The Risks of Spread Betting? What is Spread Betting? It allows you to speculate on the movement of stocks, shares and other assets without using a stockbroker or market maker, which means that you do not have to pay the normal commissions or fees. We make a 'spread' around a live, underlying market price, e.
This means that you can make a profit from both rising and falling markets, however, if the market doesn't move as planned then you can lose money. Spread betting, CFDs and margined forex trading are leveraged products which carry a high level of risk to your capital.
Please ensure spread betting, CFDs and margined forex meet your investment objectives and, if necessary, seek independent advice. Click here to see the full risk warning notice. Indicative Spread Betting Prices Prices shown are delayed by 15 minutes, indicative only, and subject to our website terms and conditions. Spread betting can be an efficient investment option for trading the financial markets. Not only is it very versatile, allowing you to either go long buy or short sell a market, it can also help to reduce your trading costs because you do not pay traditional stock broker commissions.
You can also use spread betting as a hedging tool, i. With spread betting you do not have to speculate on the markets moving up in order to make a profit. With spread betting you can also Sell markets i. The "spread" in the phrase 'spread betting' refers to the Sell Bid and Buy Offer price quoted by a spread betting company.
This price is calculated around the live or the estimated future market price of a financial product. The Sell Bid price is the price you would sell at if you thought the market would go down. Conversely, the Buy Offer price is the price you would buy at if you felt that the market would go up. What are the Benefits of Spread Betting? Wide Range of Markets - spread betting allows investors access to many markets that were previously restricted to institutions, banks and wealthy investors - read more No Commissions or Broker's Fees - read more Trading on Margin - you can start trading with a small amount of capital.
Unlike share trading or CFD trading where your gains are potentially taxed at your current income tax rate, spread bets are not subject to capital gains tax - read more. The Risks of Financial Spread Betting Do Not Forget the Downside Although you can make substantial profits from spread betting, if the markets move against your bet, your losses can also be substantial.
You should ensure spread betting, CFDs and margined forex meet your investment objectives and, if necessary, seek independent advice. Note that you can use Stop orders and Guaranteed Stop orders to help reduce your downside. With Financial Spreads MT4 accounts, Stop orders are not automatically added to each trade however, we recommend that you add a Stop order manually.
With any account, if a Stop order is triggered it is subject to market gaps unless you specified for your Stop order to be guaranteed. UK Rolling Daily Sell One of the problems for spread betting companies is the word 'betting' as it can often provide a false impression to the marketplace. Spread betting is in fact a highly adaptable trading tool. As usual, there are no complex withdrawal criteria Why Trade with Financial Spreads? We offer investors tight spreads on thousands of spread betting and CFD markets, advanced charts, 24 hour trading and low margins, plus flexible trading orders, first-rate customer service and Here we discuss the benefits of spread betting but also the risks including An Introduction to Spread Betting This introductory guide to spread betting comes with an interactive trading example.
Think of it as you would any business. You need a business plan, finance to see you through the first months. Taking your profits out at the end of each month will not work. It needs a structured approach. Ideally you'd only want to be taking half or less of your income out of the account so that it can still grow constantly. Taking exactly what you make out and keeping the account the same size isn't going to work, because as soon as you hit losing streaks your account is going to start shrinking rapidly.
There is no such thing as easy money. In reality all profits are a factor of work, be it risk or actual labour. If you are just starting out bet very small and measure the results. Betting with real money however small is different from doing it on paper.
However, if you bet too big, random market swings will blow you out of the game. This is called 'gamblers ruin'. If you bet too big you will always lose even if you are generally right. Spread bet are leveraged but you should avoid using too much of this leverage on any one single bet. You have to be very disciplined and if you are day trading it is very easy to end up in a situation where you make money one day only to give it back the day after. I don't do it for a living, and don't think I could handle the added pressure of having to make a certain amount every week.
Look at it another way though. Then, you could consider leaving the full-time job being much more experienced and able to trade. A: My father used to train race horses. I would go to the track in the mornings with him and this 'the one that got away' sort of talk brings back memories.
