What is Spread Betting
It’s a derivative trading strategy, where traders do not own the underlying asset that they have bet on, for example, commodity or stock. Instead, spread bettors merely speculate on if the asset’s price will increase or decrease based the estimates presented by a broker.
Main features of spread betting involve the capability to go long and short, leverage usage, the broad range of available markets and various tax benefits.
What is a Spread?
Similar to stock market trading, there are two prices quoted for spread bets – the selling price and the buying price. The spread is the difference between the bidding and the asking price. Unlike stock market trading, spread betting companies profit from the spread, which lets spread bets to be made without commissions.
Beginners to Spread Betting
Seeing as spread betting allows you to bet on if the price of the market will rise or fall, there are just two kinds of spread bets that you can place:
Buy: When you are betting on the market price increases in its value
Sell: When you are betting on the market price declines in its value
Because there is a difference in price when buying or selling (the spread), it means that your trade will always start at a loss. Therefore, the market needs to shift in your favour for you to just break even by an equal amount of the spread.
To better your likelihood to make a quick profit, try to find the tightest spread that is offered for the specific market that you would like to place your spread bet on.
Which Type of Account is Best?
It may be in your best interest to open an account for spread betting that is designed specifically for beginners with one of the companies featured on our charts. Here are a few of the advantages to using a beginner spread betting account:
Limit the losses: Find an account with a guaranteed stop loss order that will cancel your bet if the losses hit a previously set amount.
Small stakes: Limits the amount that you spread bet with, in addition, it represents the amount that you could potentially gain or lose for each point movement.
Tight spreads: Often, beginner spread betting accounts have a small spread for giving you the best chance of turning a profit more quickly.
Please keep in mind that with spread betting, your money is at risk, therefore you should only bet the money that you are able to lose.
The best advice we can give you would be to try out spread betting by first trying a demo platform so that you don’t have to risk your own money.
For more information on selecting the right trading platform for you, please see our tutorial: What To Look For When Choosing A Trading Platform
Risk Warning: Users should be aware that all investment markets carry inherent risks, and past performance does not assure future results. Trading of any kind is a high-risk activity, and you could lose more than you initially deposited. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 73-89% of retail investor accounts lose money when trading CFDs. Please be sure you thoroughly understand the risks involved and do not invest money you cannot afford to lose. Your capital is at risk. Advertiser Disclosure: TopBrokers.Trade is an independent professional comparison site funded by referral fees. The compensation TopBrokers.Trade receives is derived from the companies and advertisements featured on the site. Due to this compensation, we can provide our users with a free comparison tool. Unfortunately we are unable to list every broker or exchange available, however, we do our best to review as many as possible.
