Three questions novice spread betters should answer before the New Year
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Deputy Editor
Tim Bennett Dec 21, 2011
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After a dire year for equities, many investors might be tempted to shut up shop and hibernate over the festive season. However, the current volatility in financial markets is good for spread betters. So if you’ve never considered it before, and fancy having a go in 2012, here are three key things you should think about before you dive in.
Business or pleasure?
Spread betting can be great fun. That’s where the many firms offering everything from sports to political bets come in. And if it’s fun you are after, fine. Just keep bet sizes small and stick to what you know best, be that football, rugby or snooker.
Above all. remember the aim is to make a bit of money (and not worry too much if you lose it) while also enjoying your favourite sport or hobby. It’s not a way to make a living, so don’t treat it as such. (For more see How to enjoy the footy and make some money)
But if you are planning to make proper money, be prepared. Like investing in shares or bonds, spread betting for serious, consistent money requires hard work and dedication. A quick chat with a few mates in the pub about what’s hot and what’s not won’t cut it (and worse still may not even be legal – see my video on insider trading for more).
So best be clear about what you hope to achieve – approach spread betting as an easy, fast way to make a few quid and you’ll get beaten up, because too many other folk with more experience are already doing it.
| Essential videos for spread betters |
John C Burford, MoneyWeek's spread betting expert, has put together a series of free, easy-to-understand video tutorials to guide you through the basics of spread betting.
Open or closed bets?
Spread betting profits and losses in, say, the currency market can mount up fast (and even be, in theory at least, unlimited) if you use a standard directional bet. So, although they are actually more expensive, consider binary, or fixed-odd, bets in the first instance. These give a fixed payout for winning and cap your downside if you get it wrong. As such, they are a fairly painless way of trying out spread betting and getting to know the quirks of your chosen market, because you don’t have to worry about setting or resetting stop losses (this can get fiddly in highly volatile conditions). (For more see Play a bumpy market with binary bets)
Do I know enough?
The good news for new spread betters is there is a wealth of information around now on how it works, top trading tips and how to limit your losses. We have an entire spread betting section with top tips from trader John C Burford. His videos and mine are also packed with 'how to' hints for beginners and more experienced traders alike. The message is simple – you can’t do too much homework when it comes to spread betting. So once the Christmas turkey has been devoured, why not take some time to check out John’s latest posts at Moneyweek’s spread betting blog?)
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