The single biggest factor separating successful spread bettors from those who blow their accounts is risk management. It is not glamorous, but it is the foundation everything else is built on.
The 1-2% Rule
Never risk more than 1-2% of your total account on a single trade. This means if you have £5,000 in your account, your maximum loss on any trade should be £50-£100.
This sounds conservative — and it is. But consider: with a 2% risk per trade, you would need 35 consecutive losing trades to lose half your account. With 10% risk per trade, just 7 losers in a row wipes out half your capital.
Position Sizing
Once you know your maximum loss per trade, work backwards to calculate your position size:
- Decide your stop loss distance (e.g. 50 points on the FTSE)
- Divide your maximum loss by the stop distance
- £100 max loss / 50 points = £2 per point
This approach means your stake size adapts to how far away your stop loss is, keeping your risk constant regardless of the trade setup.
Stop Losses: Your Safety Net
Every trade should have a stop loss. No exceptions. There are three types:
Standard Stop Loss
Closes your position at the next available price when the market reaches your stop level. In normal conditions, this works fine. But in fast-moving or gapping markets, you could be filled at a worse price (slippage).
Guaranteed Stop Loss (GSLO)
Guarantees closure at exactly your specified price, regardless of market conditions. You pay a small premium for this protection. Available at IG, CMC Markets, City Index, and Capital.com.
Trailing Stop
Moves your stop in the direction of profit as the market moves in your favour. Locks in gains while still giving the trade room to run.
Margin and Leverage
Leverage amplifies both gains and losses. FCA regulations cap retail leverage at:
- 30:1 for major forex pairs
- 20:1 for minor forex, major indices, gold
- 10:1 for other commodities
- 5:1 for individual shares
- 2:1 for cryptocurrencies
Just because you can use full leverage does not mean you should. Many experienced traders use far less than the maximum available.
The Golden Rules
- Never risk more than 1-2% per trade
- Always use a stop loss
- Size your position based on your stop distance, not your conviction
- Never add to a losing position
- Keep a trading journal and review your losses
- If you lose 10% of your account in a day, stop trading for the rest of the day
Between 51-82% of retail investor accounts lose money when spread betting. Proper risk management is essential to long-term survival.
