If you don’t use a stop loss then you will go broke. With financial spread betting you are using leverage and you need to protect yourself. If you don’t plan to use a stop loss then I suggest that you go and read about leverage and trading on a margin.

So are you going to use a stop loss? Yes? Great let’s talk about the options available to you…

You can use a manual stop loss. If you are new to spread betting then I suggest that you don’t go down this route. If you think that you will always be able to pull the trigger on a trade on a previously set exit point then I just don’t believe you will.

It isn’t just about having the emotional strength to do it… and believe me this will put you to the test… it is also about the logistics. What will your internet connection be like? Will you be in the toilet? You won’t be sat at your computer and be fully focussed 100% of the time. It just can’t be done.

Spread betting companies offer a solution for this so you should think about taking advantage. You have two types of stop losses, automatic and guaranteed.

It is important that you understand the difference between the two. With an automatic stop loss your exit will be triggered when the asset’s price goes below a pre-determined amount.

Markets can move very quickly and there is also the possibility that the asset will open at a price below your stop loss. If this were the case then you would receive the price at the time which could be lower than what you originally set.

With a guaranteed stop loss you will get the price that you set. So if that is the case then why doesn’t everyone use them? Well not every spread betting company offers them. Also then can involve additional costs.

So decide which type of stop losses you are using for your spread betting strategies. Then scour the spread betting companies for them. When you find a number of companies, investigate how each will impact on your trading.

The different bet types available to you include binary bets, daily bets, rolling daily bets and futures. I won’t be going into futures as I believe that the rolling daily bet is far superior, especially for an amateur trader.

This should go without saying but I am going to say it anyway. Only consider spread betting companies that allow you to bet how you want. Don’t change your strategy to take advantage of some type of cashback or special that they are offering you.

These day most spread betting companies do offer the full range but it is one of the first questions that you need to ask. You can rule a number out straight away as a result of checking this.

I will briefly explain the types of bets just to make sure we are on the same wavelength.

Binary Bets…

The binary bet is becoming more and more popular especially to traders new to financial spread betting. The reason for this is that it uses a similar methodology to fixed odds betting you see in sports.

It is this familiarity combined with their transparency that makes it so appealing. With this bet you know what you will win if you win and know what you lose if you lose prior to entering the bet. I believe this helps a lot of traders with removing some of the emotional element of trading.

As the name suggests you are either right about the bet or you are wrong. It doesn’t matter how right you are as long as you are right. You will win the same amount.

Let’s look at an example…

The FTSE 100 opened the day 5000 and is currently trading at 5020. The binary bet spread is 70 – 65. You are confident that it will finish up at the end of the day so you place a £1 stake on it. You know that you will win £30 if it remains up and lose £70 if it closes lower.

So where did the FTSE 100 finish?? YES… it closed at 5020 so you won your £30. Imagine that it had actually closed at 5100. Even though you were very right you would still have only won the £30.

The same can be said if you lose. If the FTSE had closed at 4999 or 4800 you would have lost £70.

The binary bet expired after 1 day for the bet we have just mentioned. While they are mostly for short term trades always check this out beforehand.

The other types of bet that most spread betting companies offer are the daily bets and the rolling daily bets.

They are different to the binary bet in that it does matter how right or wrong you are. If you are bullish on a particular asset and you decide to go long, you will win or lose the exit price minus the entry price times the stake that you put on.

For example, you are bullish on The Spread Betting Companies Website PLC. They are trading at 400 – 395. You place a stake of £5 per point. You exit the trade with the spread at 420 – 415. You will make £75 in profit ((415 – 400) * £5).

As you can see it does make a difference how right you are. Did you see that we didn’t take any commissions off? That is because spread betting companies don’t charge them. They make their money by the size of the spread.

Please note that the trade could have easily gone in the opposite direction and we would have lost money.

The difference between the daily bet and the rolling daily bet is that the daily bet expires after one day. The rolling daily bet expires on your instruction, either through a manual trade or through a stop (or may be a margin call).

As you are trading on a margin, if you do continue your trade into the next day with the rolling daily then you will either incur interest or be credited interest depending on whether you are long or short.

If you are long you will incur interest and if you are short you will be credited it. Don’t get too excited though, you actually get credited close to zero at current rates while you will be charged interest.

Now you should have already known all of that before looking for a spread betting company. If you didn’t then stop right now and go back to doing your research.

Know your strategy, know your bets and stick with them.

I know this isn’t a website about spread betting strategies but this is something that you need to be sure of. This is your mission, this is how you expect to win… spread betting companies are only there as a tool to help you execute your mission.

When you nail your strategy or your spread betting system selecting a broker becomes easy. I am probably better off saying ‘ruling out brokers becomes easy’. Remember that they are there to serve you… they provide a service to you. There are so many to choose from that you will find one that will help you execute you strategy exactly.

