Spread betting is a simple tax-free way of predicting on the price movement of thousands of global financial markets, ranging from shares, indices, currency pairs, commodities to treasuries. Do not be mislead by the title of betting, it is not the same as going down to the betting shop.
When you spread bet, it means you are taking a position based on whether the price of goods to rise or fall in value. Traders make a tax free profit depending on whether or not the market moves in their chosen trend.
When spread betting, traders don’t buy or sell the primary asset. Instead, traders place bets based on if they expect the price of the product to rise or go down in worth. If traders expect the value of goods to move up, they open an extended position of buy. Equally, if they expect the value of the product to drop, they take a short position of sell.
How Does Spread Betting Works?
When you open a spread bet on any online trading company, you will pick the amount you would like to trade with, and your profit will increase every time the market rise in your favor. If you feel that the price you have chosen will go up, click on buy. For every point it increases, you will win your stake back. Nevertheless, if the price drops, then you will lose a majority of your stake.
If you think that the price of oil is going to rise, then you could put a buy with a stake of £5 a point. The result will be you earning £5 for every point the price of oil goes up. However, should the price of oil goes down, you will lose £5 for every point the market goes down.
Benefits of Spread Betting.
Winnings from spread betting are not subjected to capital gain tax or stamp duty. Winners take home the full amount won from spread bet.
There are a thousand available markets.
Online trading companies like CMC Markets offers spread bets on a massive range of markets, ranging from forex, shares, indices and much more. All you need is to find the best option to place your spread bets. It offers you an opportunity to access different markets from one account and also deal with markets that you couldn’t otherwise access.
Spread betting is a leveraged type of product meaning you won’t have to put up your entire value to start trading. Leverage can improve your investment capital. However, if the market moves against you, there is a danger you can lose more than your initial deposit.
You can short the market.
Spread betting enables you to view and place bets on markets that are falling as well as rising and at the same time placing bets on the direction in which assets will move.
Opening a spread bet is very simple. All you need is only to pick your market, your bet size and whether you are buying or selling and then hit the confirm button to open your position.
Unlike equity CFDs, there is no fee to pay on spread bets. The total cost of opening a position is contained within the spread itself.
There are 24-hour markets.
In most cases, spread bets are offered all the time in certain markets. It enables players to open and close trading positions even if the primary market is closed.
Spread Betting Strategies.
- Always employ a stop-loss each time you make a financial spread bet.
- Never risk too much of your account.
- Always work out the size of your position.
- Always decide when to exit the trade.
- Master your trading psychology.
- Limit the number of markets you trade in spread betting.
- Use setups to inform you to possible trades. The setup indicates that a trade may be possible.
- Decide when to enter and when to exit the trade.
Disadvantages of Spread betting.
It’s advisable to ensure you make use of stop losses and other risk-control measures to avoid making losses.
Wide bid-offer spreads.
Spread bet companies make their money from the spread. Therefore, the bid-offer prices cited are often broader than if trading the cash product.
Spread betters offer credit accounts to traders who have a good credit rating. Never fall into the trap.