What is risk management?

Prices can go up and down, and there are occasions when a market may move in an unexpected way – so it’s important to consider the implications of this risk for your spread betting positions. 

In finance, risk is usually defined as the potential for the actual return on an investment to be lower than the expected return.

Risk management reduces the impact of getting a decision wrong

This includes the potential for financial loss and, in spread betting or other types of leveraged dealing, the possibility of losing even more than you put in.

Because your bets won’t always go exactly to plan, taking steps to manage risk is a key part of successful spread betting.

Risk management is a set of rules and measures you can put in place to ensure the impact of getting a decision wrong is manageable. In fact, spread bettors with particularly effective risk management strategies can still make money even if they lose more bets than they win. This is because their winning bets are, on average, more profitable than their losses.

Your risk management strategy should be based on:

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