Financial Spread Betting

Financial Spread Betting is an alternative way to speculate on various financial markets. Many brokers offer bets on a very wide range of instruments including spot forex, oil, gas, tracker funds, stocks and many more. Some brokers also offer bets on Futures and Options contracts too.

Unlike conventional trading, the speculator usually has to decide on the amount they wish to bet. The bet size is the amount wagered per point movement. For example if the Dow Jones was priced at 13,000 points and one was to place a long bet at £1 per point, a move to 13,100 points would make the bet worth +£100. Like mainstream markets, you can set take profit prices and use stop losses.

One advantage of many spread bets is the margin requirements are often very low. One broker only charges a 200 point margin requirement for a GBP/USD bet. However, it is important to be aware that trading on margin incurs a high level of risk and losses in excess of your initial deposit can occur if the market moves against your position. You will be liable for these losses.

On the down side, the buy/sell rate spread is often higher with spread betting than conventional trading as the market is much thinner.

Spread betting is very common in the UK, one reason for this under British jurisdiction spread betting is classed as gambling and therefore does not incur any tax. It is growing in popular in many other countries like Singapore.

Unfortunately, it is currently illegal in the United States.

This article was wrriten by Peter Marsden who runs a Forex for Beginners site