Financial spread betting is easier to understand than many believe. This simple ten point guide offers you the tools to enter the financial spread betting market with more understanding. It can be applied to currency trading too.

1. Practice makes perfect

If you are a novice then the world of financial spread betting is full of dangers. I would suggest opening up a “demo” account. There are plenty of companies that will allow you to do this. They usually give you up to $10,000 to play trade with. Get comfortable and then go to real money.

2. When opening up a real account

Companies will let you set up for as little as $200. I would suggest setting up your first account with a minimum of $1,000. This will allow you to absorb more losses than with $200 or $500, keep your betting size to small fraction. I suggest that 2% is an ideal maximum risk but with a small account 5% is generally figure used.

3. Start Slow

The UK FTSE 100 is a good place to begin. The blue chip stocks are even better as they are more liquid. The US stock market and Forex (Foreign Exchange) is generally too volatile for a beginner.

4. Increasing your profits

The best time to bet is when you believe the market is going to move sharply either up or down. This is done only by studying the market and noticing trends and practicing also helps. There is software to buy that can help you predict the market.

5. Never Average Down

This means simply never increase you position when the market moves against you. Although if you are up then increasing you position can be advisable; a good example would be when you open at $1 a point on the FTSE at 6000, stop loss at 5900. The market moves to 6100. That means a profit of $100. In this example you buy another 50p and moving your stop to 6000. Should the market move against you, you will break even on the $1 point per trade but be $50 up on the 50p per point trade. (If this doesn’t seem to make sense just read again slowly and it will become clearer).

6. Daily Bets

If you decide to bet daily make sure that you have access to the all information constantly. For the beginner it is easy to spot general trends that take place over days rather than hours. Daily betting can lead to small losses accumulating into large sums. The desire to cover you losses becomes greater.

7. When betting

To make sure that you are covered always use firms that give firm quotes on the screen. Use proper regulated firms. There are unscrupulous people out there who will not think twice about taking your money.

8. Telephone betting

If you close a deal by phone then state your requirements firmly and accurately (ask them to repeat back to make sure). Check you contract note carefully and never ever expect advice as it is against the law.

9. Minimising your losses

When placing your bet always use a stop loss (maybe even a guaranteed stop loss) and perhaps a limit order. This will then protect you if the market suddenly turns against you.

10. Profits

In the first six months don’t expect to make a profit. You will be refining your technique in the real world environment. Please be strict with yourself and bank even small profits rather than betting them again for bigger gain. It will take a long time before you know technical analysis very well. The first six months will also be about finding out about yourself and if you can deal with losing money. If you cannot handle the fear of losing money then step away.

Financial betting can be confusing and scary. If you feel overwhelmed then just sit back watch the markets and wait until you feel safe to stick your toe back in the water. When you start to master the intricacies of financial spread betting then it can be a rewarding and even fun experience.



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Financial Spread Betting is a form of investment which does not limit an investor to a simple, fixed ‘win’ or ’lose’ scenario when speculating on the movement of markets or indices.

Instead, an investor decides whether to BUY or SELL a market ie spread betting on it to move up or down respectively.

For every point that the market moves, in the direction that the trader forecast, a profit is calculated by multiplying the stake per point and the number of points by which the market has moved.

However, if the asset had moved against the investor then a loss would be generated by multiplying the stake per point by the number of points by which the asset had moved in the wrong direction.

If we consider a simplified example this system becomes clearer.

FTSE Spread Betting Example

Financial spread betting is offered by a host of spread betting companies like FinancialSpreads.com and GFT and on a wide range of markets.

For this example, let’s assume that you have gone onto a spread betting website, such as Financial Spreads, and have seen their online quote for the FTSE 100 Index Rolling Daily Market as 5050 – 5051.

If you were to buy this index at 5051, ie bet on the FTSE 100 to go up, then, if the market moves up to 5070 – 5071 you could close you bet by selling at 5070.

If you were risking a stake of £2 per point then your profit = (5070 – 5051) x stake per point = 19 points x £2 per point = £38.

On the other hand, if you had bought the FTSE at 5051 but instead the index had decreased in value to 5040 – 5041 then you may have wanted to close your bet and limit any further losses. You could do so by selling at 5040.

So with the same risk or stake of £2 per point you loss = (5040 – 5051) x stake per point = -9 points x £2 per point = -£18.

Spread Betting Key Points

As no stock is actually exchanged, spread bets are not susceptible to stamp duty, likewise UK spread betting does not incur capital gains tax*

Spread betting usually offers a large variety of markets on which to trade such as indices, foreign exchange, commodities and equities.

Spread betting is a leveraged product. This amplifies your profits on winning trades. However, it also means that you can lose more than your initial investment.

Before you start spread betting note that it carries a high level of risk to your funds. It may not suit all investors. Only speculate with funds that you can afford to lose. Ensure you understand the risks and seek independent financial advice if and when necessary.

*Based on current UK Tax law. If you pay tax in a jurisdiction other than the UK then this may be different.



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