Stop losses, this is what will stop you losing thousands if things move against you. Setting your stop loss effectively allows you to set how much money you want to risk in each trade. This means your losses are limited and your profits are unlimited – very generous! A normal stop loss is typically free, but you will pay extra for the other ones available by way of a larger spread.
Make sure you know where to place your stop losses. If you set it too close all you are doing is handing over your cash to the spread betting company as it will ping off during normal daily movements. Look at the volatility of the market, choose a level of risk you are happy at and then set it appropriately.
There are many different types of stop loss to choose from. You may have heard the term “guaranteed stop loss” coined. With a normal stop loss the markets can “gap” against you, this means the market is moving quickly and your trade can’t be filled quickly enough causing it to pass your stop loss level – a guaranteed stop loss will prevent this from happening.
A trailing stop loss is a stop loss that will automatically stay a set amount of points behind the market price. This effectively locks in your profit on a winning trade. These are no substitute for watching the market. If a firm doesn’t offer a trailing stop call them up and they can move up your stop manually or do it yourself online.