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Tips for Trading the Financial Markets

With the global markets still recovering, many people are still questioning how the markets got so out of control. They are also questioning something a little closer to home: their own finances.

Tax efficiency, opportunities in fluctuating markets, diversifying existing investment portfolios and planning investments for the future are all priorities. Everyone, of course, should understand the necessity of planning ahead.

Many are turning away from pure funds and pensions and considering newer forms of trading that provide new opportunities. Spread trading offers some interesting features and is worth considering as part of your investment strategy.

Whilst speculating, however, you must always remind yourself that the markets can go down as well as up. With spread trading you can lose more than your original stake or investment.

The Financial Services Authority regulates the UK based companies. This tends to ensure a certain level of service and, more importantly, consumer protection. With regulated spread trading companies such as FinancialSpreads.com you can trade some markets 24 hours a day, including key currencies and stock market indices. In addition, you can also trade more traditional markets such as crude oil, gold, UK and US shares and many more.

However, whilst there are many plus points, you also need to remember the potential downside.

Spread trading carries a high level of risk. Before trading, ensure that spread trading matches your investment objectives. Familiarise yourself with the risks involved and seek independent advice if necessary.

Spread Trading Tips

Most investors have developed their own trading rules and tips to help guide their trading. Here are a few of the more common ideas.

1) Put a plan together before you trade. I include the markets I am going trade, how much I am prepared to risk and, naturally, the profit level I am aiming for. With most trades I also plan my Stop Loss level to protect my downside. I also plan my Limit Orders level to help lock in profits.

2) Trade the markets and sectors that you are most familiar with. If you have little experience of the oil markets but have a good appreciation for the US equities markets then you are probably best off trading the US equities markets.

3) It is often worth trying a spread trading demo account with a company like FinancialSpreads.com or CMC Markets, there are usually free. If you are less familiar with this style of trading a little practice should help you understand the risks and rewards.

4) Try to avoid trading too many markets at any one time. It’s unlikely that you will find the time to fully research a lot of markets. I tend to trade up to five markets at any given time. How someone can trade 20 positions is beyond me. If the markets were to move quickly against your open positions then how do you expect to make intelligent and rational decisions?

5) Consider using a Stop Loss. These are simple trading orders that help you limit your potential exposure. You can add a Stop Loss to your trade when you open the position or at a later date.

A leading financial writer based in London’s financial heartland. Peter Jones is a seasoned commentator on the futures and CFDs spread trading markets.

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