- Financial Spread Betting
- Compare Financial Spread Betting Brokers
- Financial Spread Betting Guide
- How to Choose Spread Betting Account
- Quarterly vs Rolling Bet
- Margins and Financing
- Spread Betting Orders
- Forex Trading Basics
- Forex Trading Guide
- Why Forex Trading
- Forex Trading Myths
- Recommended Financial Spread Betting Books
Financial Spread Betting Guide
Financial Spread Betting is a tax free, cost effective alternative to traditional share trading. It allows traders to take long or short positions without using a stockbroker. Unlike traditional share dealing and CFD where you have to pay a commission for every transaction in Financial Spread Betting the commission is built into the spread (difference between 'bid' and 'offer'). In order to spread bet you would need to open an account with Financial Spread Betting provider. We compare more Financial Spread Betting accounts than anybody on the internet.
Financial Spread Betting Features:
- No CGT, losses cannot be offset against tax as well.
- No Stamp Duty. With Spread Betting you do not physically buy shares.
- Low Capital Requirements. Financial Spread Betting is a 'margined' product.
- Ability to Go Long or Short.
- Huge Range of Markets. Financial Spread Betting is available for practically any market.
- Cap Your Potential Losses. Stop Losses and Limit Orders are available with Spread Betting.
Financial Spread Betting is very versatile and cost effective way of investing, with Spread betting there is no need to pay Stamp Duty and UK residents do not pay CGT (Capital Gains Tax) making financial spread betting the fastest growing market in the UK.
When you spread bet, you do not buy shares or commodities but instead you make a bet as to which way you think the market or share price will move. You can bet per penny or point movement - the amount you wish to bet is known as the 'stake', and can be as little as £1 per point. It is important to understand that £1 bet on shares represents 100 shares (how many shares do you need to buy to make £1 if the share price goes up 1 penny? 100 shares).
Financial Spread Betting, just like Contract For Difference, is a margined product, thus only small deposits are required to open a new position (with some Spread Betting companies £30 is enough to open £1 FTSE100 position, refer to Spread Betting comparison). Once you have chosen the market on which you wish to bet, you can bet the stake of your choice (each market has its own min and max allowable stake), which will represent your profit or loss per point movement in that market. For this reason you must be aware that your losses (just like profit) can increase dramatically if the markets move substantially in the opposite direction to your bet.
Spread Betting Example:
You are determined that FTSE100 should go up; in order for you to profit you decided to make a bet (buy FTSE100 Daily Rolling). You spread betting company quotes 5,200 (the sell price) - 5,201 (the buy price), so you place a £10 bet on FTSE100 to go up (you buy FTSE at 5,201).
In the next few hours FTSE100 is trading at 5,311-5,312 and you decide to close the position, thus selling it at 5,311. Your profit is £1,100 (£10 x 110 points), this profit is tax free and can be withdrawn or used in the future for other bets.
Experienced investors use financial spread betting as an additional trading tool as the spreads (commissions) are low. Alternatively, many investors use spread betting to hedge their existing share portfolio. For example, if you have some shares, which are decreasing in value in the short-term, you could 'sell' the value of the share using a sell bet.
You do not need to be an experienced investor to spread bet, but you DO need to research the products that you wish to trade and be aware of the risks associated with spread betting. Many individuals, experienced and new, use technical analysis to guide their investment decision. All spread betting companies provide some sort of charts and technical tools, use the comparison tool and read reviews to find out who provides the tools you need.
One of the problems for financial spread betting is the word 'betting' as this gives a false impression to the marketplace. Spread Betting is in fact a highly adaptable trading tool. With Spread Betting you can trade in many financial products like shares, indices, commodities, currencies, interest rates, etc. It is also important to notice that all Financial Spread Betting providers just like CFD providers and stock brokers, are authorised and regulated by FSA (Financial Services Authority). At IndependentInvestor.co.uk we DO NOT compare or quote providers or brokers who are NOT authorised and regulated by FSA.