Let’s talk about strategy a little more. Do you have one? What does it cover? Do you have an edge? You need to have an edge. If you don’t have an edge then stop looking for spread betting companies right now and find it. Don’t expect to find your edge in the market from guessing… you will go broke that way.

What is an edge? Think of it as your competitive advantage. What is going to make you win over the long term. There are people out there trading without an edge but you can imagine what happens can’t you? Yes… their money ends up with traders who have an edge.

You shouldn’t be looking for spread betting companies without a clear edge. Instead you need to do some reading and testing. There are some great books out there to help you do that and I may, once I finish this series, recommend a few.

What other things do you need to think about as part of your spread betting strategies? Bet type, bet sizes, markets, entry and exit strategies, length of trades and others.

I hope that you can see that if you really understand each of these then picking a spread betting company becomes a lot easier.

Before you open a live account with one of the spread betting companies you should open a dummy account or a practice account. While you may not be able to use all the functions of the account they do offer a real advantage.

If you have never traded before it allows you the time to practice what you have been researching. Have you really understood what those bet types mean? Do you know how much exposure each of your bets generates?

It doesn’t matter how much research you have done before hand, it is really useful to put it into practice before you play for the real money. Only once you have been putting on bets without making any errors should you move onto a live account.

When you are using the practice account try to use the same bet sizes that you will be using in a real the trading environment. You want to make the experience as real as possible. You shouldn’t therefore open a live account until you are at least breaking even.

While it is great that spread betting companies offer practice accounts for you to use they never reflect the real world totally. Often you aren’t on their live servers and can’t access the full functionality.

Another problem that you will have is that you will never replicate the pressure and the emotional stress of trading with your own money. Imagine you are down a substantial amount and you are approaching your stop loss. Would you make the same decision with your practice account as you would in the situation on your live?

With that said I believe that practice without pressure is better than no practice at all.

Another great reason for trying a dummy account with a spread betting company is that it allows you to check them out before you hand over your money to them. This is where they are useful for a trader who already has an account.

Customer service differs between spread betting companies so these accounts give you a real way of checking them out. You will also be able to see and use (even if limited functionality) their software. A crucial aspect of any trading is the software.

Many spread betting companies offer you the option of having a dummy account or practice accounts. It is in your interests to ‘try before you buy’.

There are so many spread betting companies around that many people don’t know where to begin. In fact when I last looked, even as an experienced trader, I was a little overwhelmed with all the choices available. I thought to myself that I was glad I wasn’t new to this as I wouldn’t know where to start.

Then that got me thinking… why don’t I write a guide for those people who are new to this. I created this website in preparation for that and have almost finished the guide now. I will be releasing it on this website and hope that it will make a difference.

It will be covering types of accounts, bet sizes and types… right done to practice and dummy accounts. The first part of the series will come out in the next week or too. I am a bit of a perfectionist so I am finding ways to improve it all the time.

Don’t think that the guide will only be useful to those who aren’t experienced. I want to be able to assist those who already have used spread betting companies too. It will save you time and hopefully a lot of hassle.

I would also love a bit of feedback when it is released. I will be releasing it in parts so your comments will be able to affect later parts of the series. I think that will be useful for everyone.

Not long now so keep your eye out for the first part of my spread betting companies guide.

UPDATE: Part 1 is now live on the website and it is about spread betting practice accounts.

I plan to write about what you need to look for, not just for spread betting companies, but also for different accounts that you may choose. I want people to understand that while you van change to a different account in the future you may want to put a bit of effort in upfront to make sure that they find one that suits you.

I have to admit that I have had mixed experiences with spread betting companies. Some have been really good and some have been poor. I know that none will be perfect but there are some that are better than others and I want you to be able to select the one that is right for you.

So where do you begin when looking at the spread betting companies? Well first of all you need to look at your own trading. You need to be extremely clear about your requirements.

My first suggestion would be for you to sit down and make a list with 2 columns next to it. The first column should be entitled ‘essential’ and the second should be desirable. An example of the of an essential requirement would be stop losses. A desirable requirement may be cashback.

Try to make sure that the list is as comprehensive as possible. Write as much down as you can even if some of the suggestions seem trivial. There is so much competition between spread betting companies these days that they are offering you so much to open an account with them. That is why it is good to write what you want down. If you don’t you will look at the first broker and they will seem great.

I will be putting together a checklist that I use and will make it available to you as soon as I can. I will also make future posts going over the specifics of what you should look for to distinguish between the spread betting companies.

Just before completing this brief introduction I would like to recommend that you get as much literature on the accounts that you can. Don’t just read what is on the internet. Phone them up and ask them to send it to you. It is a great way to find out more about the company.