Spread Betting its all in the planning

Yes, planning is the key if you’re going to spread your investments and come out with a reasonable return at the end. Most experienced stocks and shares players know that random dipping in and out will inevitably lead to losses in the long term.

With UK financial spread betting you have a good range of assets available, from individual companies, to the movement in stock market indices, to the price of commodities. Each different type of asset has different levels of risk associated with it and different levels of expertise necessary to successfully manage that risk. Market wisdom suggests that you find a market or asset that interests you and that offers risk that you are comfortable with, and then become an expert in that alone, rather than try and play with a wide range of asset types.

While you can start with just a couple of hundred pounds, most of the spread betting companies you can deal with will probably be looking for an initial stake of about £1,000 to give you some resilience to early losses as you build that experience.

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The next part of your plan is to set your stop-loss; this, if you like, is your safety net in case you get caught up in the excitement of a market move and start betting by impulse rather than reason. Many have been caught by an unexpected rise in a market that suddenly reverses, leaving the opportunist punter out on a limb with large losses to absorb. Most spread betting companies have the facility to mark your investments with those stop-losses, so that you quickly drop out if the trading goes against you.

Like a surfer choosing a wave, success in spread betting depends on the choice and timing of your entry point. This is where expertise in the market you have chosen plays such an important role; it is the sharpness of a rise or fall in asset value that determines the return on your bet. Anything from a tsunami devastating crops to a vote hungry politician making wild election promises can send commodity or share values plummeting or rocketing; knowing the market well will allow you to quickly interpret the implications and respond with rapid investment or divestment.

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For a novice to financial spread betting, many of the companies you will use to manage your investment also offer the chance to practice using virtual money to bet on real asset movements, for example spread betting with IG. What better way to see if this form of trading is for you – before you take a risk?