Financial Spread Betting & SpreadBetting Companies Explained

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Financial Spreadbetting

SpreadBetting.com is the information website for all things Spreadbetting. Whether you are new to financial spreadbetting or more experienced, you will find this website packed with useful information, articles and news to keep you up to date with the world of financial spread betting. We want to help you to trade better and be a successful financial spread better, so help you in two main ways. Firstly, we work with the top spreadbetting exchanges to give you up to date information on offers and deals to ensure you have the best spreads and margins. Secondly, we draft in experts to provide us with market insights, trading strategies and tools to make us a success.

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We have the super new SpreadBetting.com forum which has been set up for you to ask questions, to share and to learn. So if you want to know how to trade stocks,/strong>, to compare the latest offers in the market, or if you should trade gold, turnips or the Dow Jones, simply join up, log in and get communicating.

Beginner, Intermediate or Expert?

Spread Betting Explained

Are you asking yourself what is spread betting? or how to trade stocks? Are you considering opening your first financial spread betting account? Want to know where to go, who to compare or what to look for?

OR, are you further along your spread betting learning curve? Do you consider yourself an expert? Can you explain your strategy clearly? How you use your stop losses to best effect? What affects the markets that you operate in, what patterns you look out for? Never forget, there is always more to learn.

An Introduction to Financial Spread betting

Today I want to share with you my experience with some Spread Betting companies. First of all, I want to explain what is actually financial spread betting as a financial product. It has many similarities with Spot Forex and Binary Options contracts but it is totally different. It has regulated as a financial product from the biggest regulators of the world (FSA etc.). One advantage of this product is that it’s tax free, at least in UK and Ireland. There are many financial spread betting firms and they offer Forex, Commodities, Stock Indices, a big amount of shares, Bonds, Interest Rates and House Prices. A client can spread bet in every one of the above products and like Spot Forex and Binary Options he can earn money by the rise or the fall of the market.

In every company there is a bid/offer price for each product. If you believe that the market will rise , you can buy the product in the offer price. If you believe that the market will fall you can sell the product in the bid price. So, simply. The companies made money from the hidden spread within the offer and the bid price. The spread is usually 1 point (pip) for the popular products like Forex, Commodities and Stock Indices. Now, the question is how much money you can earn by the rise or the fall of the market if you will predict right. Before this, you should know some basics things about the financial spread betting. Let’s go.

• The hidden spread

This is how spread betting firms make money. From the hidden spreads. For example, let’s say that we have the currency pair EURUSD and it’s 1.28276 and we have the offer and the bid price. If you want to buy the pair maybe the price will be 1.28277 and if you want to sell the pair maybe the price will be 1.28267. This difference of 10 pipettes (1 pip) is the hidden spread and it’s the company’s profit. Like the Spot Forex Brokers.

• How many $ per point

Now, this is the real deal. In these spread Betting Brokers you can fix your contract and choose how many dollars or euro you want to earn or loose by the change of one point (one pip).So, let’s say that we want to buy the above currency pair, EURUSD, because we believe that the Euro will rise and we choose 20$ per pip(point). We buy at 1.28277. After some minutes the currency pair is at 1.28377 that means that there is a 10 pips change up for our favor. So,
10 pips * 20 = 200$
And this is our profit.

Like Spot Forex or Binary Options in an Exchange you have the choice to put a stop Loss or a stop limit order. With a stop loss order you can protect your account from a big loss and with a stop limit order you can protect your profit from a big bad change of the market and take your profit and leave.

You have the choice to put some other orders before the price hit the strike price you want. For example, if the currency pair EURUSD is at 1.29200 right now, you have the choice to put a buy order right now, only when the currency pair will reach at 1.29240. You can do the same with sell orders. You can put Stop Loss/Limit with these orders, too.

It’s the amount of money you must have in your account to take a trade. Your account balance must be enough to cover the damage in a case of a loss.

• Profitable ways which I use for spread bets

The best way to make money with spreads, it’s obviously trends. If you can identify a trend from its beginning and invest on it there isn’t a limit to the money you can earn. Of course, stop Loss is a “must” because in a market with high volatility if the price will move against you it’s very easy to wipe out an account. So, you should never take a trade without a stop Loss order.

