Many novice spread betters find out the hard way that without care you can lose money fast. Stop losses help, but they can seem too fiddly, or in some cases too expensive, to organise on every trade. So why not give one-touch betting a go?
Here your maximum win is capped that's the bad news but so is your maximum loss. So it's a lot more like placing a fixed-odds bet at a bookmaker.
You pick an event - say, the FTSE 100 closing up - then you decide how much you want to take away if you are right. A site such as BetOnMarkets.com will then tell you how much you need to wager. You can place these bets on all kinds of major indices and some individual shares. So, for example, you might decide you want to walk away with £100 if the FTSE 100 closes above 5,000 in seven days' time.
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You are offered a price of £25. That's what you pay now and the maximum amount you can lose if you are wrong. Great for those who wouldn't sleep well with an open spread bet in play. Get the bet right and you win £100 minus your stake, or in this case £75. Sure, if the FTSE 100 leaps above 5,300 a conventional spread better would have made a lot more money, but fixed-odds betting gives you the benefit of a known upside and downside.
And once you get the hang of it you can make your bets more sophisticated. For example, a range bet might pay out a fixed amount if the FTSE 100 fails to break above and below two chosen resistance points. Or there's the "up or down". Here you think, for example, an exchange rate will jump on, say, the release of the next piece of US jobs data, but you don't know whether it will rise or fall. So you could set up two trigger points: one above the current rate, and the other below it. If the exchange rate for the currency pair you have chosen hits either, you win. If it hits neither, you lose - but again, only a fixed amount.
Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.
He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.
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