What is Spread Betting?
Spread betting is the simplest and most exciting ways of making money by speculating on the future price movements of financial markets. It has grown in popularity over the past ten years to become the most widely-used form of trading currencies, stocks, commodities and indices. The reason for this is due to the fact that it is incredibly easy for anyone can open a spread betting account with a very low deposit and begin making money using completely online-based trading platforms.
Why ‘Spread Betting’?
The name ‘spread betting’ refers to the difference between the buy and sell price of the quotes provided by a broker. These prices are given either side of the underlying market price and this ‘spread’ becomes the broker’s only commission in each trade. It is referred to as betting because spread betting allows trading on a derivative market. Therefore, traders place bets on the future direction of prices and never actually own any of the asset that they place this bet on. This makes spread betting very attractive as it means that traders will not get stuck with a stock or commodity that they cannot sell instantly.
Simplicity and Attractiveness
Spread betting replicates the real underlying prices of the market and trading platforms provide charts and tools that professional traders use. One of the biggest appeals of this form of trading is the simplicity in placing trades. Spread betting breaks each market movement down in to points and traders can then place bets on a per point basis. An example of this is placing a spread bet on Google’s share price rising over the next two days with a buy price of 600.45 USD. A trader may consider this a good opportunity and place a buy trade at £10 per point. Over the next two days the price rises to 600.85 USD which is equal to a 40 point increase. With the trader placing a bet of £10 per point this will result in a £400 profit.
Spread betting is available to trade throughout the week and many of the forex and commodity markets operate 24 hours per day, allowing trading both day and night. Many traders prefer spread betting to traditional trading because of this flexibility and also because it allows all markets to be traded on one platform. Spread betting platforms give traders access to thousands of different markets and therefore many more opportunities to make profits than traditional stock trading.
Tristan from www.spread.co.uk is interested in spread betting, and how it can help you become an investor with a large portfolio.