Spread betting is not without risk and you could be risking more than your initial deposit. There are some downsides to consider and understand before you begin trading.

1) You have to still pay commissions to the firms through the price of the spread and charges for rolling your trades over night so it is not fully commission free. Although this is a fraction of what you will have to pay when using traditional investments.

2) You don’t actually hold any assets when spread betting. To most people this is not a concern as it is all about the profits you can make.

3) You can lose thousands more than your initial deposit if things go drastically against you. This is very much a worst case scenario though! If you set your stop losses sensibly you can prevent this from happening to you.

4) If you enjoy day-trading it can be very time consuming as you will be spending a lot of time looking for correct exit and entry points. However, you can set an order to open so your trade will open at a specified level and also you can set a limit order to close your trade when the markets hit a certain level thus locking in your profits. This allows you to spend much less time monitoring your positions if you have to go to work.

5) It is easy to get carried away and begin to trade emotionally. Remember to cut your losses and use logic to trade not emotions.