While eating breakfast every morning I always catch the financial section of the breakfast news, most of the time I’m not paying full attention to what the presenter is saying, but the information seems to sink in somehow and I always have a rough idea of how the major markets are doing and how exchange rates are performing. I seem to buy a fair amount of goods from the US over the internet these days and watching to see how many US dollars I get for my pounds sterling can mean the difference between a good deal and a great deal. Recently I have been working for a financial company and specifically in their spread betting area of specialty, while it’s not essential for me to know all the ins and outs of spread betting for what I do, it is certainly beneficial and paying attention to the spread betting news while eating breakfast has been hugely beneficial. In addition to this I have also been learning a general overview of the subject and thought I would compile what I have learnt so far.

Spread betting is the method of making money from price fluctuations, such as the price of gold or currencies or individual stocks and shares. Put simply if the FTSE were to rise by 40 points in a day and I’ve bought £1 a point, then I have won £40. It also works the other way and if the FTSE were to drop 40 points then I have lost £40. You can also profit from a falling market, if the FTSE falls by 40 points and you’ve sold at £1 a point then you’ve won £40.

From that simple analysis you can see that spread betting can present both huge gains and huge losses. In addition to the stakes, spread betting also offers tax free profits, no commission or brokerage fee and no stamp duty in the UK. So without any more waffle, here are the key points to consider before diving into the deep end.

1. Never gamble with money you need. If you are spread betting with you rent or mortgage money for the month then you will have an immediate attachment to that money and will ultimately make decisions based on emotion. It’s best to detach yourself from the money and say, I can loss this happily.

2. Don’t go running in to you first market and expect to make wins straight off the bat. Be realistic with your expectations and know that you will be able to win and lose hundreds of pounds in just a few minutes. If you are set on making a fortune then do your research in the markets and learn how the systems work.

3. Don’t jump in the deep end with and start buying at £20 a point. Most companies will allow you to buy at £1 a point and there are a few that will allow you to buy at 1p a point for a couple of weeks while you find your feet.

4. Pick your market, research and learn its trends and stick with it. Don’t jump about from one market to the next like a headless chicken; you are bound to make a loss. The traders who are the most successful are the ones who stick to just one market or a couple of specific stocks.

5. Learn how to manage your money safely when spread betting. The majority of successful traders know not to place any more than 2% of their bank at risk on a single trade. If your bank is £200 then you should be looking for your maximum loss on a single trade to be around £4

6. Know when to pull the plug. If your trade is sinking fast, don’t sit there and watch it drop further, cut your losses while you can because the majority of the time the stock won’t recover.

7. When you’re making a profit don’t pull the plug straight away, if you wait a few minutes longer you could be up another £50 on top of £100. Experienced traders say that beginners run their losses and cut their profits. But remember, no one makes a loss when taking a profit.

To find out more on Spread Betting then one of the best places to look is a weekly finance publication where spread betting strategies can be learnt.