How Much Risk is Involved in Spread Betting?

There is no kind of spread bet, or any kind of financial trade for that matter, without an element of risk. However, this risk can be minimised by putting everything you can into every trade that you enter. The approach that smart traders take is to adopt a somewhat fearless approach to the market. However, this lack of fear is based on the fact that they have calculated the risk being taken with each transaction, giving them cause to be confident.

On the other side of the coin, there are a number of investors who fear taking even the slightest risk. You can’t enjoy playing the game, however, if you are only playing at an inch-by-inch level and will greatly limit your profit potential.

So there are a few aspects of trading which need to be grasped in order to make intelligent decisions, ensuring that you only take risks when the odds are truly in your favour. Some of these aspects are based around diversification of your portfolio.

Diversifying your investment portfolio is among the most essential and basic things that you can do if you wish to protect your gain, profits and the investment itself. It may look or sound easy at first glance but implementing this strategy can be tedious. This is due to the fact that there are some qualifications needed if you want to make the most of the diversification of your portfolio. With spread betting, for example, it could mean that you put a position on instruments or assets that are entirely unrelated. This requires that you spend some time investigating if your underlying assets are unrelated in any way to the asset being traded on.

Also essential are the appropriate and proper risk management strategies when it comes to financial spread trading. One of the more popular types of tools that can be implemented are limit orders or stop loss orders. Stop losses work in that they are implemented at a certain price and should the market reach that price; the order is then regarded as being a limit order. Therefore, they regulate or limit the amount that can be lost on a trade. For example, should an investor enter a trade at £400, he may wish to place a stop loss order on £3,950. He is essentially speculating the commodity in fifty points or less and if the price falls below that amount, he exits the trade and limits the loss.

Cantor Index provides an opportunity, via its trading platform, for you to make your first foray into financial spreads. Belonging to the Cantor Fitzgerald Group and regulated and authorised by the Financial Services Authority, they are among the more established and experienced trading firms. They are genuinely passionate about trading which is revealed through their knowledge and experience, and are willing to help their customers to make the most of the tools available and succeed in spread betting. These tools include live streaming charting, market news and market analysis, each playing their part in placing the odds in your favour.

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