Except trends, you could trade the news with some orders I said above. For example, if some news is coming, you can put an order to buy in a particular strike price and catch a bullish break out. Stop Loss is again a “must”. Let’s see some screen shots.

Here are some trades of mine. Look at AUDUSD at 19:43. I bought the currency pair for 10$ per pip.

It was the begging of a new up trend. I closed my position some minutes later and I took my profit which was 86$.

Spread Betting

What is financial spread betting?

Financial spread betting provides the ordinary investor a tax efficient opportunity to speculate on fluctuations in the prices of thousands of global market instruments. These include individual shares, equity indices, foreign exchange, commodities, interest rates and bullion.

The Best Spread Betting Brokers + Trading Platforms

Why might you choose spread betting?

It offers four key advantages over other more traditional investment methods;

Spread Betting is Tax Free in the UK

Within the UK and a few other countries spread betting is totally exempt from tax (no capital gains or income taxes and no stamp duty) so any profits you make from trading are yours in full.

Greater Profit Opportunities – Going long and short

You can choose which way you think the market will go so you aren’t restricted to just buying and waiting for the price to rise. You can buy or sell (go long or short) giving you more flexibility in your decision making and ultimately giving you greater opportunities to profit from a price movement within the market.

The power of margin

Margin trading gives you the opportunity to leverage your trade, meaning a significantly reduced initial deposit than would be traditionally required to obtain a similar exposure to the markets.

International market exposure with no currency risk

You can trade on international markets without having to worry about converting any profits back in to your home currency. Each transaction produces a profit or loss in a single currency nominated, in advance, by you.

How does it work?

Financial Spread Betting uses the same fundamental trading techniques that are used when trading most traditional assets.

The major difference is that you do not physically take ownership of the underlying asset, you simply ‘bet’ on the direction of the price movement instead.

When placing a spread bet, an investor is asked to define three basic things –

The instrument/market and type of bet

The direction they believe the market will move

The stake, i.e. the amount they would like to make for every point that the market moves in that direction

Choosing the instrument

Most companies offer real-time prices in thousands of markets, which of those you trade is solely your decision. For example, you may wish to take a short term view on an index or have a longer-term view on a share or commodity, you can even do both at the same time. The platforms brokers offer have real-time charts with built-in indicators and analysis to help you decide.

The only other thing you need to consider when choosing an instrument is the type of bet that you wish to place on that market. The top spred betting companies offer a range of bet options that are available to suit the desired duration of your trade. These range from only a few minutes, to a single day, to 3 months in length, and even one where there is no defined end date.

Daily Cash Bets- designed for the short term trader and are settled at the end of the day.

Daily Rolling Cash Bets- these bets do not expire at the end of the day and are automatically ‘rolled over’ to the next trading day (subject to overnight financing charges)

Daily Rolling Future Bets- these bets do not expire at the end of the day and are automatically ‘rolled over’ to the next trading day (subject to overnight financing rolling charges)

Quarterly Bets- expire on a set date three months in the future and do not incur financing (or rolling) costs – it is all built into the price, up front.

It is important to note that a bet can be closed at any time before the bet’s initial expiration date.

Choosing the Bet Direction

If the investor believes the value of an asset is set to rise in the future they would place a ‘buy’ (or ‘up’) bet, this is known, in market terminology, as ‘going long’. Conversely if they feel that the asset price is likely to fall in value, they would enter a ‘Sell’ (or ‘down’) bet, otherwise known as ‘going short’.

Going Short (or “shorting”) is a major advantage compared with traditional trading. It describes the practice of selling a borrowed asset with the intention of buying it back later at a cheaper rate than at which they initially sold. The short seller is looking for the price of the asset to fall before buying it back at a cheaper price. This concept opens up the possibility of making profit when the price of an asset is falling in value.

Choosing the Stake

When placing your bet you will be asked the stake/amount you would like for the bet. For every point that the asset moves in the correct direction the investor will profit by the stake amount. So as an example, if you had placed a buy bet at £1 per point and the asset value rose by 10 points the bet would be worth £10. It really is that simple. Obviously, if the market moves in the other direction, then those profits turn into losses.

The stake amount is an indication of the level of risk you are prepared to take on that trade. The larger the value of the stake amount, the greater the potential reward, however, there is clearly also the potential for larger losses.

Find it all too complicated? You might find social trading a good alternative.