Spread Betting is a tool that allows traders to make money from both up and down moves on a broad divergency of financial markets, whether stock indexes, exclusive shares, currencies, bonds, and commodities such as silver or minerals. Spread betting is a designation used to describe various types of wagering on the result of an event, where the pay-off is based on the precision of the wager, rather than a distinct binary result (win or loss).

Spread betting is free of tax, cost efficient alternative to standard percentage trading. One of the down sides of spread betting is that it is simple to misinterpret the risks and costs. While certainly not for the inept or comprehensively inexperienced, spread betting is an extremely flexible, cost competent and user-friendly way to gain entry to the biggest games in town. The other important feature of spread betting is that trades can be closed at any time, and never have to be left to expire. And because, as a margin product, traders could potentially lose a different of their initial stake, spread betting is really for use only by professionals, day traders and experienced investors. While funds can be made and can be substantial, spread betting is highly speculative and losses can be comprehensive.

Betting

Just like any other form of betting, however, spread betting is not for all, and spread betting should be played in moderation. One fascinating aspect to spread betting is that you can choose whether you want to look into the financial world of spread betting or whether you would rather bet on one of numerous renowned sports. Unlike fixed odds betting the amount won or lost can be very large, as there is no single stake to limit the maximum losses. Spread betting on politics and sport is gambling, pure and simple.

Financial

Financial spread betting can be very bewildering and players who usually bet in this way are quite prepared to lose large sums as well as win them. The “spread” in the phrase financial spread betting refers to the Sell (Bid) and Buy (Offer) price quoted by a financial spread betting firm. This price is worked out by adding additional points around the live (or the estimated impending) market price of a financial product. One of the most obvious advantages of financial spread betting is the exclusive chance to go short of (or sell) a stock or dividend. Competent investors use financial spread betting as an additional trading tool as the spreads offered rival the prices on hand in the valid market. Quite a few of the main Spread Betting sites offer guides and recourses to help players who may be slightly daunted by the world of financial trading.

Sports

Sports Spread Betting allows traders the chance to place bets on just about anything with the result of a sporting encounter merely being one of a number of betting opportunities. 15 years ago, make-up, supremacy and mid-point was a foreign language to most sports gamblers. If you already bet in a selected sport of your choice, spread betting can add an extra angle for you.

Conclusion

Spread betting is simply a matter of deciding whether the outcome of an event will be higher or lower than the spread firms quote and for how much per point you are prepared to stake. You can win and lose a lot more than your initial stake and for that reason spread betting is actually illegal in most countries. A important risk of spread betting is that if a spread bet position moves against you, the bettor, you can incur extra liabilities far in excess of your initial margin deposit. As a newcomer to trading, spread betting could appear to be a very attractive way of entering the markets; but before you leap in feet earliest, it’s authorized to understand what spread betting is and how it works or you might as well throw your funds straight down the toilet!



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Spread betting is a risky business, and depending on who you believe, leaves most traders on the losing side. As a form of trading, it is a relatively new concept, having been introduced into the London markets for professional and city traders to hedge their trades. With the growth of on line investing and day trading, spread betting has now become a retail investor activity. Setting up an account is very simple, and trades can be as small as a penny a point.

As you will see we use betting jargon, as this aspect of trading has more to do with gambling than investing. It is called spread betting for a reason and not spread investing. It is a dangerous tool, since it uses leverage to allow you to control large blocks of shares with very little cash in your account. Most companies work on a highly geared, or leveraged account, which will allow you to work on a ratio of at least one to ten, if not more. This means in effect that with a small amount of capital in your account, you can control a large amount of real money in the market.

The concept of spread betting in principle is very simple. The company quotes a spread of two prices for a particular instrument. The instruments covered include shares, stocks, commodities, and even the major indices. Increasingly most companies now offer spread prices on on all major sports, political events and television shows, as well as all the major financial and currency markets. If you think the price is going up you buy at the higher price, and hope that the underlying instrument goes up, allowing you to sell at the lower price and make a profit. In short selling where you believe an instrument is falling in value, then the reverse is true. In this case you sell at the lower price, and buy at the higher price to close the trade, and hopefully make a profit.

Spread betting is also about trading a derivative. As the name implies, this is something that has been derived from another market. The primary market is called the cash market. This is where stocks and shares are traded daily and real money changes hands. In owning a share, you become a shareholder in the company, receive dividends and are able to vote. With a derivative, the spread price quoted is derived from the cash market price, so any movement in the price will always be dictated by a change in the cash market. You are not a shareholder, have no voting rights and do not receive any dividends. The company will then quote the spread based on this underlying price. All companies offer different spreads on different instruments, depending on the liquidity and volatility of particular markets.

There are therefore no dividends and the derivative has a contract life much the same as in the options market. These periods vary, but can be anywhere from a day to several months. Some contracts expire, but others are rolled over into following periods. Before you open a trade, be sure to understand the type and length of contract, and also the expiry and rollover dates.

All these companies offer starting stakes which are very small. You can trade with some of them for as little as 1p per point which effectively means you are trading one share. This is an excellent way to learn and you will not burn your fingers. I actually think this is better then paper trading, (pretend trading) as it is real money, even though it is only small amounts. As I have said before, when you start in a new market or a new trading tool, start small while you learn. Build up a track record and gradually increase your stakes. If you try to break the bank, it will break you first – you have been warned!



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The list of financial spread betting companies around is quite long. Some of the established and reputable spread betting companies around are IG Index, Capital Spreads, City index, CMC Markets, Cantor Index and Financial Spreads.

Each individual has his or her own preferences when it comes to choosing a spread betting company. However, there are several factors for everyone to consider when you are choosing a spread betting providers.

Stability and Regulation

For me this is the most important factor. We have to ensure that the company we are dealing with is reliable and offer a stable trading platform. Make sure the company are authorised and regulated by the FSA (Financial Service Authority).

Range of Market, Narrow Spread & General Functionality

Even though, most spread betting companies offer wide range of market such as individual equities and stock indices, foreign exchange, bonds, commodities and interest rates, you will still have to ensure that the company provide the spread services that you required.

Stop Loss

Activating the Stop Loss is a feature which will limit your risk. This is very important during volatile market situation, when the market movement is against you and your bet will be closed once the market hits your stop loss level. Read the rules of each spread betting companies thoroughly as each firms have different rules for Stop Loss facility.

New Account Offers

There are new account offers for most spread betting companies. However, these offers are subject to term and conditions of each individual company. Different company will have their own promotion mechanisms and rewards based on the deposited amount.

Every financial spread betting company has its own advantages and disadvanrages. The choices are based own individual preferences. Choose the most suitable company based on your preferences and you can always change if you are not satisfied with their services.



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