The risks of spread betting
Stay in control. Know all the facts and keep informed.
When you spread bet you are betting on the real-time movement of a financial market. The markets can move quickly throughout the day, so the value of your account can also change quickly.
To make money from spread betting you have to get the market direction right. This goes without saying, but it is equally important that you understand risk management. One of the key aspects of successful spread betting is understanding the risks involved and learning to manage this risk. With our advanced risk management tools you can reduce the risks and maximise your profits. We have readily available, in-depth education on how to use the risk management tools available on our spread betting platform.
You can lose more than your initial deposit
It’s important to remember that the amount of any loss for an individual bet may exceed the amount of margin that you used to enter into that bet. This is a feature of ‘leveraged’ or ‘margined’ trading – you can lose more than your initial payment.
The bigger the stake, the bigger the risk
The impact of any price movement on the funds in your account will depend on the size of your stake, not the amount of margin. A small movement in price may have a large impact on your account if you have bet a large stake.
The golden rules:
- Don’t trade with money that you can’t afford to lose. If a trade goes wrong it should be a nuisance, not a disaster.
- Practice first on our spread betting demo account, where you can spread bet on the price movements of indices, commodities, company shares and currencies without using real money. See our search feature on the left hand side on what instruments you can spread bet on.
- Make sure you understand the upside and downside of every trade. You may only need to pay a small amount of margin, but the potential gains and losses could be much greater.
- Use stop loss orders to manage your risk. We offer a number of order types that help you manage your risk, including stop loss orders, trailing stop losses, take profit orders and transaction based stop losses. With transaction based stop losses our spread betting platform automatically suggests a stop loss level for each trade. You can then edit this level at any time if you want to be exposed to more or less risk. This feature can be turned off, but we recommend you use it, especially if you are new to spread betting. Trailing stop losses move in the same direction as the price when it moves favourably for you, to help lock in your profits. Click here to learn more about the order types we offer.
When it comes to spread betting, practice really is the best way to hone your skills, develop strategies and learn how to manage your risk effectively to make more profits. Our demo account offers a risk-free environment in which you can do just that, and signing up is quick and easy.