In Financial spread betting, it is usually prudent to calculate the risk to reward ratio. This is a way for you to find out if the risk you are going to undertake is worth the benefits you are likely to realize incase of a profit.
It is important to come to a conclusion on the amount of money you are willing to shell out for a stock or commodity. To get the total investment that you will require, multiply the quantity of stock or commodity by your price.

The next step is to set your spread betting target. You need to set a maximum and minimum price for a profit and loss respectively. This cushions you from losing all your money. The maximum target is the price you are willing to sell your investment at to claim a profit. On the other hand the minimum target is the price you are going to sell for a loss.

To calculate your potential loss, multiply your minimum price by the quantity you bet on. Your potential profit is the quantity multiplied by the maximum price.

Now to get your risk to reward ratio, divide your potential profit by your potential loss. The ratio is represented on either side of a colon e.g. 6:1

Spread betting should always be approached with caution and tact.

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