Every gambler has a story and a strategy. I always wondered where they got the money to stake with. I'm just here to explain a little about how the business works. That said, your emotive tone causes me concern. Sound investing is founded on detachment and a sober view of things. You are already talking like you need to chase your losses come hell or high water. Please do be careful, I know a lot of people who would love to take that K off of you. You put up these arbitrary goalposts, e.
Why two years? I worked with traders for two years and they better understood how to interpret what was happening in the market, but I never got a sense that they suddenly became great visionaries. You seem like a nice person but looking for an angle - in your case spread betting strategies. There is quite plenty of material on this site and the Internet on strategies which you can peruse, but I do know what causes me concern.
To me it's not much different and setting you up to be preyed upon like Inside Track. For instance, I happened to read a hilarious forum post on a crashing house price forum about some woman in Surrey who bought all these buy-to-let places in the usual dumps like mini-England in Spain and Orlando the latter being the white trash capital of the world IMHO btw. It was apparant from reading about the place in Spain that she bought it sight unseen.
Can you imagine buying a home without ever even looking at it in person!?!?! Shocking, sad and laughable. I can only say that prudence and a good education has kept me debt free and allowed me to live my dreams of living in Europe. You need to define happiness for yourself first at the outset before you proceed. Reading your e-mail, I am concerned that happiness for you is the thrill of a gambler.
A: A very interesting question indeed Unless you have extremely large capital I personally think it is very hard to make enough income from just trading. And of course if you take the money you aren't increasing capital But what I think is that if I needed to live off my trading completely I would be a much worse trader. Because of the pressure of having to make money all the time. To suddenly rely on trading to replace your income can surely not be void of emotion. Add to this the volatility of day trading and that's why it can be so dangerous.
What happens if you start to approach your deadline and realise you haven't reached your targets but at the same time you are desperate to not have to go back to a job you hate? Will risks and mistakes start to escalate? I do have in fact a residual stream of income but without that income I am pretty sure I would be less likely to take losses fast and more likely to snatch profits too quickly.
And you leave it with your broker so it will be executed automatically and without you being able to change your mind. Turn off your monitor and stop looking at live prices. That's what I've learnt! Even if you are wrong 7 times out of 10 or more on your stock picking, as long as you apply the above discipline you will make money. I prefer to let my profits run, the reason being you need to cover costs, i.
Do not try not to average down or add to a losing share. Keep it running of course assuming that your stop loss has not yet been hit. And rather, try and add to winning positions, those that are really going up. The reason behind this is that the smart money will be doing the same. Also, you can increase your chances of success by trading with say, 'sector rotation'. The big money moves in and out of sectors. You just need to be aware and take advantage.
Recently money came come out of energy and in to the more defensive stocks e. It's one of the reasons why the Dow has taken off of late, money was rotating in there from smaller caps after the market recently decided to re-asses risk, figuring while these companies may not double overnight, neither will they halve. A simple moving average trend following system will never get you in at the bottom since these systems never buy a falling share price.
Nor will they get your out at the top. The aim is to grab the chunk in the middle. But you will have the vast majority of the market's money trading in your direction and moves up can be swif. Just respect the leverage and obey your rules and over time you will make money. A: Different strokes for different folks really. It really depends how active, what trading time frame you use, average length of trades, percentage capital at risk Perhaps it would be helpful if you did the sums backwards?
In other words, how many points do you need to make in a year; from that you can see how big your stakes need to be and how much money you would need to survive a losing streak. For those thinking of doing it, a backup fund is needed for security and to take some of the stress away. Also, a part-time job hours - non trading times would be sensible.
Think of it as you would any business. You need a business plan, finance to see you through the first months. Taking your profits out at the end of each month will not work. It needs a structured approach. Ideally you'd only want to be taking half or less of your income out of the account so that it can still grow constantly.
Taking exactly what you make out and keeping the account the same size isn't going to work, because as soon as you hit losing streaks your account is going to start shrinking rapidly. There is no such thing as easy money.
