New Traders - Manage Your Trading Risk

LONDON, December 16, 2011 -

Opening a spread betting or CFD trading account can be daunting for any new trader. However, there are a number of ways for new traders to manage risk and help dictate the size of any profit or loss that they will eventually make.

As spread betting is a leveraged product, it involves a higher degree of trading risk compared to other forms of trading such as share dealing. This results from the fact that only a small deposit as margin is required in order to trade a larger exposure. But while the potential for gains is high, traders may quickly lose more than the amount of funds that they hold in their accounts if the market moves against them significantly.

Fortunately, there are a number of ways to help minimise losses and City Index offers trading tools such as Closing Orders to help you to do this.

Joshua Raymond of City Index states that: “The key to spread betting is making sure your total profits outnumber your losses. When traders take profits too early and run their losses, they are already making life difficult for themselves.”

Stop Loss Orders & Limit Orders

The City Index online trading platform utilises an order system which allows traders to manage trades and minimise risks, even when they are not in front of a trading screen. Orders can be created to close trades when prices reach a specific level.

Stop Loss Orders can be used to close a trade to prevent further losses i.e. stopping your losses. Although there is a small risk that the closing price could be different from the order level if there is a gap in the market prices when the shares being traded next open for business.

A Guaranteed Stop Loss Order will ensure that the trade closes at the stop loss level determined, regardless of any market gapping, although a small fee is charged for this added protection.

A Limit Order is an instruction to close out a trade at a price that is better than the current market level and is used to help lock in profit targets.

Make a Plan

While knowledge of the trading platform features is essential, common sense and a practical approach are just as important as any tools.

Mr Raymond added: “When trading in general, it pays to safeguard yourself against emotions. It can be easy to get carried away and make impulsive spread betting decisions.”

Proper planning with something as simple as a spreadsheet to outline profit goals and sustainable losses as well as entry and exit points for each trade can quickly and efficiently manage a wide range of spread bets.

It is also advisable to trade a variety of markets to help spread the risk of your spread bet portfolio. By placing all of your eggs in one basket, this will help to prevent your account from living and dying by a single trade.

Learn more about spread betting with a free City Index seminar.

Visit www.cityindex.co.uk/learn-to-trade/seminars.aspx for details.

Spread betting and CFD trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.

——————————————————————————————————————————————

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, CFD trading and, in the UK, spread betting.

We constantly look to widen the range of assets we offer, improve the performance of our platforms and expand the range of services we provide. The result is that our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer service and support. Visit www.cityindex.co.uk/ to learn more about spread betting.

Contact: Joshua Raymond, City Index Group, Tel: +44(0)20-7107-7002, Email: joshua.raymond[at]cityindex.co.uk