Making money in stocks is a lucrative yet a tough option. If you're keen to try your hand at making money through speculating on the stock market yet don't have enough available capital to invest in shares then a higher risk approach may suit you. There is an increasing trend among investors towards CFD trading and spread betting - tools which allow traders to bet on the direction of a particular stock or market without purchasing the underlying financial instrument.
Spread betting is more straightforward than CFD trading and therefore more favoured by beginners. It has the advantage of being tax free, and it is possible to set up an account with a spread betting company such as City Index for as little as £200. Spread betters place a bid with a company on the direction of a particular stock or index. If the underlying financial instrument moves in the predicted direction then they make money.
If you're keen to get into spread betting then here are a few ways of making money while minimising the associated risks.
1. Don't take big risks: If you're starting off as a spread better then it's inadvisable to take large risks straight away. If you only buy when things are going well then you may miss out on more substantial gains - but you will also avoid substantial losses.
2. Don't expect fast results: Spread betting is a skill - one that it takes time to develop. However much you read up on the subject, you're unlikely to make vast amounts of money within the first six months of starting out. Completing a journal with reasons why you entered and exited trade may help you understand your own motivation better and therefore improve your tactics in the longer term.
3. Choose the right spread betting company: Use a reputable company, such as City Index or Barclays Stockbrokers. Good spread betting companies should be able to advise those starting off - if there is anything you don't understand about the way they operate then ask. You can also improve your knowledge of spread betting through taking a short training course - try the Selftrade Spread Betting Trading Academy.
4. Practice first: Opening a demo account with a spread betting firm such as Capital spreads is a great way to try spread betting out before you engage in it for real. Many online simulators will allow you up to £20,000 of 'virtual money' while also providing you with a free guide and tips. A simulator will allow you to assess your own performance and judge whether you could make money from spread betting.
