Financial Spread Betting give you access to many advantages - which are well covered in my other articles - but one of the main advantages is also one of the main risks.
Which one? That will be 'Leverage'.
The possibilities of much higher returns versus ordinary equity investments as a ration of capital invested is one of the key attractions to Financial Spread Betting, but the flip side of that is that it is also one of the key risks.
We need to accept that before we ever place a single bet, and develop a strategy that reduces and mitigates that risk.
But what are the key elements to reducing this particular risk? The first is quite simply the size of the bet.
Always bear in mind - unlike with ordinary equity investment - that you can lose more than you invest.
As a result some novice traders lose their perspective on the size of their bets.
Keep your bet sizes small, particularly during the learning period.
See how much the swings in the market can make you win - and lose - over a very short period of time.
Only when you are confident in your trading ability should you consider your appetite - or otherwise - for larger bets.
Another simple risk mitigator is to understand your market properly.
Time and experience will show you which markets tend to move quickly and which are less volatile.
You will also learn to pick up the signals that indicate movement is likely.
Novices often suffer from not understanding their market.
But remember, historical performance is only a guide, it can never guarantee how any particular market or instrument will perform in future.
The main tool you can use for loss mitigation are 'stop losses'.
Those of you who follow my articles know that setting a stop loss for every trade you do is one of my golden rules.
Not only can it help mitigate losses at times when you can't constantly monitor the market yourself, but it can also be used as a 'base marker' to ensure you have a reality check on where each bet started.
If you don't use stop losses then you need to monitor your positions all the time, real time.
Also remember that stop losses only trigger an order.
If there is market 'slippage' the price may move beyond your limit before it can be executed.
Many traders are happy to live with this risk, but if it is an issue for you then consider using the more expensive, but safer 'guaranteed stop loss' facility that some firms offer.
The type of bet you chose to undertake can also affect your risk profile.
For example Binary Bets limit your loss to a predetermined amount, as opposed to a standard spread bet which can in some cases be unlimited.
One of the main reasons - however - that some proponents of Financial Spread Betting dislike the binary bet derivative is because the downside is restricted, but so is the upside.
They argue that a standard bet with a stop loss limits the downside whilst allowing you to 'ride' the unlimited upside.
Financial Spread Betting gives you the benefits of leverage, just make sure you cover off the risks!