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Conserving Your Cash

By: Larue Capracotta

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As everyone knows, the stock market can be extremely difficult to predict. Even traders who have been in the markets for their entire lives make wrong decisions from time to times, in many ways, the stock markets are an art and not a science.

The problem for people who are interested in spread betting or CFD trading is that if the experts aren''t able to get it right all the time, what hope can a part-time trader have, regardless of how good they are? Obviously there are no rules for avoiding getting burnt, but there are a few things that you can do to give yourself a fighting chance.

The key is to know your market inside out and the first thing you need to look for is when your market moves. Most markets will move most sharply when trading opens, unfortunately this can be difficult to get perfect because there will be a pre-opening auction that you won''t know the details of, and the market will have moved on the spread betting platform overnight, even if it hasn''t in the real world. Keep a record of how the market moves overnight, and how it positions itself in relation to yesterdays close and you''ll start to get a feel for how the market reacts in certain situations.

Connected to this are the events that make the market move. One good example is US job data at the start of the year, everyone knew that the market was going to react, but no one knew how because it''s difficult to judge whether people have already taken positions based on what they think will happen or if they''re waiting to find out.

With market events, it''s worth bearing in mind that no news source in the world will be good enough to inform you of an event before the market takes it on board, particularly if you''re not on a trading floor somewhere. That''s why it''s difficult to wait for news and then trade, as the market will already have moved.

America and China are, of course, the two major players in world stock markets, so any news that comes from them is worth keeping an eye on. The Dow opens at 2.30pm British time, and its opening often has an impact on the FTSE, bear in mind, however, that opening prices are often anticipated, so instead of looking for 2.30pm, keep an eye out for around the 3.00pm mark where things really begin to move.

A final thing that you can do to prepare yourself is to make sure that you know what affects your own chosen market. The FTSE, for example, has a significant number of financial institutions in it so anything connected to the Bank of England will have an impact, this means that you can look in particular for BoE announcements and prepare your trades accordingly.

Finally, the best defence is the stop loss, always operate a stop loss otherwise you stand to lose potentially unlimited sums of money. Spread betting is not easy, and if even the professionals get it wrong, there''s every chance that you can too, so always remember your stop loss.

Article Source: http://depositarticles.com/

Larue Capracotta is a market trader and financial expert with 10 years experience of the stock market. They recommend CMC Markets for CFD trading and spread betting.

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