Spread Betting Pt 2 - The Stop Loss Technique
The Stop Loss technique is, like spread betting itself, quite simple in theory. Let's say that you BUY a given spread and then shortly afterwards discover that you have made an error of judgement. Instead of letting your bet 'ride' deeper and deeper into trouble you could SELL the spread, thus limiting your losses.
For example, someone who is betting on the total number of goals to be scored on any given Saturday may have BOUGHT the spread thinking that there was going to be an unusually high number of goals scored. But if an hour later the bettor realises he might have made a serious mistake, he can then SELL the spread and get out whilst the damage isn't too serious.
This is where spread betting appeals to many professional bettors. In traditional betting, your bet will win or lose based on the final result of any given event. But when spread betting you can often limit your losses or even change your mind whilst the event is still running.
Most successful spread bettors operate a stop loss strategy of one sort or another. Indeed, some investment strategies used by spread bettors are mind-bogglingly complex and involve using several stop-loss bets at the same time. Obviously this, like spread betting in general, is something which you would need to study in great depth before getting involved.
Spread betting is a fascinating and exciting development in the gambling world, and anyone who has an ambition to become a professional gambler must give this subject serious consideration. For now though, we will leave you with a few important spread betting guidelines. Don't place a bet before you've studied them...
Remember that although Spread betting offers enormous potential profits, the downside can be just as great. Because of this, most spread betting firms will want to take a brief look at your financial status before allowing you to place a bet.
It is vitally important that you study spread betting and understand the various concepts involved thoroughly before placing even a small bet.
As in all areas of speculative investment, and spread betting even more so, you should never gamble more than you can realistically afford to lose. One 21 year old man who ignored this rule in 1988 ended up owing City Index £34,580 and was sued accordingly. Debts run up by spread bettors are not legally 'gambling debts' but are losing investments and as such the payment of them can be enforced by law. This is applicable even if the bets are placed using a credit account.
Bear in mind that spread betting rewards and punishes the bettor according to how right or wrong he is regarding his opinion of any given event. Therefore if you can't get your predictions right even when you are placing traditional bets, it is highly unlikely that a move into an area of even greater risk will benefit you.
As in all forms of betting, you stand a better chance of succeeding the more you know about your subject. Therefore make sure you study and fully understand every aspect of the sport you wish to bet on before actually doing so. In betting, knowledge is king.
Before selecting a spread betting firm to use, request a free information pack from each and make your decision based on what type of spread betting you are most likely to get involved in. For financial spread betting, for example, City Index is regarded by most speculative investors as being the best there is.
Finally, the official warning about spread betting which the Securities and Futures Authority insist you should note: "Spread betting can be very voltile. Prices may move rapidly against your interests and resulting losses may require further payments to be made. Only speculate with money you can afford to lose. Spread betting may not be suitable for all investors: therefore ensure that you fully understand the risks involved and seek advice if necessary."