Edge Your Bets With Financial Spread Betting
Financial spread betting can take a great amount of the risk out of trading and good money can be made. This is a cost effective and tax free (in the UK) way of alternative share trading. It is a method which is used online where the trader is able to speculate without the assistance of a stockbroker.
This is a completely new way of participating in movements on the stock market without having to pay commission to a stock broker, and thereby making larger profits. The actually bet is placed on whether or not share prices will increase or drop.
The “spread” refers to the “Sell/bid or Buy/offer price. These prices are calculated based by adding more points to the live market price of the product (financial) and this is the estimated future price. This price is quoted by the spread betting company. An example of this is if the Daily FTSE trades at 4729, then the company will quote figures of say 4727 – 4731 and the trader places a bet on this price.
It only requires a very small deposit to open a new position or account, this can be as small as dollar, euro, pound10 – 40. The bet is 1 on each point direction in which the market moves, this point is referred to as a tick. Once the trader has decided where they want to place a bet, they do this and this stake represents per tick movement in either profit or loss.
Each financial market has their own maximum stake allowed, so you bet your 1 pound, dollar or euro per tick (point), choosing a bet that the market price will increase or alternatively, drop. If your wager is correct then you win or rather make a profit which is the amount of your wager or stake multiplied by the amount in which the market moves in your favor. If you wager is incorrect you lose your stake multiplied by the amount of points the market moves in the opposite direction.
It is very important that the trader understands that in as much as profits can be made, losses can also be incurred and it is not only a case of losing the wager amount, it is multiplied.
Because spread betting is considered to be a “bet” in the UK, and profits from this system of wagering do not have to be declared to the Tax Man. They are neither subject to Income or Capital gains tax.
New spread betters should always practice with a demo account first to see if they are able to grasp the concept. Learning about spread betting first without any financial risk is the best approach. The demo account will emulate precisely how a live account will react and it comes with a guide for beginners.
This means a new trader is exposed to the system first with no financial risk. Once they are confident that they understand the system fully, and have come to grips with the concept. They can begin live trading. Any online company you sign up with for a spread betting account must offer you this demo account, if they do not have one available, look for another spread betting company.
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