Spread Bets
Advice for Spread Betting
1st January 2007
The
key to spread betting successfully is the same as playing most any
other gambling and speculating. In order to place a bet that has a
reasonable chance of winning, you have to employ your knowledge about
the game and/or the market and be smart about your betting.
Do Some Research
One of the key components of any type of successful gambling is self-discipline, especially with regard to research.
Punters
often depend too much on what they think the result will be without
checking out the latest form, statistics and/or numbers on the game or
financial instrument/market they are betting or speculating on.
Although
you still stand a high chance of losing - after all, that is the risk
factor involved in gambling and the higher the reward, the higher the
risk - you can greatly improve your chances of successful spread
betting by avoiding falling into sloppy habits.
If
you are placing a spread bet on a particular share in the financial
market, don’t only depend on how much a company's share price usually
trades for. Do some research on the latest numbers, including recent
trades and recent financial results, and what is happening in related
markets, and then make an informed decision.
If you are spread betting on a horse race, for example, don’t
simply choose a winning time at random. Do some research on the average
times for the track the horses will be running on and then consider
other factors, such as the track conditions and the previous
performances of each horse at that particular track.
Risk Warning on Spread Betting
Spread betting can be very rewarding and produce large returns on small stakes. Basically the more you’re right, the more you win. However, the opposite may also be true. The more you’re wrong, the more you potentially lose. The profit or loss is determined by the difference between the final result and the level at which the bet was originally made, multiplied by the stake that you nominated. In some volatile markets, such as cricket runs, your profit or loss can escalate very rapidly.
For this reason, careful control is vital and four basic guidelines are recommend by most professional spread betting firms:
- Work out the worst case result you are willing to accommodate whichever way you decide to bet. Limit your stake within this scenario. Remember to check whether there is a maximum result for your particular bet.
- Where possible, keep a careful eye on the event on which you have placed the bet, and be prepared to cut a loss if the bet is going against you.
- Recognise that some sports betting markets are more volatile than others (i.e. the final result could be a long way off from the original quote).
- Always remember that you may lose more than your original stake.
- Consider using a Stop Loss position so that you can benefit from a cap on the amount that can be lost. Familiarise yourself with the stop loss rules; they can limit your winnings, limit the size of the bet if it was to expose you to excessive risk, or in some instances cause a bet to be refused.
Spread betting is ideal for short-term trading; but is not generally suitable for long-term investing.