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Things to Know Before Initiating Spread Betting

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Compared to traditional trading, spread betting is a tax-free alternative. Instead of seeking the assistance of a market maker or a stockbroker, you’ll be able to speculate on the movements of assets like shares and stocks on your own, once you participate into this type of trading. So, it gives out a clear indication that you won’t have to bear the natural fees or commissions that are associated with various forms of trading. The spread is created keeping with an underlying market value. Take for instance the price of gold, which allows you predict the rise or fall of the market and invest accordingly.

You may choose to participate in one of the best spread betting platforms online and capitalize on the market swings. At the same time, you ought to be careful about the sudden changes in order to prevent yourself from losing out on your hard-earned money. Your capital experiences a certain degree of risk to be posed by leveraged products like margined Forex Trading, CFDs and spread betting. That’s why it’s important for you to acquire more knowledge before taking the plunge on this type of trading.

How Spread Betting Works

When it comes to trading in the financial sector, spread-betting could prove to be an effective investment option. It gets versatile by enabling a trader to play short (sell) or long (buy) within the market. Apart from this, it even curbs the costs of trading by keeping you from paying the commissions to stockbrokers like in a traditional form of trading. You’ll find a strong hedging tool in your spread betting techniques as they help in safeguard investments in a current portfolio.

The Market Conditions

  •    Trade after taking the stock market indices into consideration as there aren’t any restrictions pertaining to share trading.
  •    Apart from GBP/USD and other Forex markets, the bet can be spread on a number of other financial markets like gold and crude oil.
  •    Spread betting doesn’t allow you to be speculative on the rising market in order to earn a profit. You may even sell markets while spread betting i.e. bet on the fall.

How to Describe a Spread

A spread betting company quotes the price relating to the Offer (Buying) and Bid (Selling). This is what the “spread” in this type of trading is all about. Such price is arrived at only after taking into account the live market value of any financial product. The price that you’d choose to sell it for if the market goes down is termed as the Bid (Selling) price. On the other hand, the price at which you’d choose to buy it when the market improves is termed as the Offer (buying).

The underlying asset is actually not touched upon while spread betting. You aren’t buying or selling it, but you study the market movements and bet accordingly. For instance, while spread-betting on Facebook, you’ll actually be speculating on the rise and fall of their share price, but you wouldn’t own any of their shares.

Likewise, you wouldn’t own any of the trading currency within the Forex market while spread-betting on a certain forex pair. In this case, you’d actually be speculating on the movement of the forex trading market.

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