Spread Betting / Money Management

[hagadol]

Spread Betting / Money Managment

What are the various methods of managing your risk in Spread Betting ?

If I am trading through a traditional stock broker I might have a pot of $100K and decide never to use more than 2% per trade. How can I judge my risk with the Spread Betting in this way ?

 

[damianoakley]

Here goes.

Let's say you have £5,000 capital and want to risk 2% max. per trade.

You want to go long on a stock at 250p with a stop at 230p.

2% risk = £100

£100 divided by your stop of 20p = £5

Therefore you would buy the stock at £5 per point with the Spreadbet company. Providing you exit promptly at 230p, you will lose no more than your 2% risk of £100.

Hope this helps.

 

[hagadol]

Thanks - Great explanation !