start small.

However, stake sizing is a critical element when one is in a stop loss situation. When one cannot take the losses after hitting stop loss then stake size is too big. As a rule of thumb use 0.02-0.06% of available trading capital. These values can give good return for a successful trade and also keep losses within a comfortable zone.

Hence, the best method of choosing a stake size is by determining the stop loss level.

Position Sizing

Position sizing is different from stake sizing. It is adding further trades to a position. In other words it is like partial closing of a successful position to lock in profits. Suppose one has gone long and the index has risen to a resistance point. If one thinks that it will rise further then he or she may open another trade. If one closes here the trade then he or she risks missing further gains.

Trading Hours and Timing

Don’t enter the market for at least the first twenty minutes of trading. Never rush into the first trade of the day. Watch the market carefully. Never enter into new trade during the last hour of trading of the day. Keep patience. Don’t trade if the price is not good. There will be other opportunities.

For more information see: Forex Trading Hours