Spread betting is a derivative strategy, where participants do not actually own the underlying asset they bet on, such as a stock or commodity.
Spread betting is a margined product that only requires you to deposit a small percentage of the full value of your position. This means that the potential for profits, or losses, from an initial capital outlay is significantly higher than in traditional trading. The margin required is typically between 1% and 10% of the total value of your position, depending on the market.
Spread betting is flexible as it’s possible to take short positions and deal on over 10,000 markets. However, it is important to understand the risks involved and have suitable risk management strategies in place.
How to Spread Bet?
You can use spread betting to speculate on the future direction of market prices, enabling you to profit irrespective of whether underlying market prices are rising or falling.
When taking a position on a market through our range of trading platforms, you’ll be offered two prices – the ‘sell’ price and the ‘buy’ price. The difference between these two prices is known as the ‘spread’.
To sum up, you can make huge sums by spread betting, or by owning a bit of a spread-betting firm, but the risks are formidable.
Spread Betting tips
You can create profitable trading strategies using simple moving average combinations for example. It is really advisable that you only pick two to three of your top choices indicators and getting to understand them completely. Then build up your trading strategy from there. Here are simple tips that you can follow:
- Know when to enter and exit.
- Never risk too much of your account.
- Always use stop loss.
- Get limited markets to trade with.
- Be alerted with possible trades using setups.
Make use of all the resources available to you to maximize your understanding of the markets. Your trades will move in tandem with the live market and by being in a position to react to market news, you will be in a much better position to open new trades or exit positions quicker than if you were not keeping up to date with market events.
Understanding the basics of spread betting will help you to easily manage it.