One of the key factors to becoming successful at financial spread betting is to know exactly when to get out of a bet. Holding on to a bet for too long is one of the main errors made by novice traders, and this article looks at the key deciding factors you should consider in your exit strategy.

Traders should focus on the following four main reasons for exiting a bet:

The bet isn't going anywhere
Along with understanding why you are placing the bet, you should decide how long you are going to give it to produce results. If you don't get the movement you were looking for in the timescale you had set, then get out. Keeping a rolling daily bet can cost both financially with interest costs, and also in your time taken to manage it. Don't fall in love with your bets, and don't forget, if the price starts to move later, you can always get back in.

The underlying reason for the bet goes away
Please tell me that you always have an underlying reason for each of your bets, right? If you don't, please stop betting now and go read one of the earlier articles on underlying reasons for financial spread bets. OK, well you need to keep those reasons at the forefront of your mind throughout the life of the bet. Did this month's improved trade statistic not show an improvement, thereby not boosting the FTSE 100? Did the tropical rainstorms in Brazil not lead to announcements of damage to coffee crops? Keep it in mind. If the reason you had for undertaking a bet goes away, get out. And don't forget, others may have made the same assumption as you, which may have started to move the market. When the assumption proves not to materialise, the swing could go back against you quickly.

The bet goes against us
This one comes as no surprise to you, surely? There are hundreds of articles out there on 'Financial Spread Betting Basics' where you can see how and why setting stop losses were an essential part of any financial spread betting strategy. So not only should this not come as a surprise, it also shouldn't require any effort on your part as the stop loss will execute this part of the strategy for you! If you are not using stop losses please stop betting now and go back and read up on them. If you don't, your wealth is seriously at risk.

The bet goes our way
Ah, the tricky one. Let's be honest, reasons one to three were pretty straightforward, and shouldn't cause you much difficulty. But what do you do when the bet starts to go in your favour? The temptation is to stay in it, even through temporary small downturns. But then it falls further and you are tempted to believe it will quickly go back to the high you have just seen it at. Or do you fix a price, say 10% above what you got in at? The problem there is you will never ride the huge and sustained rises that come along from time to time, as you will always have sold out. The answer lies in 'trailing stop losses'. It's a misnomer in many ways, because you are using a mechanism designed to limit your losses, even though you are in profit. So you simply keep moving up the price at which you automatically sell out, ensuring that even if its hit, your exit price is above your entry price, thus locking in a guaranteed profit.

In this article, we have looked at the ideal time to exit each spread bet. Make sure you have a clearly defined exit strategy, and make sure you stick to it!

Mr S Smith writes extensively on Financial Spread Betting and recommends http://www.financialspreadbetting.co.uk as the site of choice for trading in Financial Spread Bets.