In reality all profits are a factor of work, be it risk or actual labour. If you are just starting out bet very small and measure the results. Betting with real money however small is different from doing it on paper. However, if you bet too big, random market swings will blow you out of the game. This is called 'gamblers ruin'. If you bet too big you will always lose even if you are generally right. Spread bet are leveraged but you should avoid using too much of this leverage on any one single bet.
You have to be very disciplined and if you are day trading it is very easy to end up in a situation where you make money one day only to give it back the day after. I don't do it for a living, and don't think I could handle the added pressure of having to make a certain amount every week. Look at it another way though. Then, you could consider leaving the full-time job being much more experienced and able to trade.
A: My father used to train race horses. I would go to the track in the mornings with him and this 'the one that got away' sort of talk brings back memories. Every gambler has a story and a strategy. I always wondered where they got the money to stake with.
I'm just here to explain a little about how the business works. That said, your emotive tone causes me concern. Start trading today. Call or email newaccounts. Contact us: Spread betting is a popular derivative product you can use to speculate on financial markets — such as forex, indices, commodities or shares — without taking ownership of the underlying asset.
This gives you a much wider range of opportunities than traditional buy-and-hold investing. Ready to start spread betting? Open an account. Spread betting works by tracking the value of an asset, so that you can take a position on the underlying market price — without taking ownership of the asset. There are a few key concepts about spread betting you need to know, including:.
Going long is the term used to describe placing a bet that the market price will increase over a certain timeframe. So spread betting enables you to speculate on both rising and falling markets. You would buy the market to go long, or sell the market to go short. The loss or gain to your position would depend on the extent to which your prediction was correct. If the market did decline, your spread bet would profit. But if the price of gold increased instead, your position would make a loss.
Say you wanted to open a position on Facebook shares. As an investor that would mean paying the full cost of the shares upfront. Discover the benefits of spread betting. To manage your exposure, you should create a suitable risk management strategy and to consider how much capital you can afford to put at risk.
When you spread bet, you put down a small initial deposit — known as the margin — to open a position. Spread betting has three main features: the spread, bet size and bet duration. The spread is the difference between the buy and sell prices, which are wrapped around the underlying market price.
For example, if the FTSE is trading at The bet size is the amount you want to bet per unit of movement of the underlying market. You can choose your bet size, as long as it meets the minimum we accept for that market. Your profit or loss is calculated as the difference between the opening price and the closing price of the market, multiplied by the value of your bet. We measure the price movements of the underlying market in points. Depending on the liquidity and volatility of your chosen market, a point of movement can represent a pound, a penny, or even a one hundredth of a penny.
You can find out what a point means for your chosen market on the deal ticket. The bet duration is the length of time before your position expires. All spread bets have a fixed timescale that can range from a day to several months away. If Apple shares did rise in price, you might decide to close your trade when the sell price hits If the market had fallen in value instead — down to a sell price of 11, — you would have ended up with a loss.
Again, not including any additional charges. Find out more about how to spread bet and see more examples. It is important to remember that all forms of trading carry risk. So, although spread betting provides opportunities for profit, you should never risk more than you can afford to lose. When you hedge using a spread bet, you open a position that will offset negative price movement in an existing position.
This could be trading the same asset in the opposite direction, or on an asset that moves in a different direction to your existing trade. For example, if you were worried that inflation might impact the value of your share portfolio, you might decide to take a long position on gold — an asset that typically has an inverse correlation with the dollar and can protect portfolios from inflation.
If your shareholdings did decline, the profits from your spread bet on gold could offset any losses. But if your shareholdings rose in value instead, this profit could offset any potential loss to your gold spread bet. Spread bets are not taxed. Discover more benefits of spread betting. Spread betting is a bet on the future direction of a market, while a CFD is an agreement to exchange the difference in the price of an asset from when the contract is opened to when it is closed. There are a range of similarities and differences between these two derivative products.
Take an in-depth look at spread betting vs CFDs. Discover more about risk management , including what leverage is and how it impacts your trades. Dividend payments have no impact on your spread betting position. Tax law may differ in a jurisdiction other than the UK. New client: or newaccounts.
