Spread Betting Guide
Financial Spread Betting has become increasingly popular over recent years and is now available as a service from many companies through simple on-line trading tools. The current exemption from taxation in the UK and the easy trading concepts make spread betting appealing and accessible to people who may have had no previous trading experience.*
Trading platforms are available to download or over the web, meaning you can trade directly on thousands of markets from the comfort of you own home or while travelling without having to speak with a professional broker over the phone.
Trades can be opened for as little as £1 per point and the easy to use platforms give access to real time market data as well as automated order functions so you can programme your entry or exit from trades without you needing to be there!
This simplicity of use and attractive benefits are why many more people are turning to spread betting as a means of making profits from the markets.
What is Spread betting ?
The concept of spread betting itself is very simple:
You decide the share, index, currency or commodity that you want to trade.
You choose the size of the stake you want to place per point movement.
You choose which direction you think the price will move.
Once a trade is opened the trading tools will track your profits (or losses) as the price moves and when you are ready, you can close the trade. Or if you prefer, an automated order can set the price that you want to close the trade.
Some markets are more volatile than others and therefore you should consider your stake size relative to the confidence you have in the price movement.
For example a £5 stake per point on a UK100 index which can move 60 points in a single day will earn (or lose) £300.
So what does the spread betting company get out of it? There is a spread between the buy and sell price, which is the fraction on the trade that the company makes. This is similar to when you buy and sell your foreign currency when you go on holiday.
Spreads are clearly displayed on all trades before you execute so you know what you are getting into and competition across the spread betting companies ensures that the spread remains low. See our comparison table that shows the spread price on the most traded instruments across spreadbetting companies.
If you have any doubts then feel free to try the 3DMarkets demo account or read more of our other guides on the subject.
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*Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.