Spread Betting Myths
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1) Spread Betting – It’s a Man's Game
Not true. The percentage of female spread bettors continues to grow year-on-year. What is more, City Index technical analyst Sandy Jadeja has noted that women actually possess a better spread betting mentality than men. He believes that females are naturally more cautious traders and thus prepare their spread betting research more effectively than their male counterparts.
This is a view shared by several financial spread betting companies who have revealed that their female clients clearly outperform their male ones.
2) Spread Betting is Difficult to Understand
Not true. Financial spread betting is not easy, but it is not a complicated concept. The problem is when spread bettors risk real money without fully understanding what they are doing. This opens them up to potentially significant spread betting losses.
The best way to learn spread betting is through a combination of theory and practice. Providers such as City Index offer spread betting seminars and webinars for traders of all levels, so these are ideal places for beginners to start and for more advanced spread bettors to improve.
3) Spread Betting is Only for the Rich
Not true. In fact, because spread betting is a leveraged product, it actually allows you to control a much larger position than if you were to make an identical investment in standard trading.
The advantage of this is that your profits will be inflated, but the obvious disadvantage is that your losses will be magnified too. Ultimately, spread betting is for people of any financial standing, as long as they only risk money that they can afford to lose.
4) Spread Betting Companies Make Money from Your Losses
Not true. A spread betting company makes money off every single trade you make, regardless of whether you win or lose, as their costs are met in the original bid-offer spread.
Essentially, this means that spread betting companies actually prefer you to be a successful spread bettor, as those who make profitable spread bets are probably more likely to return and trade more.
5) Your Spread Betting Affects the Markets
Not true. Unless you are trading in a closed market, there is no scenario in which another spread bettor can benefit or suffer from your own financial spread betting.
Similarly, spread betting platforms purely serve to mirror the real markets, so the spread bets you place have no bearing on the price movements or the values of the actual companies themselves.
Spread betting carries a high level of risk to your capital with the possibility of losing more than your initial investment and may not be suitable for all investors. Ensure you fully understand the risks involved and seek independent advice if necessary.
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Risk Warning: Spread betting, CFDs and Forex trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.
'Spread Betting Myths' edited by DB, updated 20-Oct-10
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