Knowing How Financial Spread Betting and Spread Bets Work!

In this article, I explore the best time to day trade, including covering the 10 AM stock trading rule, the best times to day trade including trading in the morning or afternoon and the best days of the week and times of the year to day trade.

Spread betting, also called spread trading, is a great way for all those with small capital amounts to involve themselves in financial market trading. In simple words, spread betting lets you trade on whether the price of a specific stock is likely to go up or down. If you bet indicating that the stock price will move up, you will generate profits every time it actually does. Though, spread betting is not as easy as it is said. It comes with its own risks since you would lose money if the price goes down after you bet that it would go up. It may be difficult for beginners to understand the concept of financial spread betting. This article aims at throwing light on how spread betting works.

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The Basic Idea behind Spread Betting

A spread bet is traded on the underlying instrument’s potential movement. In simple terms, if you trust that the underlying instrument will move up, you set forth a buy bet and if you trust that the underlying instrument will move down you set forth a sell bet. This is not like the usual share trading as you can gain from rising as well as falling shares or other such financial instruments. You need to spend quality time to figure out how to start trading shares online.

Offer and Bid

For a specific underlying instrument, a spread betting firm will quote 2 prices- a ‘offer’ like in the case of usual equity (price at which you purchase) and a ‘bid’ (price at which you can sell). The difference between these two is called spread.

The underlying instrument’s movement is measured in terms of points. For instance: It is point = 1 pence for equities, 1 point = £1 for indices and you can set forth a bet of any particular value against each point movement.

Closing a Bet

If you wish to close a bet, you just have to set forth an opposite bet on the particular instrument at the same £ per point. If you want to close a buy bet, you need to sell at the present quote and if you want to close a sell bet, you need to purchase the present quote.

As a result, the loss or profit you make is the difference of points between the closing bet and the opening bet multiplied by your bet per point’s value. That is, £1 per point or £10 per point.

Getting Started

Understanding the concept of spread betting and following few good tips from experts in the field can help beginners grow greatly in this field and generate huge profits. If people interested in trading and betting get to know about the benefits of spread betting, they would certainly want to try their hand at it.

Top Benefits 

Few of the benefits are:

  • The ability to work from home,
  • opportunity to involve in stock market with just a small account, and
  • Tax-free earnings since such bets are free from capital gains tax.

All the features and capabilities of spread betting make it a market that is most suitable for individuals with less money to play with.

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