Spread betting is not for everyone. As high risk as it can be high reward, it is ill-suited to the cautious, faint of heart, or risk-averse. Yet for those who enjoy the occasional toss of the dice, it can be just perfect.
Not to be confused with matched betting; spread betting is a relatively simple concept to understand. Essentially, it allows traders to speculate on the financial markets and the directions that they’ll take. With all of the normal volatility of investing, plus a little more besides, the risks are extensive, but it remains beloved of many.
One of the key reasons for this is the tax benefits attached to it. 100% free of charges or levies against any profits made, spread betting can be extremely profitable when it all goes to plan.
If you’d like to give it a go, then here are three strategies to help increase the odds of success…
1: Start small
Spread betting is a pursuit best learned through practical application, yet considering the potential for it all to go awry, it’s best to start out small.
Although the promise of profits may be enticing, you need to remember that losses are a very real possibility, especially in the early days, and you should never lose sight of this.
Take your time to master your art, keeping your gambles to around £1 per point until you start scoring solid successes. Once you trust your instincts, you can increase your amounts, but make sure that you’re confident in your skills before you even consider this.
2: Tailor your trades
Another solid strategic move is to tailor your trades. Not every prospect that arises will have the same potential with regards to risk and reward, and you should alter the amount that you’re willing to gamble accordingly.
The best way to do this is by remembering that the higher your risk is, the greater your reward will be, meaning that you needn’t lay as much on the line in order to turn a comfortable profit.
Thus, where the risk is high, stick to a low amount, and limit your potential for losses; where the risk is low, increase your bet, and the likely earnings that you’ll make.
3: Use stop losses
One final tip is to always use stop losses. It has been said that more money has been lost on the spread betting markets through people not using them, than through all of the other reasons put together.
One very simple solution is to avoid falling into this trap entirely, by utilising them every time that you trade. Make sure that your losses are never catastrophic, and you will always find yourself with the potential to make more money tomorrow.
Do you think Spread Betting could be an interesting project for you?
Ricky Willis is the original Skint Dad. A money-making enthusiast, father, and husband to Naomi. He is always looking for unique ways to earn a little extra.