This post was provided by CityIndex.co.uk.

Forex spread betting allows you to go both long and short on a wide range of currency pairs whilst requiring only a small percentage of the total value that you wish to trade as a deposit.

However, leveraged products can result in losses greater than your initial deposit, which is why it is important to educate yourself and understand the risks when trading.

Here we give a brief overview of spread betting and consider the steps you should take to help you succeed when trading.

Spread Betting: An Overview

For many new traders, spread betting offers an affordable gateway into the world of stocks, Indices, commodities and currencies. Foreign exchange (often referred to as Forex, or simply FX) is one of the most popular traded financial products, providing attractive opportunities for savvy traders, even in volatile market conditions.

Here, City Index offers a step-by-step guide for new traders to help them try to achieve more profitable trades.

Step 1: Research & Analyse

Before you start spread betting, it is essential that you know how to use technical and fundamental tools. So that traders can trade more effectively, they sometimes rely solely on technical analysis, whilst others prefer a more fundamental approach.

However, some traders use a combination of both.

As you can see, it is important that you grow to learn the best approach for yourself in order to gain a more comprehensive overview of each currency pair in order to prepare yourself for potential movements in the market based on trends and/or news.

Step 2: Develop a Plan

Now that you have fully researched and analysed your currency pairs and the market – and are continuing to do so – you should take the time to construct a well-considered plan.

This plan should outline your parameters for profit goals, maximum risk allowance, trading strategies and evaluation criteria.

Trading purely on impulse can not only be dangerous, but difficult at times too.

This is why a carefully considered spread betting plan and strategy will not only help you to manage your trades better, but help to prevent indecision in the heat of the moment.

Step 3: Manage your Risk

The City Index trading platform also provides a variety of tools to assist you in minimizing losses, locking in profits and entering the markets at predetermined levels in order to help you to seize opportunities.

Stop and limit orders can help you manage risk and protect potential profits by helping you get in or out of the market at specified prices. This also means that an effective stop loss and limit order strategy can effectively let your account run itself, giving you greater peace of mind while trading.

Step 4: Be Disciplined

One of the most important parts of formulating a brilliant trading strategy can simply be to stick to it. However, not every trade you make will be successful. In a losing situation, it is easy to let losses accumulate in the hope that prices will turn around.

To avoid these mistakes, it is important to remember why the spread betting position was made in the first place. This is why more experienced traders tend to cut their losses quickly and run their profits to a level they expect the market to reach and they use their trading strategy and trading plans to help enforce these rules.

Step 5: Follow the News

Because your forex trades will move in tandem with the live market and are likely to be influenced by global, social and economic events, you will be in a much better position to open new trades or exit positions by keeping up to date with market events.

However, it is easy to be tempted into trading currencies based on rumours. If you hear about a trade that interests you, do your own research to make sure that you are taking a valued and considered view.

Summary

Forex spread betting can offer a number of benefits over traditional Forex trading. You can learn more about spread betting on foreign exchange rates with City Index at the link in the article above.

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

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