Lesson 8: Spread Betting Entry, Exit and RRR

Once you have identified an opportunity, you will want to place your bet. Let's say you want to go long (buy) the EURUSD. To go long hit the “buy/ask” button (to short = sell, hit the "sell/bid" button) on your platform, you will then be asked to specify the bet size. Bet size = how much do you want to bet per pip (the last digit on the right of the quote). Some firms allow you to bet as little as 10p a point, this means that every point is worth 10p, so a 10 point move would equal £1 (10x10=100p). If desired (you should) you can also place a stop loss order, an area where you would wish to close your bet should it go against (an insurance policy if you will) and a take profit order, representing a level of profit you would be happy with. In these orders you are asked to type in the exact price at which you would want to sell. Here's an example, we buy the EURUSD at 1.30000, we place our stop at 1.29990 (-10pips) and a take profit order at 1.30020 (+20pips). You can see we are are basically trying to double our money. We call this a risk reward ratio of 1:2, because we are risking 1 (10pips) to get 2 (20pips) back. A RRR of 1:2 is genuinely accepted as the absolute minimum a trader should accept. Throughout your trade you are able to update your stop and take profit levels (however you rarely change your take profit area). This is fab as it means we can lock in gains reducing our RRR. For example when our trade moves in our favour by 10 pips it has not yet hit our profit target but we could move our stop loss to our entry price, essentially making our risk 0,  (If we bought and sold at 1.30000 we would register no loss or gain) so our RRR would be 0:2. When you move your stop, it is called a trailing stop. When trailing a stop we have to give price a little wiggle room because the collective market agreement of what something is worth fluctuates a fair bit! ;) So to avoid being stopped out too early we have to keep our stop loss wide.