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Learn Spread Betting

Learn to Spreadbet
Written by David

The ability to take advantage of the financial markets is not the sole right of institutions; on a daily basis the markets offer vast opportunities for individual traders and investors alike.

A pool of liquidity created by institutions exists as a result of the sheer size and volume of transactions made. This allows retail clients to move money in and out of markets relatively unnoticed, and also explains how so many different trading and investing styles and strategies have evolved over the years.

Having said that, I’ve never been one for shortcuts and I fully expect to be in for the long haul when it comes to trading, I’m just looking forward to gaining the sort of experience that enables you to look at the bigger picture and plan/execute trades consistently, should be fun learning!

If you want to learn spread betting, then this article will give you an overall view, and point you in the right direction for further resources. Spread betting is rapidly growing because it has many advantages over traditional financial trading. It is flexible, allowing you to place a long and short bets equally easily, it can be applied to any financial market, most spread betting providers will give you access to more markets than you need, and it is easy to understand and works on a uniform interface, no matter what you are spread betting on.

The other reason many people are turning to spread betting and away from traditional financial trading is that you do not get involved with capital gains or stamp duty, as you make your money from betting which is not subject to either.

The way it works is that your spread betting broker will quote you two prices for anything you are interested in – the first price is the selling price, and the second is the buying price, and the difference between them is called the spread. When you place a long bet, betting that the price will increase, it goes on at the buying price and is closed at the selling price; when you place a short or selling bet, expecting the price go down, it is placed at the selling price and is closed at the buying price.

This means that whichever way you choose to bet, your spread betting company will receive a commission equivalent to the spread on your bet. This is the only fee, as there are no other commissions or duties charged. Your bets can be for any amount you want, subject to minimums and maximums imposed by the spread betting broker for practical reasons, and you bet in pounds sterling, euros, or whatever currency is appropriate to your domicile, regardless of what currency the spread betting numbers are expressed in.

For instance, you could place a bet on the price of gold, currently quoted 1785.04 – 1785.54. Commodities are quite often quoted in US dollars, as this is, but this makes no difference to the fact that you can bet in pounds sterling. You can bet that the price will go up, and that bet is placed at 1785.54, or you can bet the price will go down, which starts at 1785.04. When the price changes, you can close your bet at the appropriate price, and work out how much you won or lost from how many units or “points” the price moved times the size of your bet.

It is important to realize that these bets are open-ended, which means you can gain or lose an indefinite amount, subject only to the fact that the price cannot go down beyond zero. Fortunes can be made or lost, and when you learn spread betting properly you learn techniques to limit how much you can lose. Spread betting offers an easy and attractive way to become involved in the financial markets, and amply repays time you spend learning about it.



About the author


I first cut my teeth in the Square Mile in the winter of 2002. I was young, fresh-faced and straight out of university; keen but maybe a little naïve about the way the investment world really worked… A few years ago I discover a whole new world of opportunity: spread betting on the financial markets.

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