The way it works is that you place a bet on the price and which way you think it is going to go - you can profit equally easily from the price going up or down. If you believe a specific stock index like the FTSE , currency pair or commodity will rise or fall, you can bet so much a point and either keep the end date open or set a time limit, which is normally a day or three months forward to close the trade. For every point the trade moves in your favour, you win multiples of your stake and for every point it moves against you lose multiples of your stake.
We will go into this in more detail later. Your profit or loss is the difference between the price at which you enter and the price at which you close the trade. The more the market moves in your direction you have predicted, the greater your profit. Conversely, when the market moves against you, the more you lose. The danger is that the loss may exceed your deposit margin.
The fees are in the spread - so watch the spread. There is no CGT, stamp duty, explicit trading commissions. Trading on margin allows traders and investors to open larger positions, which makes it viable to target relatively small price movements.
But bear in mind you may still need the money to back it up!! And don't forget, importantly it's easy to place down bets which means that you can use spread trading to sell short so as to profit from any correctly predicted price declines. This is important: As you do not physically own the product, but trade solely on price movements, you can profit from falling markets as well as rising markets.
This is a handy guide to financial spread betting - how it works, have fun and hopefully make a few quid. Our guide covers an impressive amount of ground, starting out with tutorials and learning about spread betting right down to working out exposure and the psychology of making a trade. Learn the mechanics and advantages of spread betting, including short selling and trading on margin. Plus how to develop a trading plan and the fundamentals of risk management. Continues here - Spread Betting Basics and Summary.
By clicking the links to the left you can access a series of free sample trading lessons which set out some of the techniques I use to trade from Spain. They explain in detail how it is possible to transform your trading through an understanding of the herd mindset. I have been widely criticised by other traders for making this information freely available. Some have asked me to take the pages down as they do not like the idea of these traders secretes being made public.
You can understand why once this material has been learned as these are powerful lessons and you will never see the markets in the same way again. Time is at a premium these days so make the most of this material whilst it is still here and free. In our introduction to the Trade School page we talked about how trading is a simple process that most traders over complicate.
If we were a retail company we would want to buy the goods at the cheapest price the manufacturer would sell to us at and then sell them on for the highest price we could get. Simply buying low and selling high. This is exactly what we need to be doing as stock or futures traders.
Except that most get caught up in the seductive technology of the trading process itself or they create an emotional relationship with the company or market that prohibits them from buying at the best price and selling when the market can take no more. Why is this? Trading the news. The consistently profitable short term traders are not always worried about the state of economy or if the housing market is buoyant or about to crash. They are however very interested in cause and effect.
By this I mean that for every effect there has to be a cause. Just as a moving object can not stop or reverse unless arrested by a force equal to or in the opposite direction, money will not start to flow in one direction or another unless there is a change in the balance between supply and demand.
Whilst mankind may have evolved over millions of years human nature changes but seldom. At such times human behaviour follows predictable patterns and the professional trader is able to recognise this information on the price chart and use it to profit. How can we profit. There can only be two ways. The first is to have some insider knowledge of news that will move the market when made public, such as end of year accounts showing profits ahead of expectations, or a key figure in the management team resigning.
Of course insider trading is illegal but there can be little doubt that it goes on. Exceptional news rarely stays bottled up for long. Evidence of this often shows up on the price chart in the volume data. However a more reliable indicator of market moves can be found from analysis of the behaviour of the traders themselves at key turning points. In order to make a profit others have to buy after you buy if you are trading long or they have to sell after you sell if you are trading short.
We need to have bought low and sold high. This may sound obvious enough but if you think carefully about what this really means you will see that to actually make money in the markets, which is nothing more than a giant auction, your behaviour, like the insider traders has to be anticipatory. In other words you need to be selling when the market is hitting resistance and buying when the market trades down to support.
To use a sports metaphor head to where the ball is going to end up and not to where it is right now. Fortunately this is not how most people trade and I say fortunately because if it was not for all of the losers there could be no winners. This may sound a little harsh but trading is a zero sum activity and by that I mean for every buyer there has to be a seller and for every winner there has to be a loser.
As most of the money is made by the minority this can only mean that the majority of traders are actually losers.