Understanding Financial Spreads
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Understanding Financial Spreads

Understanding Financial Spreads

The phrase "financial spread betting" financial spread betting" refers to the speculation on the future value of financial products. Financial spread betting is based on understanding market movements of different products.

As a trader you can speculate that the market value of a particular product will increase, in which case you would “buy” that product. eg if you thought that the price of Brent Crude Oil would rise you would “buy” Brent Crude Oil with a spread betting firm like FinancialSpreads.com. You don’t end up actually “buying a few barrels”, you are simply betting on the value increasing – with spread bets you don’t actually own the share, commodity, currency etc.

Likewise, as a trader you can speculate that the market value of a particular product will decrease, in which case you would “sell” that product. eg if you thought that the price of BA shares would go down you would “sell” BA shares, again with a spread betting company like FinancialSpreads.com. Again don’t actually “sell BA shares”, you may not own any BA shares in the first place, you are simply betting on the value decreasing.

www.cleanfinancial.com provides free information on financial spread betting companies along with free financial spread betting strategies.


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Defining the Spread

When we refer to the spread it means the difference between the buy price and the sell price of a given listed product.

Financial Fixed-Odds Betting and Spread Betting

With fixed-odds you can bet, let’s say, £50 at odds of 6/4 that the FTSE will be above a certain level at the end of the day. If you win, you win £50 x 6/4 = £75 and you also get your £50 stake back.

If you lose, you lose your £50 stake.

However with spread betting it’s more volatile, the more you are right the more you win, the more you are wrong, the more you lose. That’s to say you can win (or lose) many multiples of your stake. For more details see what is spread betting

Companies providing spread betting services in the UK

Cantor Index: Cantor Index spread betting is one of the leading companies which offers online financial spread betting services. Cantor Index offers 24 hour online trading. However be careful of out-of-hours trading ie trading outside normal market hours, the width of the spread is often wider and that makes spreadbetting more risky / more expensive.

City Index: City Index Spread Betting also provides a number of benefits for opening up a financial spread betting account with them. Namely the convenience of a fast, flexible trading platform and a range of different markets.

CMC Spreads: CMC Spreads offers online financial spread betting services. It provides quarterly future spread betting services. They help minimise risks with their Controlled Risk Bet.

FinancialSpreads.com: Financial Spreads say that they aim to provide the maximum returns to customers due to their narrow spreads. They also have an automatic stop-loss facility which helps minimise your risks while betting. Note that stop losses are useful but the actual value isn’t always guaranteed.

Clean Financial is an online resource that provides free financial spread betting information about financial spread betting in the UK and Ireland.

Visit our website www.CleanFinancial.com whenever you need more details.


Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It 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.

'Understanding Financial Spreads - Financial Spread Betting' by KK, updated 26-Jul-07

For related pages also see:

Understanding Financial Spreads - Financial Spread Betting, updated 26-Jul-07
As a trader you can speculate that the market value of a particular product will increase, in which case you would "buy" that product. eg if you thought that the price of Brent Crude Oil would rise you would "buy" Brent Crude Oil with a spread...read article.


UK Spread Betting Markets, updated 25-Jul-07
Financial spread betting in the UK became increasingly popular in the late 1990's due to some of the excellent new online features and wide ranging information that became available. Technological advances and the increasing usage of the internet...read article.


Online Financial Spread Betting Companies, updated 21-Feb-07
Spread betting companies include CMC, Capital Spreads, Cantor Index, City Index, Finspreads, Capital Spreads is another popular online UK based spread betting company. They "promise to keep permanently tight spreads" to give speculators more...read article.


Financial Spread Betting vs Share Dealing, updated 02-Jul-07
Financial spread betting could be defined as 'speculating on the movement of the price of a financial instrument'. Many users use spreads to complement their long term share dealing. For traditional share dealing in the UK, you need to pay a brokerage commission....read article.


Predicting the Futures Markets with Technology, updated 09-Jul-07
Financial spread trading is primarily based on your predictions of the future market movements of stocks, shares, commodities and forex markets. You should invest time in gathering as much information about the markets and do a complete analysis of...read article.


Types of Spread Betting, updated 18-Jun-07
Spread betting is term used to describe a variation of betting gambling where an investor bets on the direction of a market. They either make a profit or loss depending on the deviation from the spread or quote. Spread trading offers more avenues and...read article.


Financial Spread Trading Opportunity and Risk Involved, updated 16-Jun-07
The risks involved in financial spread betting can be high. You can lose more money than you initially invest. People who spread bet on shares need to understand the market. You can usually minimize risks by limiting losses using various tools and...read article.


Financial Spread Betting in the UK, updated 04-May-07
When you spread bet on stock market indices, the stock market indices, eg FTSE 100 or NASDAQ 100, act as the financial instrument. The investor speculates on the price movement of the whole stock market index. Unlike share dealing, you do not actually...read article.


Spread Trading Tips - A Technical and Analytical Game, updated 04-Jun-07
Most experienced spread traders would probably cite one of their top financial spread betting tips is to understand the importance of placing stop losses and limit orders. You can use a stop loss or limit order feature at most levels. This feature limits your...read article.


History of Financial Spread Betting, updated 18-Sep-07
The rise of spread betting in the UK can be dated back to the '70s when in '74 IG Index was founded. At the time IG Index was the only spread betting company in the UK. This initial growth was helped partly by the liberal UK Government tax policies...read article.


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Risk Warning: Spread betting carries a high level of risk to your capital and you may lose more than your initial investment. It 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.

* Tax law is subject to change or may differ if you pay tax in a jurisdiction other than the UK.

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