Spread Betting
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You'll find quite a few plus points to financial spread betting, yet there is also a primary drawback.
Because spread betting is a margined trading product it does involve a high level of risk to your capital. Losing trades may exceed the original sum that you invested. That said, there are a few basic strategies you can use to reduce your risks.
Two important options for lowering your potential downside are:
Guaranteed Stop Loss Orders - Guaranteed Stop Orders allow you to set restrictions on how much you want to risk on a particular trade. For more details also see Guaranteed Stop Loss.
Spread Betting with Smaller Stakes - Employing smaller stakes means that you will make smaller trading profits, nevertheless they also restrict how much money you can lose. You can actually open a spread betting account with a £200-£300 deposit and spread bet with smaller stake sizes. With a Financial Spreads account you can speculate on the FTSE 100 from just £1 or €1 per point.
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Spread Betting - The Advantages |
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Once you understand how you can limit your downside it is worth taking a look at the benefits which make spread betting an increasingly popular way to trade the markets.
1) To start with, a primary advantage is the potential of low cost trading. With this form of trading there aren't any brokers’ fees and trading is commission-free. Note that if you roll trades over to the next day then there is often a small overnight fee, for details see rolling daily spread betting.
2) The second advantage is that your profits are tax-free*; there's no income tax or capital gains tax.
3) Another very useful benefit is that you can buy and sell the markets. Spread betting offers two-way trading, ie investors can trade on a market to rise, as you would with typical stocks and shares trading. However it also means that you can take a position on a market to fall.
4) Most spread betting firms let you to trade a wide range of markets. You can speculate on:
- Stock Market Indices like the FTSE 100 Index, Dow Jones (aka Wall St), S&P 500, DAX 30 etc.
- Stocks and Shares like all the normal UK and US listed equities as well as equities from other countries such as Germany, France, Holland, South Africa, India etc.
- Forex Rates such as GBP/USD, EUR/USD, EUR/GBP, EUR/JPY, EUR/CHF etc.
- Commodity Markets including gold, Brent crude oil, US crude oil, sugar and coffee.
5) Longer trading hours are another key advantage. You can often trade a good number of popular markets like the FTSE 100, Dow, GBP/USD, gold and crude oil after the normal markets have closed. Also see 24 hour spread betting.
In summary, provided that you take steps to control the risks, spread betting can be a quick and convenient tool for taking short-term positions on the markets.
Don’t forget, spread betting may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
Spread Betting Companies
There is a wide range of spread betting company reviews on this site. If you’d like to read a review simply look at the left hand navigation menu and click on the relevant company.
We also compare the spread widths and minimum stakes across many of the leading companies, for details see: spread betting companies comparison.
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| Automatic Stop Loss |
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| 24 Hour Trading |
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| FSA Authorised and Regulated |
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| Candlestick Charts |
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Comparison Notes.
Spread Betting Information
We have a huge range of spread betting information on CleanFinancial.com as well as daily trading news. Popular pages include:
Financial Spreads » "With FinancialSpreads.com you get all the advantages of
Spread Betting as well as commission free CFD Trading on 2,500+ markets, 24 hour trading, professional level charts and..." read
Financial Spreads review.
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Risk Warning: Spread betting and CFD trading carry a high level of risk to your capital and you may lose more than your initial investment. Spread betting and CFD trading may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
'Spread Betting' by DB, updated 17-May-13
For related pages also see:
Spread Betting, updated 17-May-13
Spread betting for new and experienced traders. In-depth spread betting analysis, daily spread betting views, 400+ spread betting examples, spread betting company reviews, price comparison and...read article: Spread Betting.
Candlestick Charts, updated 15-May-13
A guide to using trading charts: Live Charts, Video Tutorial & Daily Technical Analysis. Plus a look at advanced charts, the basics of moving averages, the pros and cons of using charts and...read article: Candlestick Charts.
Spread Betting UK, updated 15-May-13
UK Spread Betting - a detailed guide to spread betting in the UK. We compare the UK spreads companies, we look at tax-free* spread betting in the UK and we also...read article: Spread Betting UK.
Trading Charts, updated 19-Apr-13
Live Trading Charts plus a guide to using trading charts, the basics of candlestick charts, where to get free trading charts and...read article: Trading Charts.
Spread Betting - Stop Losses, updated 19-Apr-13
Many people highlight the risks of spread betting, of losing thousands of pounds on volatile markets. And they are right. With spreads you can risk winning or losing a sizeable sum on each bet. So how to have the upside without the downside?...read article: Spread Betting - Stop Losses.
Rolling Daily Spread Betting, updated 19-Apr-13
A guide to rolling daily spread betting markets including where to trade, why trade, rolling daily spread betting examples, overnight financing costs and...read article: Rolling Daily Spread Betting.
Spread Betting and Pairs Trading, updated 19-Apr-13
When it comes to spread betting strategies many traders today opt for pairs trading. Imagine that a spread bettor specialises in the financial sector. To engage in pairs trading, that spread bettor would...read article: Spread Betting and Pairs Trading.
What Is Spread Betting?, updated 07-May-13
It is a relatively simple way of allowing you to bet on shares / markets without owning any stocks. It is a cost efficient way of investing that is Tax Free*...read article: What Is Spread Betting?.
Why Spread Bet, updated 07-May-13
There are many good reasons why you should consider spread betting as part of your investment process including: Tax Free Investments*. A wide range of markets. No commissions...read article: Why Spread Bet.
Spread Betting Glossary, updated 22-Dec-11
The answers to: What are Bollinger Bands? What is the Double Witching Day? What is a Differential Market? and more...read article: Spread Betting Glossary.
Spread Betting Definitions, updated 22-Dec-11
The answers to: What is a Notional Trading Requirement? What is an OCO order? What is the Triple Witching Hour? and more...read article: Spread Betting Definitions.
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