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:
Subscribe to 'The week ahead' newsletter
Ready to put theory into practice?
Try a spread betting platform with £10,000 virtual funds. Remember, losses can exceed deposits.