Calculate Risk To Reward Ratios Before Trading

Online, October 4, 2012 (Newswire.com) - Online spread betting knowledge and education site IndependentInvestor.co.uk has urged spread betting traders to exercise care in calculating risk to reward ratios, which it says should be carried out on a routine basis ahead of investing in a given position.

Risk to reward ratios calculate the degrees of comparative risk and reward available in a given transaction, based on projections made by the traders off the back of intensive research and price-data analysis. By calculating these ratios and comparing transactions on a like-for-like basis traders can make decisions on how to deploy capital with greater clarity.

Additionally, having access to this level of planning and data can help traders spot more potentially lucrative opportunities as they arise, allowing adjustments in spread betting strategy accordingly to take advantage of the greater profit potential, according to IndependentInvestor.co.uk.

A spokesperson for Independent Investor said that by ensuring risk to reward ratios were calculated on a regular basis and compared on transactions across the portfolio, traders could provide themselves with additional insights as to the most effective use of capital so they can better profit from the market opportunities that present themselves.

"Capital is a finite resource for most traders, and understanding how to make it work most effectively for you is an important part of building a sustainable, profitable portfolio. One of the most effective ways in which decisions of this order can be made is on the basis of risk to reward calculations, which highlight specific transactions with the capacity to be most profitable and/or least risky. Risk ratios are therefore central to the process of allocating capital, and allow traders to be more sure of the investment decisions they take,"

"At IndependentInvestor.co.uk, we encourage all traders to use risk and reward ratios in planning their trading strategy, in order to be more equipped to decide which positions to take. With portfolio brevity an important factor in creating a manageable account, ratios are an important distinguishing factor in choosing the most sensible, potentially profitable market opportunities."

About:
Designed to help new and experienced traders learn techniques for better spread betting and financial trading, IndependentInvestor.co.uk is maintained by professional traders to deliver the right information, advice and strategy to succeed in financial markets. From spread betting to share dealing to CFDs, IndependentInvestor.co.uk is home to a wealth of knowledge and resources aimed at delivering more compelling results for traders.

IndependentInvestor.co.uk also compares different spread betting and financial brokers, highlighting the most cost-effective trading solutions for investors across a range of instrument and asset types. Impartial and independent, these reviews help traders decide on the best broker for their trading needs.