Spread betting or margined trading has emerged as a very popular trading instrument amidst retail players. Given below are some tips you’ll do well to follow when you are going to get into this form of trading.
a) The spread amount on a specific stock would always be more than the difference that exists between your bid and gives price on that stock.
b) In order to hold on to your portfolio from a long term perspective, don’t be doing any kind of margined trading. That is because, each time you rollover a spread betting trade, the price increases and since there is no physical ownership of the stock, you would not get the normal advantages of dividends, bonuses or stock splits which are common with physical stocks. In the current circumstances however, because of the fall in interest rates, it may be helpful to roll over stocks.
c) You need to be aware of the deposit margins being charged. If that is extremely high on a specific stock then you would have to look to spread bet in stocks where this kind of margin is a lot lower. This will help you use your funds more effectively as the leverage will likely be similar.
d) Make sure you have sufficient back up by way of cash or property whenever you indulge in margined trading.
e) Make sure you always trade with strict stop losses and these have to be guaranteed so you are not asleep when any abrupt negative movement in stock prices.
f) Begin with liquid stocks so that the volatility is one thing you can manage at the beginning. Small cap stocks with less liquidity possess a lot of volatility that you’d have to deal with and that can lead to sharp losses if the trade not turn out as you anticipated.
g) Don’t only look for the high visible companies for your margined trading. Some of the boring stocks can give you better returns and also you only need to keep an eye for suitable opportunities.
h) Do your trading in the same currency you used to open the spread betting account. That will take care of trade related risks.
i) Remember that stock prices usually drop faster than they go up since any fall leads to panic selling.
The above tips though not exhaustive should help you in your spread betting activity.
Discover the importance of Spread Betting Leverage when you are investing in Financial Spread Betting by visiting independentinvestor.co.uk.
