Most spread traders tent to get caught in the hype. What software to buy, which indicators to use, what trading books to buy, what trading seminars to attend…etc When really the key to successful spread betting is to learn how to spread trade, understanding your psychology and risk profile, and having a solid trading plan that you act upon on a consistent basis.

In this respect a great way to learn how to trade the stock markets is to risk money you can easily afford to lose. I ‘paper traded’ forex years ago, and found that unless the money was ‘real’, it had an effect on your decision making. The reason lots of people have heard horror stories with spread betting is that many people tend to dive in without really knowing what they are doing and end up losing their money. There is a statistic thrown around that only 20% of people are successful spread betting in the long run.

In terms of your learning you still need to use the same strategy as you would with buying the actual shares. But instead you are betting on the price movement. As I said you can bet up or down which is long or short.

There are several companies you can use. IG Index and CMC Markets are well known but I think their spread is a little larger than other companies like Capital Spreads. You need to just google spread betting. You can probably find more information than I have given you obviously.

Sometimes you do encounter issues with spread betting – for instance I cannot trade a particular security because its market cap is too small for IG Index . I’m also occasionally unable to trade on certain shares with IG as they apparently limit their exposure to certain shares, so I cannot buy until someone else sells.

For instance I was confident enough with Gulf Keystone to trade with stops at £50/point. Last week I closed a trade in GKP (Gulf Keystone), taking a bit of profit on some earlier news. When I tried to get back on board, it was ‘closing trades only’ online. Really, really hacked off. £2800 would have been a nice little bonus to wake up to this morning. But, I’ve not lost any – just not made some. Still a bit gutting though! Live and learn.

For my longer term trades (i.e. weeks/months) I use larger size trades. I have trailed my stops manually to lock in profit. I have also used Capital Spreads and Cantor Index….both seem ok but I believe that with all spread betting sites you sometimes tent to be re-quoted especially in fast moving markets.

Just one parting warning call with spread betting, make sure you have sufficient capital in your account as otherwise if your bet goes against you the spreadbetting company will close out your deal.

Spread betting and CFDs are revolutionary products that allow risk management strategies unavailable with any other trading instruments, although each broker varies in this regard so you need to use the appropriate broker for the type of strategy you are looking to achieve.