The simple definition of spread betting is the act of allocating money on speculative outcomes such as whether or not an asset will increase or decrease in price. Everything in the trader’s market can bet on including indices, shares, stock, commodities and even house prices.
Traders enjoy this option of trading because it means you aren’t buying the asset itself. All you need to do is take a quick look on the prices which are being offered on whether a certain asset will increase or decrease and away you go.
If your trade goes the opposite way to which you planned then you just as quickly lose money as you can making it. Because of this loss which can happen many spread betting firms like CMC Markets for example offer some protection to their traders. This happens through a deposit which is called a ‘margin’. Although this comes in a variation of sizes it is usually based on ten percent of the initial investment of your bet. When it comes to losses, on a particular trade exceed that margin percentage then your provider can demand more money. If you haven’t got the money then your provider will close out the trade at the current position you are standing in.
Saying that, you will go deep into debt if you rely on margin calls when it comes to losses through spread betting. The strategy to take on is to stop losses happening in the first place. You can create orders on many online platforms where you can close out the trade when it reaches a specific level. There also comes a potential problem when setting out a level to close out at and that is that if the market is moving rapidly, many stop-loss orders can be triggered together at once meaning you may not exit at the level you expected. This works on a first come, first serve basis.
Why choose spread betting?
Many traders choose spread betting as their way of trading because not only is it simple and requires less strategy but is also affordable and tax free because you don’t own any assets. In the trading world, when you buy stocks through a broker you have to pay a commission or a fee but with spread betting you don’t. This makes spread betting affordable and effective to many traders around the globe.
Spread betting can be done on a range of markets around the world and isn’t meant for one specific market making it diverse for individual traders. With spread betting it is possible to bet on currencies, shares, and even political events such as who will win in a political election for example.
Spread betting can be done through virtual platforms as well as through stock broker offices. There is also demo accounts available for the traders who want to try and the water before swimming. Having the choice to practice without investing is vital when understanding what and how you are going to trade on in the future.
With spread betting it is also possible to trade during all hours of the day and night, even when the traditional markets are closed. Putting this in contrast with the general trading markets which are only open during the working hours of a weekday.
If you think spread betting is for you then have a go today! The possibilities to make large profits is increased if you have read up to date reports on the market you are betting on and if you read about strategies. Make sure you are in the know on the latest events that co-inside with your asset that you have chosen to bet on. If you aren’t sure on whether to invest in such a risky trade then have a go on virtual demo platforms before making a commitment.