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      Spread Betting - The Risks
      Every investment or speculation has risks, whether you are opening your own coffee shop, buying a house or choosing where to put your money. Spread betting has far more the feel of gambling, often compared to picking horse or putting all of your money on red. However the main difference is that financial institutions have been making millions out of financial markets for years and with the right knowledge and expertise you should be able to place your bet with a little more informed knowledge than just the guess at the spin of a roulette wheel.

    One of the main reasons Spread betting can be very risky is the huge leverage that is offered by many Trading Platforms and whilst this is very useful in making your investment far more effective at geenrtaing profits it will also make your speculation generate a very quick negative balance.

    What we recommend to all traders whether large or small is to know the extremes of teh trade you are in, as we have heard many timee over the years from the banks 'What is the worst case scenario'. if everything goes agaisnt you how badly could your currency pairs rise or fall and if it does, do you have the time and resources unds to cover your position?

    In essence this should be no different to when you buy a house. If you take out a 1005 mortgage you can only just afford, the instant thought is well what if house prices drop? What if interest rates increase and your monthly outgoings increase? What if you do not have the funds to pay your monthly mortgage? Already it seems obvious to all that as you are trading to the max this leaves you with little room for negative movement. However if you had only taken a 50% mortgage and monthly paymenst were only half of your income, already you are in a sustantially safer and more controllable position.

    We would advise using this same analogy in yoru Spread Betting, do not bet the whole house on one position. You may well be right that the curency pair you are trading is about to dip. But if it suddenly spikes first you may have your trades closed out and lose your capital before you can benefit.

    Spread Betting Platform may seem very generous with their high leverage options but do not be fooled, they are not there to back your position or lend you any real money. As soon as your position moves close to losing your entire initial capital, they will close out all of your trades and hand you the change. Spread Betting Platforms are there to offer you a service not to back your specualtions. So the simplest advice we can give you is make sure you have teh funds and resources to back your speculations, in the worst case scenario.


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