You should know that if you choose to spread bet online, it’s possible for your losses to exceed your deposit. This phrase appears often on the websites of brokers, but what precisely does that mean?
Trading providers are obliged by regulatory requirements to outline someone on their website that traders could potential lose more money when they spread bet than they put down as a deposit when they opened the trade. This is one primary difference between stockbroking and spread betting.
Take stockbroking, for example. If you purchased shares worth £1000 and then the market crashed so the shares were worthless, all of the money (£1000) would be lost but no more than that. However, in the case of spread betting, if you put down £1000 but the market moved against you, you could not only lose £1000 but if you didn’t have the right risk management in place, you could potentially lose thousands more.
How is this possible? There’s no need to worry. We will let you know how to avoid this happening in our “Controlling Your Risk” section of our Spread betting brokers website. It will explain everything you need to know about how risk management and leverage works, letting you know how to lock in profits and curtail losses.
As spread betting represents a greater risk than trade in funds, bonds and shares, it is recommended that spread betting is used only as a part of your investment overall strategy so you can lower your trading risks as a whole.
Also in our ultimate guide to spread betting, it covers:
- Ten Good Reasons To Try Spread Betting
- Making A First Trade
- Positive Thinking – Going Long
- Going Short – Winning A Trade From A Falling Market
- 5 Ways To Make A Profit From The Market
- Spread Betting’s Hidden Costs
- Choosing The Right Provider Of Spread Betting Services
- Glossary Of Spread Betting Terms
- Compare spread betting brokers, features, accounts and markets