Traders Should Consider Risk/Reward In Spread Betting

Online, May 11, 2013 (Newswire.com) - Financial spread betting advice site and market commentator Independent Investor has suggested that traders deploy risk to reward ratios across their planning and position research, in order to provide a constant for comparisons and make it easier to gauge the most effective deployment of trading resources.

Risk to reward ratios calculate the estimated reward as a multiple of risk, with many spread betting strategies requiring positions with a risk to reward ratio above a certain level - commonly either 2:1 or 3:1. By establishing risk to reward as a constant, traders can make more effective decisions when choosing between two different opportunities, to determine the most potentially profitable way to expose their capital.

Ratios and pre-trade planning can enable spread bettors to find more opportunities and better exploit them for short-term profits and long-term capital growth, according to IndependentInvestor.co.uk.

A spokesperson for IndependentInvestor.co.uk said that traders should constantly be mindful of how a position compares on a simple risk for reward basis, in order to ensure they continue to trade their capital in the most sensible, most effective ways.

"Risk to reward ratios are easy to calculate, yet their impact in enabling more effective trading decision making should not be underestimated. By reducing trading opportunities to a single, measurable statistic, different positions can be compared instantly to pick the most lucrative opportunities from a bunch and deploy your capital in the most potentially profitable way. Provided your projections and assessments of risk and reward are grounded in reality and an actual understanding of the markets you're trading, it can provide an excellent basis for squeezing the most from your capital."

"At IndependentInvestor.co.uk, we advocate traders make use of this kind of data in their research and planning across the board. By having recourse to usable information like risk to reward ratios, traders can start to develop a better understanding of how to best profit from the opportunities open to them in the spread betting markets, in order to trade in the optimum fashion with the lowest risks and highest possible rewards."

About:

IndependentInvestor.co.uk is a forex training and resource site, aimed at new and inexperienced traders who are looking to improve their trading results. Specialising in forex, CFDs, spread betting and a range of other trading disciplines, IndependentInvestor.co.uk is a free to access archive of professional trading know-how and content, designed to demystify the markets and make trading profits more straightforward to exact.

For those already trading, or looking to find that crucial first spread betting broker, extensive reviews and comparisons of the different account types available at the leading providers makes decision making more informed and more straightforward, with independent data and ratings to help identify the most effective trading platforms.