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Brian Hayslip

How do you succeed in spread betting?

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Spread betting is particularly popular in the UK because of its associated tax advantages. It involves taking a position on whether a market is going to rise or fall. As with other financial instruments the profits or losses you make will be determined by the size of the stake, the degree of the price move and whether you get the direction of movement correct. A lot of the guidance associated with making ‘general’ trading successful therefore applies to spread betting. One of the main aims is to preserve your capital and there are various methods to consider. First of all, have a strategy. Just moving into a market and taking positions cannot be recommended. Your strategy will of course include ‘entry points’ where signals indicate you should move into a position. It should also stipulate what stop-losses to use, when to take partial profits and when to exit. Start small, stay small. Long-term success will come from holding positions which will not materially impact your account if they are losing trades. Big wins are exciting but come hand in hand with big losses. General advice is that the value of any one position should not be greater than 2% of your total capital balance. There is nothing wrong with taking an even more conservative view. Test new ideas, or those that aren’t working any more in a Demo account environment. These are free to use at most good brokers and some of the better brokers will also provide access to historical price data so that you can back test your ideas. If your position is not working as planned, don’t double down and don’t move your stop losses in the same direction as price action. Your choice of broker will also be important. You’ll of course want one with functionality that works for you. Some are stronger in some markets than others and can offer better trading terms as a result. The frictional costs associated with trading also vary from broker to broker and overheads can eat into your profits. Do your research, find a broker that is a good fit and make sure they are reputable and well-regulated and are a member of the Financial Services Compensation Scheme.

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