Spread Betting
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Which Spread Betting Company?
At SpreadBets.org.uk, we aim to review most of the leading spread betting companies. For a direct link to the latest reviews see:
We also compare a wide range of services and markets offered by many of the leading spread betting companies. For the full comparison across a wide range of markets see: spread betting company comparison.
Spread Betting Service Comparison:
Spread Betting Account |
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| New Account Offer |
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| Online Account Application |
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| Candlestick Charts |
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| Credit Accounts Available |
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| Deposit Accounts Available |
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| Stop Loss Available |
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| Stop Loss (Automatic) |
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| 24 Hour Trading |
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| FSA Authorised and Regulated |
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The above spread betting services / markets may also be available with other companies. Also see Comparison Table Notes.
Spread Betting Risks and Risk Management
There are many benefits to financial spread betting, however there is also a primary drawback. Given that spread betting is a margined (leveraged) investment product, it does come with a high degree of risk to your funds and you can incur losses that exceed your deposit.
As with all investing, the fact that you can lose should always be at the forefront of your planning. With that in mind, you will find there are a couple of simple methods of minimising your risk.
A lot of investors use a combination of a) Guaranteed Stop Loss orders and b) trading with smaller stakes as a way of limiting their downside.
Guaranteed Stop Losses enable you to put limits on exactly how much you are risking on each trade.
If you trade with smaller stakes, then naturally you are reducing your potential profit levels, but you are also reducing the amount that you can lose.
With most firms, you can open a spread betting account with £200-250 and trade with modest stakes. With a spread betting account from Financial Spreads or GFT, it is possible to spread bet on the FTSE 100, Dow, DAX, gold, crude oil etc from as little as £1 per point.
Why Choose Spread Betting?
Reducing your risk is important but so is appreciating the many positives associated with spread betting. Firstly, buying and selling. Spread betting firms let you trade in both directions, therefore investors can financial spread bet on a given market to go up, like you can with conventional stock trading.
Nevertheless it also means you can speculate on a particular market to fall. If you think the FTSE 100 will fall or if you think the price of gold will fall then you can take a position on that.
Also, mentioned above, the majority of spread betting companies enable you to trade a wide range of markets. You can normally take positions on all the leading UK and American stocks and shares. You can generally take positions on shares listed in other regions such as Denmark, India, Ireland and South Africa.
Naturally you can trade stock market indices like the FTSE 100, DJIA and DAX. Not only that but most spreads firms offer markets on commodities like gold, silver, crude oil, natural gas, wheat and sugar as well as foreign exchange markets, such as the sterling/dollar and dollar/yen.
Spread betting can also help you keep your trading costs down, given that with spread betting there aren't any broker fees and trading is commission free.
Likewise, your trading/profits are tax free*, that means there’s no capital gains tax, no income tax and no stamp duty.
There are also more flexible trading hours. Investors can normally trade a number of the most popular markets like the FTSE 100, Dow, Nikkei 225, US crude oil, gold, euro/yen, euro/sterling, sterling/dollar etc outside of normal trading hours. See 24 Hour Spread Bet for details.
In short, if you keep on top of your risks, financial spread betting can be a convenient and flexible way of trading.
How Does Spread Betting Work?
Indices tend to be the most popular markets and the three most traded markets are normally the FTSE 100, the Dow (aka Wall St) and the DAX 30.
For more on trading stock market indices see spread betting on indices. As a quick example though, the Dow Jones (rolling daily) market is currently 12230 - 12232 with FinancialSpreads.com. Therefore you can bet on:
a) The Dow Jones to go above 12232, or
b) The Dow Jones to go below 12230.
With this market, you normally trade in £X per point, where a point is 1 point of Dow Jones movement. For example, if you were to invest £2 per point and the Dow Jones index moves 15 points then you would see a change to your profits/losses of £30.
Dow Jones Spread Betting Example
So let’s say you see the current spread of 12230 - 12232. Having done your market analysis, you might feel that the Dow will move higher than 12232. This implies:
- You think the Dow Jones will increase
- Therefore, you choose to go long of the market at 12232 and you invest £1 per point
- The market increases with the market moving to 12379 - 12381
- With this new price you may choose to guarantee a profit and close your bet. In order to do this you would sell at 12379
- Buy price = 12232
- Profit/Loss = (Closing Price - Opening Price) x stake
- Profit/Loss = (12379 - 12232) x £1 per point stake
- Profit/Loss = 147 x £1 per point stake
- Profit/Loss = £147 profit
However, had the US market failed to move as you forecast, and had the Dow Jones decreased in price, with the market moving down to 12097 - 12099, then you could decide to settle your position and stop any more losses. To do this you would sell at 12097.
- Initial buy price = 12232
- Profit/Loss = (Closing Price - Opening Price) x stake
- Profit/Loss = (12097 - 12232) x £1 per point stake
- Profit/Loss = -135 x £1 per point stake
- Profit/Loss = -£135 loss
Please note that with a Rolling Daily Spread Bet if you ‘Roll a bet’ over to the subsequent day you might incur a charge or income for every day that the trade is held overnight. For more information read: Rolling Daily Spread Betting Charges.
(Market quoted: 04-Mar-11)
More Spread Betting Information?
Apart from a range of spread betting companies reviews we also have a range of free guides such as:
Spread Betting Offers
Opening a spread betting account is generally subject to status however if you are interested in applying for a spread betting account then some of the latest trading offers include:
"Spread Betting" last update by R Thomas, 03-Feb-2012
Warning: Financial spread betting carries a high level of risk. You can lose more than your initial investment or stake. Financial spread betting may not be suitable for all investors. Only trade with money that you can afford to lose. Make sure you fully understand the risk involved. If necessary, seek independent financial advice.
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