Let’s take the FTSE 100 index. If you believe that the FTSE 100 index will rise, you would buy at say £1 a point. If you believe that the FTSE 100 index will fall, you would sell. If you sell at £1 a point and the Footsie drops 60 points, you make £60. But if it rises 60 points, you lose £60.

If you place a spreadbet at £20 per point and the FTSE 100 rises by 25 points, you stand to make £500 (£20 x 25 points). But if it falls 30 points, you lose £600. The more the market goes in your predicted direction, the more you make; conversely the more the market moves against you, the more you lose.